Real Property Fall 2013- Curran (C. Thomson)
Introduction
The typical real estate transaction:
a. Marketing
- Case law on misrepresentation by lawyers
b. Signed K of purchase and Sale
- Legal Document
- Legally binding
c. Conditions
- ‘subject to’ conditions, i.e. condition precedent must be fulfilled in order for K to be completed
- Ex. Property inspections, financing, sale of purchasor’s home, insurance etc.
d. Documents and signatures prepared by purchasor’s lawyer
e. Closing date
- When the transaction actually happens
f. Challenges After Closing
- If fraud or misrep is discovered later
Volume of Transactions
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Huge volume of transactions, in 2011 there were 53,000 in the greater Victoria area ALONE
Real estate transactions are not just purchase and sale of fee simple, but also easements, leases and
convenants etc.
Very simple mistakes happen a lot because there are so many transactions and vast majority are completed
by paralegals.
Notaries public can also do real estate transactions
Liability
Commercial and residential real estate make up 15% of law society insurance claims
Greatest areas of solicitor liability
Communication
- 26% of claims
- Often client instructions are received through a 3rd party i.e. realtor or paralegal
- Failure in listening, asking or explaining
Oversights
- 24% of claims
- Failure to make sure precedents are up to date
- Drafting errors
- Don’t notice the wrong property is on the contract etc.
- Often due to high volume of transactions and the fact that the assistant does everything and the lawyer just
checks it over quickly
Unmanageable Risk
- 16% of claims
- These are situations where there were no steps that could have been taken to prevent the insurance claim
- Ex. Caught in a change in the law, or fraud that wasn’t discoverable.
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Legal Issues
- 15% of claims
- Failure to understand the law
Engagement Management
- 15% of claims
- Problems between what the client expects and what the lawyer is actually going to do
No Trail
- 4% of claims
- No confirmation in writing
- Failure to have changes in instructions in writing, or failure to follow up in writing after oral communication with
the client
Lawyer Oversight
Code of Professional Conduct for B.C. 6.1-3
6.1-1: Direct supervision of staff and assistants by the lawyer is required
- They must maintain actual and personal control
6.1-3: What a legal assistant CANNOT do
- Application of the law
- Take instructions from client or make undertakings unless approved by the lawyer
- CAN do most other tasks—draft docs
6.1-3.2: Paralegals
- Lawyer must ensure adequately trained, competent and ethical
6.1-3.3: What Paralegals CAN do
- Give legal advice or represent clients as allowed by a court or tribunal
- Again responsibility on the lawyer to ensure they are adequate for the job
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Definitions
Condition: Fundamental term of the contract that must occur for the K to be completed; breach allows damaged party
to sue
- Price, the property itself, the state of the property, etc
Conveyance: Process of transferring an interest in property from one part to another
- Mortgage, fee simple, leasehold etc.
Covenant: An agreement as to what can or cannot be done on a piece of property. Registered on the title and endure in
perpetuity until agreement to remove or can show it is no longer relevant.
- Often for property value, ex. Minimize colours people can choose to paint their house
Easement: Gives particular right to do a certain thing with someone’s property particularly for that purpose.
- Generally things like access, utility or sewage, entry for repairs, etc
- Registered on title and run with the property – like covenants
Encumbrance: Any charge on land (general term)
- Mortgage, easement, covenant, right of way etc.
Lien: Encumbrance on a property in security for performance of payment or debt. Informs parties that there are
outstanding financial dealings against the property
- Distinct from a mortgage
- May be statutorily authorized, ex tax lien, builders lien. Most common law liens have been superseded by
statute.
Misrepresentation: Untrue statement or deliberate omission of a material fact. Can be fraudulent or negligent.
Mortgage: Security for payment of a debt – particular instrument by which we secure a debt on land
- Charge on the title – when debt is redeemed, the charge is dropped; registered on title of property
Licensee: A realtor; someone who has a license under the Real Estate Services Act to provide real estate services.
Purchaser: The person buying property.
Repudiation (repudiate the contract): Behaviour by one party that amounts to rejection of their obligations under the
contract.
- Allows other party to treat the K as if it is at an end
Strata Property: A form of co-ownership in which you own your own unit and have an equal share in the common area.
- Strata Property Act contains additional requirements to convey strata property
Tender: Show evidence that you are ready, willing and able to complete the K.
- Usually happens around closing
- One party may ask for this if they are unsure whether the other party will go through with the K
Time is of the Essence: Agreement between parties that they will adhere to the time lines within the K
Title (to the property): Proof of ownership – registered with the LTO – all public information
Undertakings: Personal promise, in capacity as a lawyer to do something.
- Must be in writing and in expressed in unambiguous terms
Vendor: The person selling the property
Warranties and Representations: Terms that do not go to the heart of the K, so if broken they only give rise to damages
and do not give rise to the right of termination of the K.
- Different and lesser than a condition
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Regulatory Context
Aboriginal Title
- 95% of land in BC is owned by the Crown
- Only 2 historic treaties and 3 or 4 modern treaties, the rest of crown land is subject to asserted aboriginal
title/rights
- Most Ab title and rights in the province are unresolved, which calls into question the legitimacy of the Land Title
regime
- The province cannot extinguish Ab title but they can infringe it
- Ab title burden on Crown title
- Not necessarily part of the Torrens system
- Federal Land with complex rules/statutes etc.
- Leases on reserve land
Delgamuukw v. British Columbia
Aboriginal Title OUTSIDE of the treaty process
Key Facts
 Gitksan and Wet’suwet’en claim 58,000 km2 in BC. Trial judge did not give independent weight to natives’ oral
history of their attachment to the land (since it includes subjective views and myth) and concluded plaintiffs had
not proved their historical occupation, hence dismissing the claim.
Origin of Aboriginal Title
 S.35 did not create aboriginal title, just entrenched existing common-law title
 S.35 takes common-law title and applies it uniformly across the country (i.e. applies in Quebec where they have
civil law only)
 Flows from assertion of sovereignty as this is what validates the common-law
 At time of sovereignty (BC 1846), aboriginal allodial title became a burden on the crown’s allodial title.
 Aboriginal title existed in its own form before sovereignty.
Content of Aboriginal Title
 “Sui Generis” which means no estates, it is owned communally and inalienable except to the crown
 Existed before assertion of sovereignty and therefore is not completely common-law nor completely aboriginal
law, a mix of the two which s.35 attempts to reconcile (main purpose of s.35 is this reconciliation btwn prior
occupancy and crown sovereignty).
 Have exclusive right to occupy and use: more than just a right to engage in certain activities.
 Exists in the past, present and future
 NOT a ‘personal right’ in a way that means it isn’t a property right BUT rather it is a personal right in a sense that
it is inalienable except to the crown.
Limits of Aboriginal Title
 Cannot do anything to deprive future generations of their claim
 Basis of claim cannot be destroyed by present use ex. if claim based on hunting cannot use land for a strip mine
and destroy its purpose as hunting grounds.
 However courts have also said that aboriginal title is not locked into history and modern uses can be engaged in,
therefore it is a balancing process.
 Thus the concept of how the land may be used is similar to that of “equitable waste” (which means to destroy
interest for someone else) can’t be destructive but can engage in modern exploitation
 None of this blocks the ability of Aboriginal peoples to surrender land to the crown.
How to Establish Aboriginal Title
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1. Occupation at time of assertion of SOVEREIGNTY (BC ~1846). Occupation defined as both common law
‘possession’ and aboriginal concept of occupation which could be more like land use.
