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Real Estate Law
 
Real Estate Litigation
 

According to Murphy's law,  things will go wrong in any given situation, if you give them a chance. This is especially so in real estate transactions. Real Estate Law is more of an art than a science. Anything That Can Possibly Go Wrong, Does. In most cases, time is of essence and there's a very short window of time to get it fixed. It's of paramount important that everything is done right the first time; and if any issue shall arise, it's to be dealt with promptly. HTW Law can help. Call us now at 647-849-6582 or send us a message if you have some legal questions / inquiries or want to schedule an appointment with HTW Law.

Some issues that keep come up in a real estate transaction are as follow:

 

Patent Defect vs. Latent Defect

It’s the Vendor lawyer’s job to advise the Vendor as to what must be and what need not be disclosed. Under most situations, there’s no duty to disclose. In recent years, the Court has consistently denied recovery for failure to disclose. For instance, the Court failed to provide relief for failure of the information about the history of the property (that a murder had happened in the property) and the surrounding neighbourhood (that a child molester lived nearby).

A patent defect is one that is readily discoverable either by a purchaser or a purchaser’s professional home inspector, or the purchaser’s solicitor. A latent defect is unknown to the purchaser and presumably to the Vendor and is not easily discoverable. If it’s something that a purchaser will discover after careful and reasonable inspection, or it’s something in the public record, then it’s a patent defect, of which the Vendor has no duty to disclose. The onus is on the purchaser.

Vendors have no duty to disclose latent defects that the Vendor has no knowledge of. However, where a Vendor knows of a latent physical defect (such as a seriously faulty foundation or large amounts of radon gas in the basement), there is a duty to disclose this if either (a) the defect renders the property unfit or dangerous immediately or potentially, (b) repair of the defect will be so costly as to significantly reduce the property value or (c) the defect renders the property or at least part of it to be inhabitable.

If there's a latent defect and the Vendor fails to disclose, the Purchaser may be entitled to rescind the contract and get the deposit back if it's discovered prior to closing; or the Purchaser shall entitled to damage if it's discovered post-closing. Whether it's a patent defect or a latent defect is very fact specific and depends on many factors. You are advised to contact someone familiar with real estate law for more information on this topic. HTW Law can help. Call us now at 647-849-6582 or send us a message if you have some legal questions / inquiries or want to schedule an appointment with HTW Law.

​Representation, Warranties and Exculpatory Clauses

 

A warranty is an assertion that a certain fact is as stated or will be as promised. Warranties differ from representations in that warranties must be given as a part of the contract, whereas representations precede and induce the contract. Upon breach of a warranty, the purchaser may be granted an award for damages but the contract will remain binding. However, if a representation by the vendor is found to be false, the purchaser may be entitled to terminate the agreement and recover amounts paid, i.e. to rescind the contract.

 

Many people are involved in the purchase and sale of property: there’s promotion pamphlets, verbal promises made by real estate agents and other salespersons making all sort of promises that they are not qualify to make and as such a lot of problems arose. To tackle that, nowadays an agreement of purchase and sale usually has an exculpatory clause in it which simply states that the contract itself is all the terms of purchase and sale, then even if there were other warranties, representations, promises that were given, they would not enforceable unless: 1. The exculpatory clause creates a windfall; and 2. it raises to the level of unconscionability. This is a very high standard to meet. So it is advisable not to rely on any promotional materials, warranties, representations and promises unless it’s reduced to writing in the agreement of purchase and sale.

However, even an exculpatory clause cannot save a contract resulted from misrepresentation or fraud. If you think you have been tricked into signing a bad deal you are well advised to act quickly, and it's usually much easier to get relief prior to closing than after. HTW Law can help. Call us now at 647-849-6582 or send us a message if you have some legal questions / inquiries or want to schedule an appointment with HTW Law.

Anticipatory Breaches (Repudiation) & Tender & Rescission

Anticipatory Breaches

Anticipatory Breach occurs when one party to a contract acts in such a manner as to permit the other party or parties thereto to conclude that the first party no longer intends to honour or be bound by the provisions of the contract.

Be warned, however, that not every breach of the terms of a contract will amount to an anticipatory breach. To constitute an anticipatory breach, the threatened breach must be so severe that it deprives the injured party of a substantial part of the benefit to which he or she is entitled to under the contract.

