One of my all-time favourite court cases deals with the Edmonton family who were well into building their dream home when they discovered that they didn’t own the lot where their new house was under construction.
The story began back in 1981, when Tom Broumas told his real estate agent, Al Batik, that he wanted to buy a lot to build a new house for his family.
Batik checked the listings on the local multiple listing service and decided to show Broumas and his wife lot 37 which was incorrectly described as the “only vacant lot on south side of street.”
On the day Broumas physically inspected the lot, his agent directed him to lot 27 on 10th Ave. instead of lot 37. The two lots were separated by nine completed houses. Lot 27 was owned by the city of Edmonton and lot 37 by private owners.
Without ever being shown a survey or the subdivision plan by the agent, Broumas eventually signed an agreement to buy lot 37 and the deal closed successfully. Unfortunately, he was under the impression that he had purchased lot 27.
About a year later, Broumas hired an architect who designed a 3,700-square-foot house.
Construction began on Sept. 20, 1982 and completion was estimated for Dec. 1 the same year.
Despite a local bylaw requiring anyone building a home to apply for a development permit before work started, the owner’s architect did not file the paperwork until one month after construction began. By this time, the house being constructed on the wrong lot was well into the framing stage, with part of the roughed-in plumbing and electrical work already completed.
Broumas did not discover that he was building a house on a lot he didn’t own until he received a phone call from a developer asking if he wanted to sell his vacant lot, number 37. When Broumas told him that he was well into construction, the developer replied that he must be building on the wrong lot.
Construction of the house continued even after the mistake was discovered, but there were significant delays due to the inability to place mortgage financing on the lot Broumas didn’t own.
Eventually, an agreement was reached with the City of Edmonton to exchange titles of the two lots for an administrative fee of only $250. Three months later, Broumas owned both the house and the lot underneath it.
Broumas sued his real estate agent and the agent’s brokerage, Royal Trust, for damages for delay in the construction of the house, inconvenience, embarrassment, pain and suffering, and out-of-pocket expenses resulting from extra fees and the construction delay.
Strangely, he did not sue his lawyer, who could have discovered the error before closing by showing his client the plan of subdivision.
In the end, Justice Ernest Hutchinson ruled that the real estate agent had a duty to verify the information published in the multiple listing service. As a result, he was held liable for not ensuring that the proper lot was examined by the buyers in the first place.
Total damages, in 1982 dollars, were set at $3,135.34, plus costs.
Ontario landowners who might find themselves caught in a similar situation can resort to a remedy found in the Conveyancing and Law of Property Act. Section 37 of the law says that where a person makes lasting improvements on land under the belief that he or she owns it, that person is entitled to a lien on the land for the value of the improvements.
In addition, the lawful owner may be forced to accept compensation for the land and transfer ownership if a judge is of the opinion that this alternative is appropriate. Alberta has a similar provision in its laws.
Of course, situations like this could be avoided altogether if landowners always referred to a land survey or plan of subdivision, or both, before building any house, garage, fence or retaining wall.
Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron in Toronto and a board member of the Tarion Warranty Corp. Bob specializes in the areas of real estate, corporate and commercial law, estates and wills and landlord/tenant law. His Title Page column appears Saturdays in The Toronto Star and weekly on Move Smartly. E-mail firstname.lastname@example.org
November 1, 2010Legal |