A. CONTINUITY: If using present occupation as evidence of historical occupation at time of sovereignty,
must show continuity of occupation since that time. “Continuity” need not be an unbroken chain and
nature of occupation can change. Just need “a substantial connection between the people and the land” to
have been “maintained”. Substantial maintenance of the connection Test from Mabo. Allowance is made
for periods of disruptions (ex. by European settlers).
B. EXCLUSIVITY: Must have been exclusive occupation at time of sovereignty. If other groups were using
the area, it would still be exclusive as long as the ability to exclude others existed. Equal weight is given
to the common law, factual reality as encountered by Europeans (more literal—actual occupancy) and the
Aboriginal perspective, the intention and capacity to retain exclusive control ex. by making treaties or
implementing trespass laws. (*Note joint title can be given to two or more aboriginal groups if both had
exclusive right to occupy)
C. INTEGRAL: need to show connection to land is of central significance to their culture. Usually simple to
do b/c if you occupy exclusively it will clearly be significant. However if occupation was not completely
exclusive, this factor can be used to override that requirement and grant title. “Central Significance Test”
= substantial connection or sufficiently important. More than incidental.
2. Types of Evidence
A. ORAL HISTORY: is ok in this circumstance despite rule against hearsay. Must be considered. Otherwise
Aboriginal people would never be able to establish occupation as they have an oral culture.
B. PHYSICAL EVIDENCE: archaeological, written historical accounts etc.
C. ABORIGINAL LEGAL SYSTEM: can be used to establish the exclusive right to occupy
3. Factors to consider when establishing occupation
A. Dwellings
B. Cultivation
C. Enclosure of fields
D. Regular use of defined tracts for: Hunting, fishing, other resources
E. Consider: Group’s size, manner of life, material resources, technological abilities, character of land
claimed.
Infringement on Aboriginal Title
Can be justified if it is consistent with the fiduciary duty the crown owes Aboriginal peoples.
1. JUSTIFICATION: has to be a legislative object that is compelling and substantial
 Recognition of prior occupation which is reconciled with crown sovereignty
 Reconciliation= Aboriginal societies “are part of a broader social, political and economic community,
over which the Crown is sovereign”.
2. FIDUCIARY DUTY: must be consistent with the relationship
 Link between justification and ‘priority’ of Aboriginal Interest
 As little infringement as possible
 Give fair compensation
 Duty to consult or gain full consent
EXAMPLES: Agriculture, forestry, mining, hydro-electric power, general economic development, protection of the
environment and endangered species, settlement of foreign populations.
Uukw v. British Columbia
Key Facts: Related to the action in delgamuuk
ISSUE: Can Aboriginal Title by registered under the LTA?
HELD: No
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RSNS:
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LTA is about marketable land, which means you must be able to easily divest
Ab title is collective, and can only be sold to the crown
Aboriginal Title is not registerable under the LTA b/c it lacks marketability
Ab title and Torrens system cannot interact
Ab title is not even contemplated by the LTA or the Torrens system b/c it is colonial
RATIO: Only through an action for title can aboriginal groups get the recognition they are seeking for the title, not
through registration under the LTA.
Skeetchestn Indian Band v. British Columbia
KEY FACTS:
- Land which the Skeetchestn claim Aboriginal title to have been used for agriculture
- Now province is selling to a developer for golf course/ resort/ homes etc.
- Band brings an action for title
- Seeks to register a lis pendens under s.215 of the LTA so 3rd parties won’t buy the land
- Registrar rejects the application
ISSUE: Can a pending claim of Ab title be registered as a lis pendens under s.215 of the LTA?
HELD: No
RSNS:
- Ab title is not marketable b/c it is only alienable to the crown, therefore isn’t considered by the LTA
- Shouldn’t bring a title claim through a small avenue like this, this is not the place to decide the larger issue of
title, or whether the LTA discriminates by not allowing registration of Ab title, or what happens to land that is
the subject of an ab claim that has been alienated by the Crown to a 3rd party.
- This is a simple question that comes down to statutory interpretation: legislative history shows that the BC gov
never believe Ab title existed therefore could not have intended it to a be a registerable interest under the LTA.
RATIO: Ab title is not registerable under the LTA and neither is a lis pendens for litigation concerning establishing Ab
title. The only way to establish Ab title is through a direct challenge, not through the LTA registration avenue.
Musqueam Indian Band v BC
KEY FACTS:
- Long history of musqueam claiming an area of land, but they have difficulty proving exclusive occupation
- Can only get unalienated Crown land in a treaty. Only land left near their reserve is the golf course by UBC.
- Prov enters into agreement with UBC—makes order in council authoring the sale of the golf course to UBC
BEFORE consulting with the musqueam
- At last minute consult with musqueam but still go ahead with the sale
- Musqueam wants sale stopped and want to be accommodated
ISSUE: Has there been a breach in duty to consult and accommodate?
HELD: Yes
RSNS:
- Knowledge of a credible but unproven claim suffices to trigger duty
- If there is a prima facie case (which there is here) then “deep consultation” aimed at finding a satisfactory
interm agreement is required.
- Crown’s consultation was flawed and insufficient b/c they left it too late into the sale process to be meaningful
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This is very serious for the musqueam b/c it is the only land left which they could get in a treaty agreement
There is no reason for urgency in this transaction with UBC, the golf course lease doesn’t even expire until 2015
so no rush to complete it now.
RATIO: Have to have a deep and meaningful consultation process BEFORE the conclusion of sale and purchase where the
Aboriginal band has a prima facie case for land claim.
REMEDY: Suspend the operation of the order in council that allows for the sale of land for two years to allow
negotiations to take place.
Land Title Act s.23(2)(a)
- “the subsisting conditions, provisos, restrictions, exceptions and reservations, including royalities, contained in
the original grant or contained in any other grant or disposition from the crown”
- B/c Ab title burdens the Crown, does this count as a restriction/proviso
- Could be key to answering the question decined in Skeetchasn: what happens to Ab title claims once the Crown
alienates the land to a 3rd party?
- Could also argue that if the Crown allows ab title to be extinguished by transferring it to a 3rd party then this is
ultra vires the province… so either ab title sticks around after alienation or the Crown can’t alienate any until all
Ab claims resolved.
Indian Reserves
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They are not fee simple lands, collectively administered but are private
It is the band and people of the band that have control
They are not in the Torrens system or land title system
Some land is in the Land Title Act by virtue of a treaty or another special grant of government.
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Colonial Torrens System
Purpose
- To create certainty of title
- The title reflects all the interests on it “curtain and mirror” principle
- Makes commercial and personal transactions much easier
Land Title Act
s.23: sets up indefeasible title subject to exceptions, means title holder has good title against all the world and any
interest not reflected on the title is extinguished.
- There is compensation fund for when a person is deprived of an interest in land b/c of an error or inadvertent
extinguishment
s.28: the priority of charges is based on the time of registration, the charge registered 1st gets 1st priority
s.29: Unregistered interests generally have no effect on registered title
Strata Property Act
Strata lot: Legal parcels that are owned individually and come with an undivided share in the common property.
- Underlying land can be owned or leased by the strata corporation
- Bankable interest separate from the entire strata corporation
- In building strata defined by floor, ceiling and walls… to the midway point of the outside wall or another strata
unit.
- Bare land strata no reference to the buildings, just to the land boundaries and where the common property is.
Common Property: s.66
- Takes ¾ vote to change or designate CP
- You can have limited CP, where a specific portion of the CP is designated for one unit’s use (often ground floor
patios are this)
- Strata council can give an owner or tenant permission to exclusively use common property, or a special privilege
under s.76 (can only be for one year at a time).