When faced with an anticipatory breach, an innocent party must be careful to clearly and unambiguously states that intention. The innocent party may take the position that the breach of the contract by the repudiating party relieves the innocent party of any further obligations under the contract and permits the innocent party to bring an action for damages flowing from the breach.

Alternatively, if the innocent party wishes to uphold the contract and sue for specific performance, he or she must very clearly and unambiguously states that intention and refrains from taking any subsequent action that’s inconsistent with that intention. If a Vendor repudiates an agreement of purchase and sale, the purchaser cannot demand return of the deposit and sue for specific performance since those two positions are totally inconsistent. If the innocent party wishes to uphold the contract, he or she will have to tender on the day of closing, and immediately commence an action for specific performance to preserve the notion that “time is of essence”.

Usually the innocent party needs to tender on the closing date before the innocent party can sue for specific performance or forfeit / return of deposit, unless there's evidence of anticipatory breach. If the repudiatory conduct amounts to anticipatory breach, the innocent party may immediately commence action for specific performance and doesn’t have to wait until the closing date to tender.

Tender

The innocent party tenders on the date set for closing, by showing he or she is ready, willing, and able to fulfill his or her obligations under the contract. This readiness, willingness, and ability to close must continue not only beyond the original closing date but right up to the time of the conclusion of the trial.

Great care should be taken to ensure that the tender is complete and that tender is effected upon the defaulting party (unless the agreement of purchase and sale permits tendering upon the solicitor for the defaulting party). Any effective tender requires the tendering on the defaulting party of all things required to be produced by the innocent party at the closing of the transaction, but for the default. A letter listing all of the deliveries would be useful evidence, as would a witness.

Tender may be expressly waived by a defaulting party or may be unnecessary where the facts show that a tender would be absolutely useless (e.g. an anticipatory breach was evidenced). If in doubt as to whether a tender is necessary, the safest course of action is to effect a tender.

Rescission

Rescission is the opposite of repudiation. Rescission negates and unwind an agreement that should never have been executed, and relieves the innocent party of any further obligations under the contract. If a contract is rescinded, a purchaser’s deposit would be returned. There are many ways to rescind a contract, the particular of which could be technical or procedural. You are well advised to contact someone who's familiar with real estate law if you want more information on this topic.

Tender is not needed if the other party of the contract repudiates. But not all breaches qualify as anticipatory breaches. And obviously, if a party is entitled to rescind a contract, he or she is relieved from any contractual obligation that come with it. It's very fact specific and depends on many factors. HTW Law can help. Call us now at 647-849-6582 or send us a message if you have some legal questions / inquiries or want to schedule an appointment with HTW Law.

Requisitions

 

A requisition is the act of the purchaser’s lawyer to formally request the vendor’s lawyer to perform an action. Requisition date is the date of which all requisitions have to be submitted. All requisitions submitted after the requisition date doesn’t have to be addressed with two exceptions: 1) requisition that goes to the root of title instead of cloud of title, and 2) it’s a matter of conveyancing.

 

Not all requisitions are the same. In Ontario, most purchase and sale are pursuant to the OREA form. Section 10 of the OREA form contains only four matters of contractual requisition: "any outstanding work order or deficiency notice, or to the fact the said present use may not lawfully be continued, or that the principal building may not be insured against risk of fire". That's it. Unless contracted otherwise, everything else aren’t part of the vendor’s contractual obligations are thus invalid requisitions. It is the purchaser’s lawyer who has an affirmative duty to perform his or her due diligent to protect the purchaser’s interest.

 

Cloud of title vs root of title – Cloud of title affects the marketability of the land but does not affect the marketability of title. If a title is defective, a transfer of title might not be possible, and it goes to the root of title. If it’s a cloud of title issue (e.g. existence of an easement, restrictive covenant, zoning bylaw), it will not affect the title, and thus only goes to the cloud of title.

 

Requisitions that are a Matter of Conveyancing - A matter of conveyance as opposed to one of title is an encumbrance which the vendor is able to pay off and discharge by virtue of his own interest in, or his own power over the property, or by the concurrence of a party which the vendor can compel.

 

For example, if there is an offending instrument registered against title to the property that is within the unilateral authority of the Vendor to delete from the title, it is one of conveyancing and the matter need not be raised by the requisition date, and can be raised anytime prior to closing. If the vendor is unable to obtain the relevant discharge as of right, the requisition must be an objection to title, which entitles the purchaser a recession of contract and get his or her deposit back.