- Strata corps have to repair and maintain… cannot make owners responsible for it.
Disclosure: Much more required for strata property than fee simple
- S.59 variety of things to be disclosed on an information certificate such as: monthly strata fees, indebtedness of
strata owner to strata corp, future special levies that are already approved, any expected deficit, amount of
money in the reserve fund, court proceedings etc.
Governance: The Strata property is governed by the Strata Corporation, who is the developer until the first conveyance
happens.
- Strata corp responsible for maintaining the CP for the benefit of the owners
- Each strata member gets one vote and can elect strata board members (which happens at set times ex annually)
- The strata board members run the corporation, can do it themselves or can hire a strata governance company
etc.
- Some decisions require specific voting by all the owners, not just the strata council
- S.119: Must make bylaws, and there are a set of standard bylaws that can be adopted. Need ¾ vote to approve
bylaws and have to register within 60 days.
- Bylaws direct the conduct of owners, tenants and occupants… many disputes centre around the bylaws
- S.121 Can’t have bylaws that contravene any laws… including human rights code
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Liability: s.66 says that each strata owner in indebted equally with co-owners for the common property
- If judgment is delivered against the strata corp, all co-owners are equally liable and it is not based on the price of
your unit
Issues – rentals, pets, maintenance
Finances: Strata corp must pay the common expense of the strata corp, there are two classes of expenses and a fund
must be created for each type. Expenses are allocated to all owners as strata fees. Special levy can also be used to raise
funds… usually for major expenses that occur less often than annually.
(1) Operating fund: for annual expenses
- Funds can be removed from the operating fund if the expense is an expense which occurs annually and the
expense has been approved by the budget… if not approved by the budget a ¾ owner vote is required.
(2) Contingency Reserve Fund: for expenses that usually occur less often than once a year or that do not usually
occur.
- Funds can be removed only if it is an expense that occurs less often than annually and the removal has been
approved by a ¾ owner vote.
- Exception if an immediate expenditure is necessary to ensure safety or prevent significant loss/damage.
Property Law Act
Contains substantive rights and obligations of people in real property. Brings Equity into legislative law.
Family Law Act
What happens to property upon the dissolution of a marriage
o Need to find out if the property owner is recently separated as an unregistered spouse may have claim to title
o Avoid conveying property only in one spouses without the other’s consent, could be fraudulent.
Fraudulent Conveyance Act & Fraudulent Preference Act
Duties under these Acts, where if there is a sense that client is disposing of property to avoid a judgment or for other
fraudulent purposes, defraud creditors, then as a lawyer, cannot continue to act on their behalf
- If you suspect it is a fraudulent conveyance, you have to cease by virtue of the Professional Code of Conduct
(LOOK UP SECTION)
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Owning Land
(a) Arrangements Used to Own Land
- Fee simple
- Strata
- Joint tenancy
- Tenancy in common
- Trust
- Company/corporate
- Co-operative
(b) Interests in land
- Easement
- License
- Covenant
- Life estate
- Liens
- Profit a prendre
- Mortgage
- Lease
- Rights of way
- Fee simple
- strata
(c) Problems
- Bylaws & Zoning
- Governance
- Who Pays For What
- Encroachment and trespass
- Use and Enjoyment
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Process of a Residential Real Estate Transaction
Three stages:
Gather information
Prepare & execute documents
Receive funds, tender documents for registration, pay out funds
Look at the Residential Conveyance Property Checklist
1. Initial contact
2. Review purchase contract and property disclosure statement (if any)
o Look at the K and ask for any other documents related to the contract or the deal
o Can be disclosure statements, addenda to the K
o Need to bring forward any important dates and send a letter to the purchaser telling them about your retainer
o Need to ensure 3 parts of contract: offer, acceptance and consideration
o Then make sure there is clarity of the primary elements: Property, parties and the price
o Completion: actual transfer of the property occurs
o Adjustment: the date where the liabilities associated with the property cease to be the responsibility of the
vendor and of the purchaser
o Possession: date after the transaction occurs
o Need to confirm the vendors representation of residency
o If new or renovated property, does GST or HST apply
3. Search title
4. Other preliminary matters
5. Consult with client and obtain instructions
o Advise on the enforceability of contract and give opinion on the state of the title.
o Ask about vendors marital status, need to know about any split ups, etc
6. Follow-up from initial review and discussion with client
o Confirm in writing what it is you told them
o Provide a written assessment of your interpretation of the state of the their title, and a written confirmation of
the contract
o This is so you have paper trail of what your advice was in case something goes wrong in the future
7. Prior to completion
o Adjustment statement shows the various monetary requirements of both the vendor and the purchaser and
the way the accounts are accounted for in the deal
o Discharge form: things not staying on title
o Authority to pay out
8. Closing
o Do a pre-closing title search to make sure that something has not changed
o Then a post-completion search to make sure that everything went through properly
9. Post-closing
o Transfer funds to pay yourself, release any hold backs, notify within 60 of the mortgage discharge as this is a
law society rule to prevent mortgage fraud.
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Acting for Both Parties
Code of Professional Conduct for B.C. Appendix C
o Lawyers cannot act when they have a conflict of interest EXCEPT in real estate conveyancing when:
(a) The location is remote
(b) It is a simple conveyance
- Payment of all cash
- Discharge of mortgage and payment of balance
- New build only if the time for builders liens has expired
- NEVER commercial real estate, building with than 3 unites, where leases are involved or where the
vendor is giving the purchaser a mortgage.
(c) One party just wants the lawyer to remove encumbrances or to witness documents
Residential Real Estate – Pitfalls and Tips
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There is BC lawyers compulsory professional liability insurance policy
Reporting claims: If you become aware of an error or any circumstances which could reasonably be expected to
be the basis of a claim however unmeritorious, you will give written notice, along with the fullest information as
soon as practicable.
Can be circumstantial or alleged errors which expect to result in a claim. Look to reasonable person
Common errors with clients and obtaining instructions
o Title registered as tenants in common despite instructions to Register as JT. To avoid this discuss legal
implications and take notes
o Client claims unaware of presence or effect of charges registered on title
o Failing to obtain correct mailing address to be noted on title for purchaser
Review of the purchase K
o Failing to notice or ascertain that more than one legal title to be conveyed as part of purchase
transaction
o Failing to notice/explain holdbacks. Review K in detail
o Failing to identify non-resident tax issues. When dealing with non-resident situation, ensure the correct
amount is held back as different amounts are required depending on property sold
Mortgage transactions
o Wrongfully assuming transaction governed by past practice/lender. Always verify instructions.
o Failing to note mortgage to be secured against multiple properties
o Failing to obtain appropriate insurance burden for bare land strata
o Failing to review pay-out statement from lender
Searches and investigations
o Failing to resolve undertaking dispute prior to the closing of LTO
o Courier fails to deliver closing documents on time due to weather
o Assuming extensions will be granted as a matter of course
o Failing to review undertakings
o Failing to correct registration errors prior to defect notice expiry
Expanding your Practice to Commercial Real Estate
- Commercial real estate is a transaction with a primarily business or commercial purpose involving real property
- If you are taking on a commercial file, it is always wise to take a moment to consider what legislation might
apply and what searches should be done that are outside the usual residential practice
- You should always read this K because the person who has drawn the K may have attempted to force the
standard residential K of purchase and sale to fit commercial.
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Marketing the Property
Real Estate Development Marketing Act
Section 2: Application
o All new properties which are marketed in BC
o The property doesn’t have to be in BC
Section 14: Disclosure
o Developer must prepare a disclosure statement, file it with the superintendent and include all material facts
Section 1: Definitions
o “Material Facts” are defined as anything that affects or could affect the value, price or use of the property
Section 15: Providing Disclosure
o Have to give disclosure statement before entering into K for p+s
Section 16: Amending Disclosure14
o Have to amend disclosure statement as soon as aware that it is no longer correct or something has changed
o Have to provide new disclosure statement to each purchaser who has yet to receive title
Section 23: Effect of Disclosure
o A K for p+s is enforceable if you fail to disclose a material fact.
Ulansky v. Waterscape Homes Ltd. Partnership 2010 BCSC
KEY FACTS:
o People that live in Discovery Bay buy new condos in the skye tower b/c they don’t like the short term rentals
there.
o After completion of K for p+s they find out that zoning allows short term rentals in skye
o Ptfs want their K rescinded under s.23 of REDMA b/c of failure to disclose material fact.
ISSUE: Did waterscapes disclose all “material facts” as required by REDMA?
HELD: No
RSNS: Short term rental is a material fact because it affects the way you can ‘use’ the property.
TEST: Would a reasonable person conclude that the fact at issue would affect or could be expected to affect the price,
value or use of the property?
Marzarei v Icon Omega Developments
KEY FACTS:
o Development in Alberta is marketed in BC
o People who entered into K of p+s claimed lack of disclosure under s.14 of REDMA
ISSUE: Is REDMA intra vires the province even though it applies to people marketing property that are not in BC?
HELD: Yes, intra vires
RSNS:
o The act only applies to people when they decide to enter the BC market. Free to market their property however
they want outside the province.
o If a developer doesn’t want to be subject to the act they don’t have to market their property in BC
o In pith and substance this act is about protecting consumers in BC so falls under s.92(13)
RATIO: REDMA is constitutionally valid and applies to anyone who markets a new development in BC regardless of
where the property is located.
299 Burrard Residential Limited Partnership v. Essalat 2012 BCCA 27
KEY FACTS:
o Disclosure under REDMA happened about a certain completion date
o 2 years after K for p+s the building is finished, which is 8 months after the completion date noted in the
disclosure
o Developer knew the completion date would be later even before they signed the K for p+s
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ISSUE: Does a change in completion date allow a K to be rescinded under s.23 of REDMA if it isn’t filed as an
amendment?
HELD: Yes
RSNS:
o Based on superintendent’s policy that the completion date should be disclosed, it therefore must be filed as an
amendment as soon as the developer is aware that it has changed
o Unreasonable to sign K for p+s knowing that the completion date was wrong in the disclosure statement
o Affects the value of the property as the market changes over time, therefore completion date is a material fact.
o REDMA is a consumer protection act and must be strict about filing disclosure to maintain meaningful protection
o Developer’s behaviour just must be reasonable, not perfect.
RATIO:
The court will strictly enforce the need to file amendments to disclosure statements.
NOTE:
If the disclosure statement changes in a material way, the purchasers may choose to rescind the K.
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Real Estate Licensees
Relationship with Principal
Agent’s authority
- Agent is recognized as having a fiduciary relationship with their Principle
o Special relationship in Law, where someone is relying on your particular skills – trust/vulnerability
- Heightened duties and responsibilities
1. Duty to disclose all relevant information
2. Duty not to be in conflict of interest with the Principle
3. High standard of professional conduct – protects the integrity of the profession
Listing licensee
- Engages with the Vendor and provides them with advice, then the house is listed for sale
- Vendor is the principle
- May also owe principle-like duties to the Purchaser where they are involved in advising purchaser
Selling licensee
- This is the agent that actually ‘sells’ (i.e. goes out and makes the deal) the property; may not have an existing
relationship with the Vendor. Usually engaged by the purchaser.
- Presumption that the selling licencee’s principle is the Purchaser
- May also have a principle-like relationship with the Vendor where circumstance warrant it
Buyer Agency
- It was not always clear that the purchaser was the principal of the selling licesee
- In the 1990s in BC case law often refers to “assumed buyer agency” which means that the selling licensee is not
necessarily the agent of the purchaser
- This is no longer correct, it is clear now that the purchaser is the selling licensee’s principal
Designate Agency
- In the past, a real estate brokerage was seen as ‘one mind’
- Therefore two real estate agent’s working in the same brokerage could not be the selling and listing agent on a deal
unless they got a limited dual agency agreement
- In Jan 2012 legislation changed this so that an agent engaged by either the vendor or purchaser is their ‘designated
agent’ and is seen as acting independently of the brokerage
- So you no longer need a limited dual agency agreement to work with another licensee in your brokerage
Limited Dual Agency:
It is a conflict of interest to act for both parties, so Rule 5 -10 allows Real Estate Agent’s to do this if they have
consent of both parties and disclose all material facts to both parties.
Designated agent will deal with parties impartially
Designated agent will have a duty of disclosure to both buy and seller except the DA will not disclose:
- what the buyer is willing to pay or terms/seller willing to accept in price or terms (each party’s bottom
line)
- If two buyers, what other buyer offering
- Motivation of buyer or seller unless authorized by the party
- Personal information
Designated agent will disclose defects about the physical condition of the property known
Will not negotiate on either party’s behalf
DeJesus v. Sharif
A limited dual agency K limitis fiduciary obligations so as to make the transaction possible. In particular, it limits
disclosure duties of the agent and the agent agrees to impartial to both parties. However as you cannot be impartial to
yourself and you cannot prevent yourself from disclosing information to yourself, it is impossible to have a dual agency
agreement where the vendor and agent are the same person.
15
Duties to Principal
Statutory Duties
Real Estate Services Act
o Complete Code for the organization of Real Estate Agents
o Very similar to the Legal Profession in the way they self-organize
o Establishes Real Estate Council
Section 1: Definitions
Real Estate Services – three different types of service: renal property management, strata management, and trading
services (we are concerned with trading services)
Trading Services – advising on price, making representations about the trade, showing real estate, receiving deposit
money, etc
Section 2: Application
RESA applies to every person who provides real estate services, whether or not paid
Section 3: Licence Requirements
You must be licensed in order to provide real estate services
Section 4: Licence Requirements
Cannot request remuneration for these services unless licenced under the RESA
Section 35: Statutory Duties of Licensees
(1) Professional misconduct – contravention of the RESA or RESA Rules
(c) wrongful taking or deceptive dealing
(d) incompetence
(2) Conduct unbecoming – similar to lawyer code
(a) acting contrary to the best interests of the public
(b) undermines public confidence in the real estate industry
(c) bring real estate industry into disrepute
Section 56: Provides for regulations for professional sanctions if Licensees contravene certain rules
- Regulations have been made.
Real Estate Services Act Rules
Rule 3-3: Duty to act in the best interests of the client and to follow their instructions etc.
Rule 3-4: Duty to act honestly and with reasonable care and skill
Rule 5-1(1-2) to 5-13: Duties for written agreements and disclosure to clients
Rule 5-1(1-2): Requirement for written service agreement with client
Rule 5-4: must deliver written offer
Rule 5-5: Licencee is prohibited from inducing a party to breach a K with intention of entering another
Rule 6-1: Payment to unlicensed person is prohibited
Duties in Contract and Tort
Obey Instructions
Glasner
of Principal
Exercise
Nixon
reasonable care
and skill
Fletcher
Preparation of the
Purchase K
Marketing
Jakube
Price
None
Must obey all of the principal’s instructions that are lawful and reasonable. If you don’t
want to do so, don’t act for them.