 

The purchaser has a duty of good faith when sending requisition letters; and the Vendor has a duty of good faith when responding.

 

The right to terminate the agreement by the purchaser only arises if a valid requisition has been made. This is to say, the requisitions were validly made before the requisition date (unless the matters goes to the root of title or is a conveyancing matter), and that the vendor is unable or unwilling to rectify the problem.

 

  1. Contractually, the purchaser is allowed to make a valid objection to title (which means that title is either not "good title" or is subject to an encumbrance that was not permitted) or to the four other specified issues: outstanding work orders, deficiency notices, (un)insurability of the property, or to the fact that the present use may not be continued;

  2. The objection must be in writing; and

  3. The Vendor must be unable or unwilling to remove, remedy or satisfy it or to obtain title insurance to address it; and

  4. The Purchaser shall not have waived its objection; then

  5. The agreement is terminated, the deposit is returned to the purchaser, and the purchaser has no further liability for costs and damages.

Requisition is an art and as such it is crucial that everything is done right the first time; and if any issue shall arise, it's to be dealt with promptly. HTW Law can help. Call us now at 647-849-6582 or send us a message if you have some legal questions / inquiries or want to schedule an appointment with HTW Law.

Default – What if the Deal Doesn’t Close on the Closing Date?

 

Specific performance

 

Specific performance is an equitable remedy whereby the court orders a party to a contract to fulfill its contractual obligations. In the case of a purchaser, the rationale for allowing specific performance is that a property is unique for the purchaser and that momentary damages alone would not be adequate. The availability of specific performance as a remedy for a vendor is not quite as clear as it’s not easy for a vendor to demonstrate that why a momentary damage would be insufficient.

Vendor

 

Almost all agreements of purchase and sale provide for a deposit to be paid to the vendor or to the vendor’s solicitor or agent to be held in trust pending closing or termination of the agreement and to be credited against the purchase price on closing.

 

A deposit made against the purchase price will generally be forfeited to the vendor on the default of the purchaser. If the vendor intends to sue for specific performance, the vendor is not in a position to claim forfeiture of the deposit.

 

Vendor side relief:

  1. Forfeiture of deposit

  2. Damage for loss of benefit of the bargain (loss of profit after resale)

  3. Consequential damage (any damage derived from the default of Purchaser)

 

Deposit is to be credited against other damages. But a Vendor has a duty to mitigate damage. When a person suffers damages as a result of a breach of contract, he or she has the legal obligation to minimize the effects and losses resulting from the injury. The duty to mitigate works to deny recovery of any part of damages that could have been reasonably avoided.

 

On one hand, a Vendor has the duty to mitigate his or her damage by seeking an alternative purchaser. On the other hand, to be eligible for specific performance the property has to be for a unique purpose of which finding an alternative purchaser would be difficult and that momentary damages alone would not be adequate. When your deal didn't close because a Purchaser had defaulted, you have a very narrow window of time to decide whether to sue the purchaser for monetary damage or to seek specific performance, and it's the real estate lawyer's duty to guide you towards the right decision. HTW Law can help. Call us now at 647-849-6582 or send us a message if you have some legal questions / inquiries or want to schedule an appointment with HTW Law.

 

Purchaser

 

There are many different reasons why a deal didn’t close. But even if the purchaser was at fault, a Court might order that the deposit be returned to the purchaser. To decide whether or not a relief against penalties and forfeiture of deposit, a Court will consider:

1. whether the forfeited deposit was out of all proportion to the damages suffered, and

2. whether it would be unconscionable for the Vendor to retain the deposit.

Both steps must be answered in the affirmative for a relief to be granted at the Court’s discretion.

If an transaction fell through because the Vendor had failed to close when the Purchaser was ready, willing, and able to do so on the closing date; or the Purchaser, having used reasonable efforts to satisfy conditions to the agreement, was unable to do so and withdrew from the agreement as permitted by it, the Purchaser will be entitled to a return of the deposit.

 

If a Vendor repudiates an agreement of purchase and sale, the Purchaser cannot demand return of the deposit and sue for specific performance since those two positions are totally inconsistent. A decision has to be made, and it's the real estate lawyer's duty to guide you towards the right decision.

When a default happens, time is usually be of essence, and the window of time to resolve the matter is usually very short. HTW Law can help. Call us now at 647-849-6582 or send us a message if you have some legal questions / inquiries or want to schedule an appointment with HTW Law.