When giving a property valuation, must exercise the care of a reasonably skilled
Licensee in that market
Licensee has a duty to exercise reasonable care and skill in verifying all material facts
about the property when acting for either the vendor or the purchaser. (have to
determine if well actually does have water)
(make sure that reno’s are actually done to code)
Must create a legally enforceable K. (Failed here b/c allowed vendors to covenant
something they could not deliver)
Can’t misrepresent the property in the marketing material
16
Material
Standard of Care
Baillie
Fiduciary Duty
Test
Guerin
Presumptive
Dejesus v
Duty
Sharif
Duty of
Loyalty
Baillie
Knock
Estate
Knock
Estate
RESA Rule
5-11
Baillie
Ocean
Realty
RESA Rule
5 - 10
Remedy
Baillie
Licensee’s are held to the standard of a reasonable licensee operating in that area.
However, if the licensee holds themselves out as having a specialized skill they will be
held to the standard of a reasonable licensee with that skill.
The nature of the relationship gives rise to the fiduciary duty, not the category of actor.
It is presumed that a licensee owes both the vendor and the purchaser a fiduciary duty.
The onus is on the licensee to rebut this by showing they did NOT have a relationship of
reliance, trust and confidence with the purchaser or vendor.
Giving advice which is then relied on creates a fiduciary relationship
If there is no interaction between the agent and the alleged beneficiary then there can be
no fiduciary relationship.
Cannot act for two principals without consent as this is a conflict of interest.
(1) This section applies if a licensee receives or anticipates receiving, directly or indirectly,
(a) remuneration as a result of providing real estate services to or on behalf of a
client, other than remuneration paid directly by the client,
(b) remuneration as a result of recommending
(i) a home inspector, mortgage broker, notary public, lawyer or savings
institution, or
(ii) any other person providing real estate related products or services to a
client, or
(c) remuneration as a result of recommending a client to a person referred to in
paragraph (b) (i) or (ii).
(2) The licensee must promptly disclose to the client, and to the licensee’s related
brokerage,
(a) the source of the remuneration,
(b) the amount of the remuneration or, if the amount of the remuneration is
unknown, the likely amount of the remuneration or the method of calculation of
the remuneration, and
(c) all other relevant facts relating to the remuneration.
A fiduciary cannot make secret profits from the principal’s property as this is a conflict of
interest.
Must disclose all material facts that might influence the conduct of the principal.
Reasonable person test.
Before providing trading services to or on behalf of a party to a trade in real estate, a
licensee must disclose the following to the party:
(a) the nature of the representation that the licensee will provide to the party;
(b) as applicable,
(i) that the licensee, or a related licensee, is or expects to be providing
trading services to or on behalf of any other person, in any capacity, in
relation to the same trade in real estate,
(ii) that the licensee, or a related licensee, is or expects to be receiving
remuneration relating to trading services referred to in subparagraph (i)
from any other person, and
(iii) the nature of the licensee’s relationship, or the relationship of the
related licensee, with any person referred to in subparagraph (i) or (ii).
A fiduciary that makes a secret profit must disgorge their profits to the ptf.
17
Duties from Principal to Agent
o Must disclose all material facts about the property to the agent
o Must co-operate with the agent (i.e. allow them to show the property)
o Must pay commission when the deal concludes
Duties to Third Parties
o Where there is no fiduciary or agency relationship, the party affected is said to be a “3rd party”
o The remedies available are in tort
Real Estate Services Act Rules 5-1 to 6-2 see above
Duty of Care
Bango v Holt
Breach of the Duty via
Misrepresentation
Betker v
Williams
Fletcher v
Hand
Bango v Holt
Reasonable Reliance
Loss Resulted
Remedy
Hedley
Byrne
Bango v Holt
Licensee’s owe a duty to exercise care when making representations
that others will reasonably rely on.
Vacant lot advertised as building site, but bylaw prevented this. Licenee
liable to purchaser as a 3rd party in neg misrep.
Licensee failed to verify facts from vendor about amount of water from
well, was liable to 3rd party for neg misrep
Not reasonable to rely on incomplete info given by listing agent, neg
misrep to communicate info to 3rd party without verifying.
The ptf must have reasonably relied on the misrepresentation to their
detriment to successfully claim negligent misrep
As this is tort, only reliance damages (i.e. whatever the ptf lost).
High handed and duplicitous behaviour: Kuller v. Lee 2011 BCSC 1648
18
Mortgages
Introduction
Terms
Mortgagor: The land owner, or the person who is in debt or debtor
Mortgagee: Creditor, the bank/lender
Mortgage: An interest in land in payment for security of a debt or obligation
Fundamental terms of a Mortgage
o The length of the mortgage
 The end of the term doesn’t mean the whole thing is paid off. You may have to re-mortgage at a new
interest rate
o The frequency of payment
o The interest rate
o The property has to be identified clearly and then the register or title
o Penalty or default provisions
o The amount, what would the amount of the mortgage be
Although they traditionally are seen as payment of a debt for land, banks now bundle your entire indebtness into one
mortgage.
History/Nature
- Had to give up the land to get the debt, so it was a bad deal for the land owners.
- The mortgagor would convey the land to the mortgagee but retain possession of it and use it, but still a transfer
of the title, subject to the person repaying by a certain date.
- Mortgage was construed very strictly on its terms, it you didn’t pay back, than you lost all your claims on the
property and STILL had to pay the debt back. This is a very harsh result when dealing with the land.
Law/Equity
- Law of equity arose to deal with this apparent harshness. The courts started to look at the substance of the
transaction and not its written form. Started to look at the fact that a conveyance of the property was a security
for repayment of debt not really a transfer of land as we understand it
- Equity of Redemption: Legal and Equitable right in property
o If you default from a legal perspective, by not repaying on time, court infers the equitable right to
redeem by a certain period of time. Debtor is given a reasonable period of time to repay the mortgage.
o So have two different payment periods, the legal one and the equitable one, if you redeem
o Section 44 of LEA: Rules of equity prevail over the rules of law
o Right to redeem can only be extinguished by 3 different things:
 (1) A lapse of time under the Limitation Act, usually expires in 6 years
 (2) An order of foreclosure or sale by the court
 (3) An actual sale under the mortgage document itself
- Right to Foreclose: The opposite of redemption, is also an equitable principle.
o If debtor breaches the mortgage after they defaulted the mortgagee can apply for a foreclosure
o Under Section 16 LEA, have to redeem within the time ordered by the court or forever be deprived of
your stake in the land. The court orders a reasonable time, if after the time they have not redeem then
get an order absolute, the creditor thinks they can go ahead and sell
o Only the first mortgagee has the right to foreclose and sell the property. Therefore if you are the second
mortgagee and want to foreclose, you must take on the first mortgagor’s interest before you can do so.
- We have both legal and equitable aspects of a mortgage, the legal aspects are the agreements and equitable are
the right to redemption and the right to foreclose
19
Torrens System Assumptions
- Land Title Act governs
- Our Torrens System adopted the equitable view that the mortgage is a charge on land (legal estate does not
pass to the mortgagee) only an interest in land is registered.
Common Elements
Redemption
- Equitable Interest that can be mortgaged itself (has its own value)
- Right to redeem mortgage when date of agreement has passed
- Cannot contract out of it—but can sell it.
- ****This is why people try to say something is a mortgage!!! So that they can get this!!***
Requirement of redeemability
- You have to be bable to pay the mortgage back within a certain time
- Equitable principle
- Solidified in s.10 of the Federal Interest Act
Collateral advantage
- It is not improper for a mortgagee to recoup more money than the stated rate of interest i.e. other charges, fees
bonuses
- Just can’t charge a criminal rate of interest over-all
Clog on equity
- Anything that ‘clogs’ equity i.e. that prohibits the expression of an equitable principle such as the right of
redemption is invalid
- So mortgage K can’t set out circumstances in which redemption can’t happen
Release of liability
- At Equity a mortgage involves personal covenants, so even if you sell your property to a 3rd party and they agree
to take over the mortgage, you are still personally bound to ensure the debt is paid
- Over-ruled By:
Property Law Act ss.20-24
- Allows original mortgagor to be released from their personal covenants when they assign the mortgage to
someone else.
- Must give notice and “someone else” must be satisfactory to the mortgagee.
20
Existence of a Mortgage
Legal Mortgage
Issue
Case/ Section
What is a
LTA s.1
Legal
Mortgage
Effect
North
Vancouver v
Carlisle BCCA
1922
LTA s.231(1)
and (2)
To Create
LTA s.225(1)
LTA s.225(2)
LTA s.225(3)
LTA s.225(5)
Register
LTA s.29(2)
LTA s.238
Richmond
Savings BCSC
2000
LTA s.28
Ratio
Notes
Charge: interest in land that is less than fee simple that includes an encumbrance.
Encumbrance: includes a mortgage
Old common-law rule: when giving a
mortgage, the mortgagor actually
transfers the property to the
mortgagee. There is an actual
conveyance.
(1) Takes care of the “transfer”
problem and says that a
mortgage is just a charge not a
conveyance
Have to comply with this section
Mortgage must be in 2 parts
Part 1—single sheet of paper, basic
info
Over-ruled by statute: LTA s.231
(2) But this then muddies the waters a little bit,
b/c it says that both parties are “entitled to all
the legal and equitable rights and remedies
that would be available to them if the
mortgagor had transferred the mortgagor’
interest in the land”
Parties
Legal description of land
Signatures of mortgagor and witness
Terms that are required by regs to be
included in part 1
(e) Anything else the director requires
Part 2—contain all the other terms,
Can adopt standard terms under s.227 or can file
either (a) standard terms (b) standard your own standard terms to use every time s.228
filed terms (c) unique terms that have (i.e. a big bank would do this). In either case you
to be exactly written out in this part. can modify the standard terms under s.226(1), but
if you do that under s.226(2) you need to (a) put a
statement in Part 1 and (b) put the actual
modification in (i) part one if space permits or (ii)
as a schedule to part 1
Someone that is transferring land is
So gotta make sure you register!
NOT affected by unregistered
interests…
Can’t register a mortgage UNLESS it complies with the LTA (creation rules above)
“Mechanical errors of form should
Thus can’t say something isn’t a mortgage due to
not be allowed to undermine the
mechanical failure under s.238 LTA
registration, binding effect or
validity”. All that is required is to
Also, a mortgage can secure more than one
have a transparent agreement
obligation.
between the parties—so that it is
clear how the mortgage was
intended to operate.
Important to register because whoever registers first (date and time) gets priority.
21
(a)
(b)
(c)
(d)
Equitable Mortgage
Issue
Case/ S.
Existence
LEA s.44
LTA
s.231(2)
Registration
LTA s.33
LTA s.28
Creation
Notes
1. Equ/future
2. Legal Fails
Notes
Royal
Bank v
Mesa
Nguyen
Kreick
Duplicate of
Indefeasible
Ratio
Notes
The rules of equity take precedence over the rules of law
Preserves equitable mortgages
Equitable mortgages cannot be registered
As interests take priority based on registration, this means that an equitable mortgage is
only good against the debtor but not against other creditors who have legal mortgages.
Can be created three ways:
1. Equitable or future interest
2. Legal mortgage fails
3. Deposit of duplicate indefeasible title
Usually this is when the right of redemption is itself mortgaged.
Look to see if the indicia of an equitable mortgage are present:
- Clear words of pledge, mortgage or charges
- Words of seizure and sale or of foreclosure
- A mortgage debt stated of ascertainable (fixed) sum
- Provision for the holder of the duplicate title documents to require production by
the deliverer of a registerable form of legal mortgage or charge, either on request
or on the happening of a stated event such as default
- Any suggestion that a registerable form of legal mortgage was ever asked for
Unregistered mortgage (home-written) on
Reasons it WASN’T an E.M.:
property civilly forfeited. Failed legal mortgage
- Purpose of loan was not to finance
requirements so is it an E.M.?
the purchase of the property
- Nowhere in agreement does it
Held: NO just a contract between two people not
mention a charge or encumbrance
attached to land.
- No lien mentioned
- Nothing would prevent owner
from selling land
Surrounding circumstances and parol evidence are allowed to determine the nature of
agreement.
Indicia of Option to Repurchase (found here):
- Loan and grant of security did not happen at the same time
- No undue influence or unconscionability
- Fixed price was adequate and fair
- Purchaser obligated to pay a fixed balance of purchase price if option not exercised.
Provision that vendor could continue to live in the house rent free
Blackaby v Where document is clear and unambiguous that it Argued here that it was an E.M. so
Rabson
is NOT an E.M. difficult to claim that it is—turns on that the defaulting party could get
credibility of oral evidence of the parties.
the right to redeem.
LTA s. 176 The registrar may issue a duplicate of indefeasible title at the request of the registered
owner
LTA s. 195 Must return duplicate of indefeasible title to the land title office in order to register a new
charge
LTA s.
Must return duplicate of indefeasible title to the land title office in order to register a
187(b)
transfer in land
Thus in effect, giving someone a duplicate of indefeasible title means you can’t do anything with your
land until you get the duplicate back from them.
Royal
There must have been mutual intention between
Dissent:
22
Bank v
Mesa
the parties to create an equitable mortgage
(evidence by the indicia listed above) in order for a
transfer of a duplicate of indefeasible title to
create an equitable mortgage.
Can’t rely on rules from other jurisdictions b/c we
have a land title system.
3 reasons you might give someone a
duplicate
(1) Safekeeping
(2) Undertaking not to sell until
obligation discharged
(3) Equitable Mortgage
Which situation has occurred
depends on the intention of the
parties there is no presumption that
an E.M. was intended.
23
Statutory Protections
Interest: Price paid for the privilege of using someone else’s money. Paying them for using the money and the risk
o Generally, when you borrow money you have to pay the lender a certain amount in addition to the
principal amount for the privilege of borrowing money from time.
Simple interest: Calculated over the term of the loan without any compounding. Principle X interest rate X number of
years
Compound interest: Where interest from a previous time unit is added to the amount of which the interest rate is
applied to.
o Vast majority of interest we deal with, compounding in the norm
Nominal rate: The rate on the face of the document, different from effective annual rate (due to compounding, fees,
bonuses, penalties, different rates).
Effective annual rate: The actual rate that you pay given the effect of compounding. The amount actually paid for after
fees, penalties, bonuses, compounding etc.
Compounding: If you compound you have more to pay, generally calculated annually or semi-annually.
o Why compounding? Banks make more money; for mortgagor: make more payments instead of monthly
payments.
o For our purposes -when you are calculating an amount paid, remember that the amount paid is not
solely on the face of the document - if compounding occurs, you will be paying more (important for
criminal rate or Interest Act violation). Ask for a payout statement from the bank to figure out how
much you actually owe.
Issue
“Blended”
payments
Case/ Section
s.6 Interest Act
Kilgoran Hotels
How Much
Interest?
What Happens
at Default?
s.7 Interest Act
s.8 Interest Act
Reliant Capital
Over Charging
Length of
Indebtedness
s.9 Interest Act
s.10 Interest
Act
Criminal Rate
s.347 CCC
Degelder
Ratio
Notes
Unclear what types of mortgages this
Old statute… since no one knows who
applies to, but basically you can’t recover
it applies to everyone just complies
interest unless it shows the principal and
with it.
rate of interst calculated yearly/half yearly
The purpose of s.6 of the Interest Act is to
Thus as long as there is disclosure of
protect the mortgagor by preventing
the principal, rate of interest and how
mortgagee from concealing the true rate of it is calculated you will comply with
interest.
s.6.
You can only get the interest rate that is stated in the mortgage agreement.
Cannot charge a fine, penalty or greater rate of interest on default: default is the
triggering event.
Where an increased rate of interest just
Court also recognizing that the parties
happens with the passage of time, it is not
are sophisticated business people, and
in conflict with s.8. To trigger s. 8, the
that it is reasonable to charge a higher
higher rate of interest must occur on
rate of interest one month before
default so as to be a fine or penalty.
finishing because if you aren’t paid off
by then risk is substantially increased
(high risk short term loan)
An interest overcharged can be recovered
Cannot be indebted forever, after 5 years you can pay-out the mortgage by paying
principle remaining and the 3 months interest. Banks can’t force you to be indebted
to them for more than 5 years.
(1) If you enter into an agreement at a
Criminal rate is defined as exceeding
criminal rate, or
60%. Interest is defined not just as the
(2) you receive payment at a criminal rate
percentage listed, it is the sum total of
then you are guilty of an indictable offence. everything received.
For the purposes of s.347(1) interest rate is However, By act of a debtor, the
24
calculated by looking to the wording of the
agreement: does it on its face exceed 60%
rate of interest based on the time period
stipulated by the agreement?
Banks
Residential
credit
transactions
Bank Act s.450
Business
Practice and
Consumer
Protection Act
(BPCPA)
BPCPA s.9
BPCPA s.8
BPCPA part 5
s.66 & 67
BPCPA s.72
BPCPA s.10
Mortgage
Brokers
Mortgage
Brokers Act
Part 2
creditor cannot suddenly be
committing an offence. If the debtor
choses to pay early, doesn’t make the
creditor liable. So cannot punt an
otherwise legal agreement into the
realm of criminal.
For the purposes of s.347(2) interest rate is
calculated by looking at what actually
happened: how much money was paid in
interest or fees over what length of time? In
this way, an agreement which does not
offend s.347(1) may become illegal.
Requires banks to disclose non-commercial borrowers the cost of borrowing
Supplier: Person who in the course of business supplies goods or services, including
real property. Should not engage in an unconscionable transaction with respect to a
consumer transaction.
Goods are defined to include credit
Consumer transaction: must be for a household purpose
(1): General prohibition - a supplier must not submit or engage in an unconscionable
consumer transaction.
(2): Burden of proof that it is conscionable transaction is on the lender, reverse onus
Looks to what the lender knew or ought to have known.
- Relation to other similar transactions; language; reasonable prospect of
repayment; harsh terms
- Court will look at the circumstances: Undue pressure on the borrower, if the
lender took advantage of a particular weakness (physical or mental infirmity,
illeteracy, inability to understand transaction), whether cost of transactions
exceeded other similar transactions, whether at the time there was no
reasonable prospect of repayment, or whether the terms were so harsh as to
be inequitable.
lender has to provide the borrower with a disclosure statement (info on agreement
entered into) at least two days before entering into this type of situation, mortgage
- Can obtain registrable discharge within 30 days, if all money is paid off
- They can reopen the mortgage, relive the borrower of any obligation to pay, or
order them to make any payment.
Additional relief powers to the courts, allows the vendor to reopen mortgage and
take account of transactions; reopen any transaction an relieve borrower or any
obligation above the prime interest rate; can order borrower to pay excess; can set
aside the agreement
- Requires protection in the context of
Disclosure: they have to disclose any
consumer protection
interest. They get paid by the banks,
- Applies to mortgage brokers and some so they get a commission and if they
types of transactions
get any fee above that they have to
- Requires disclosure and conflicts of
disclose it
interest disclosure statements.
 e.g. if a mortgage broker is
interested in a particular
property, they have to disclose
that interest to the lender
(pecuniary interest in the deal
over and above their job as a
mortgage broker).
25
Mortgage Pitfalls
Issue
Assignment
Case/ Section
LTA s.209
LTA s.27
Assumption
LEA s.36
Property Law
Act 20-24
Priorities
LTA s.22
LTA s.28
LTA s.23
LTA s.25.1
LTA s.26(1)
Gill v Bucholtz
Ratio
Notes
Transfer must be in a proscribed form, gives the person all the rights and benefits of
the mortgage. Transfers all the associated rights and equities
You cannot assign more than is due to you, the transferee takes subject to the equities
remaining
Have to give notice to Mortgagor in writing to assign your interest to another party
- Deal with what happens to the equity of redemption when you assume a
mortgage. Has overruled the CL that original mortgagors are liable forever
- These sections mean: (1) Changed the common law in that the original vendor is
released 3 months after the mortgage is expired, as opposed to forever. (2) An
original borrower can request that the vendor release them from liability and that
release cannot be unduly refused. (3) If there is a default under the mortgage,
they have a right of action against the new purchaser, even if they don’t yet have
privity of contract
- 3 Principles
(1) Only applies to the assumption of an existing mortgage
(2) Limits the ongoing liability of an existing mortgagor
(3) Gives the ability of the mortgagee or the bank which has the ongoing credit
extended to claim against mortgagor number 2.
* Doesn’t happen often. These provisions are limited to residential mortgages*
Interests must be registered, and interests past at the date of registration NOT
execution of instrument.
Priority is given based on date and time, subject Can register a priority agreement
to contrary intention in the instruments
on title to change order, need
themselves
agreement of all affected parties.
Upon registeration, a title holder is granted indefeasible title which means that it is
conclusive evidence that they are the owner of the land, subject to a few exceptions
notably (i) of a previous title to show registered owner obtained title through fraud
A void instrument upon registration does not
Thus there aren’t the same
create an interest in land.
protections for lesser interests as
there are for fee simple
Registered owner is deemed to be entitled to
Therefore registration for lesser
the estate/interest/claim created or evidence by interests only creates a rebuttable
the instrument in respect of which a charge is
presumption… not conclusive
registered, subject to some exceptions
protection like indefeasible title for
fee simple.
(1) Under s.23, Registration creates
The torrens system in BC is not
indefeasible title, with the exception under absolute: so if you are dealing with
s.23(2)(i) of an action by a true owner to
a lesser interest need to be more
recover where the second owners is part of diligent against fraud.
fraud
(2) LTA does not give the registered owner of a Currently this is dealt with by
charge the same quality as an owner. They requiring more extensive client
are deemed to be entitled, but this is a
verification.
rebuttable interest. Under s.26(1)
(3) S.25.1 LTA preservers the legal maxim of
nemo dat, that is you can’t give what you
don’t have.
o Therefore if you acquire interest in
26
Foreclosure
n/a
Requirements
of Lenders
n/a
Conflict of
Interest
Appendix C
Code of
Professional
Conduct
Fraud
n/a
Homewood
mortgage v
Lee
land though a void instrument,
then you don’t acquire that
interest
(4) Based on these provisions, Court holds that
Torrens system does not provide absolute
protection for less than fee simple
registered interests.
(5) Where a fraudster has registered a lesser
interest before the true owner has become
aware of the fraud, that lesser interest may
be subject to removal upon the true owner
taking back title, regardless of whether the
interest holder was bona fide.
This is the opposite side of the right to redeem, the right to foreclose, ask Court to set
a time limit in which the right to redeem must be exercised.
- Often banks require lawyers to do things
Example:
which are outside their expertise as lawyers
-Ensure there is “adequate”
- You have to be very careful that you don’t
insurance… only an insurance
agree to do something which is outside
broker could do that
your realm of expertise
-“value of property at closing”—
- Read the instructions very carefully and
you have no knowledge of this
don’t agree to do something which you
don’t have control over and don’t agree to
do as lawyers
- Don’t want to rely on a 3rd party in order to
carry out your promise
Lawyer can act for both purchaser and the
But if lawyer acts for both they
lender in a simple conveyance under certain
cannot act in any foreclosure
circumstances.
proceedings relating to that
transaction for either party subject
to certain exceptions—i.e. where
only dealt with bank in order for
purchaser to sign docs or mortgage
assumed by another party so
original no longer has interest.
Mortgage Fraud has become more important in Law society Rules have changed to
the last decade: client verification and avoiding
reflect this, have to know report
delay are solutions to this problem.
w/n five days to get a discharge, if
you haven’t received registerable
mortgage w/n 60 days have to
report it.
Failure to verify identity resulted in an unenforceable mortgage
Facts: Lee is aging and incapable of managing affairs. So Homewood receives
application from mortgage broker on an unencumbered home. The mortgage was
granted, but the application was a forgery.
Decision: Court relies on overwhelming evidence that Lee did not sign the mortgage or
authorize the documents. The mortgage is invalid and so the company was left not
receiving any benefit. They didn’t adequately verify the identity of the person getting
the mortgage, the address and signature were very different so their fault
27
Pre-Closing Claims
When may a purchaser refuse to close?
First, a purchaser may refuse to close because of the non-satisfaction of a condition precedent that the purchaser will not
waive and that cannot be unilaterally waived by the vendor. (weeks 4-6)
Second, a purchaser may refuse to close if the vendor has breached a fundamental promise in the agreement of
purchase and sale, a term classified as a condition as opposed to a warranty.
Third, a purchaser may refuse to close if the vendor cannot perform his or her promise to convey the quality of title
prescribed by the agreement of purchase and sale.
Fourth, a purchaser may refuse to close if the vendor has made a false representation and the other elements of a claim
for the equitable remedy of rescission are satisfied.
When may a vendor refuse to close?
First, a vendor may refuse to close where the purchaser does not have the purchase price available.
What is the effect of “time is of the essence” on closing and pre-closing problems?
Breach of a Fundamental Promise
Issue
Case/
Section
n/a
Ratio
Vendor promises to maintain property in condition “as viewed”
Warranties
Clause
8
Clause
7
n/a
n/a
Breach of promise
of “size”
Perrell
article
What type of
promise is
“fundamental”?
Conditions
Notes
There are two types of promises: conditions and warranties
What will be staying with the property as a fixture and what is going as a chattel.
Size of the property, ability to use land for the purpose you want etc.
Fixable amount, or where damages would be
What is a condition and what is a
appropriate, i.e. presence of screen doors, number
warranty all depends on what is
of rose bushes
important to the purchaser and
how significant the impact is on
the property.
If the sale of land is by ‘block’, a deficiency in size
If the sale of land is on a per unit
must be material to allow the purchaser to refuse to basis, then a deficiency in size is
close. Where the size on paper differs from the
relevant as long as it is more
actual size, but the purchaser viewed the property
than de minimus and depending
and saw the clearly demarcated boundaries of the
on the circumstances.
actual size, the deficiency is likely not material
(Lamb)
28
Failure to Convey Good Title
Good Title = A “marketable title”. Defined by case law as a title that can, at all times and under all circumstances, be
forced upon an unwilling purchaser who is not compelled to take a title with defects, clouds, or the reasonable threat of
litigation to mar peaceful possession.
Issue
Case/ S
Ratio
Notes
Vendor’s Obligation Clause 9
Vendor promises to provide title
With the exception of conditions, provisos,
free and clear of all
restrictions, reservations etc. that appear in the
encumbrances.
original Crown grant, OR restrictive covenants/
rights of way in favour of utilities and public
authorities OR existing tenancies set out in
clause 5
LTA s.50
Reservations and restrictions in the original crown grant which are permitted by
clause 9:
o Crown has title to things like minerals, water, coal, petroleum, gas and water.
They have the to take portions of land.
o Also municipal taxes, registered charges and restrictive covenants
Chen v
To fit a restrictive covenant held by a utility into the exception, must be something
Hsu
that is necessary for the operation of the holder as a public utility.
Where “defects”
LTA s. 23
Registered owner has indefeasible Except:
may come from
title (which would be clear title).
o reservations to Crown
o Federal/Prov. taxes
Looking to see if there are any of
o Municipal taxes
the exceptions and make a
o lease for less than 3 years
determination of the title is clear
o highways and public easements
or not.
o expropriations and escheats
o registered charges on title
o incorrect boundaries
o fraud
o restrictive conditions imposed by Forest
Act.
LTA s. 20
No transfer of land occurs except if However, doesn’t mean that agreement is not
it is registered
enforceable between the parties. Just can’t
effect 3rd parties with a claim of an
unregistered transfer
LTA s. 27
Registration gives notice to 3rd
So anything registered may cause you a
parties
problem
LTA s. 29
Anyone who is taking an interest
So if something isn’t registered, may be difficult
in land is not affected by
to claim that it is a defect.
unregistered interests even if they
had notice
LTA s.
Just b/c an interest is registered,
So even if there is something registered on
26(2)
doesn’t necessarily mean it is a
title, it may not be a defect, for example if it
valid interest
isn’t valid. Lawyer has to make the call whether
something is valid and thus may be a defect…
LTA s.
Registration of a restrictive
221(2)
covenant is not evidence of its
enforceability
What the Parties
Clause 13 Parties agree to close on undertakings of lawyers should vendor need purchaser’s
Must Do to Fulfil
& 14
money to discharge a financial encumbrance (i.e. their mortgage) or should the
Obligation
purchaser require the transfer of property before their mortgage can be released to
the vendor.
29
Can’t say there is a
defect in title if this
is due to your
failure to uphold
your own duties
PLA 4-6
PLA s. 3
PLA s. 6
LTA s. 185
LTA s. 186
Norfolk v
Aiken
Is the defect
sufficient to entitle
the purchaser to
refuse?
Chen v
Hsu
Has the defect been
cleared?
Clause 13
& 14
Norfolk v
Aiken
Seguss v
Fawcus
Chen v
Hsu
Campbell
v Frolek
Purchaser has an obligation to prepare transfer documents. Vendor must supply
Purchaser with the signed transfer instruments.
Either party may apply to the Supreme Court to decide on transfer issues
A person who is transferring land
Note: Recent exception to this in Mariner
must first register their own title,
Towers, Court allowed purchaser to contract
make sure that it is their own
out of their s.6 property rights where pre-sale
name, otherwise transferor cannot condo K signed with shell corp but transfer
sue.
coming from main developer
Must use approved form to
Which is form A freehold transfer
transfer
Covenants incorporated by
Basically, the terms from the Land Transfer
reference unless exempted
Form Act apply to the transfer doc. Shortens
the doc considerably.
Can’t force a party to agree to
Important b/c here, before clause 13 & 14 – so
close on undertakings or in any
one party couldn’t fulfil obligations b/c other
manner that is not stipulated by
party refused to close on undertakings—but
the interm agreement… must be
this was OK b/c no agreement to close that
written in the K to say they had to way.
do it.
Only a material defect entitles a
Examples:
purchaser to refuse to complete.
- restrictive covenant requiring approval of
architecture (chen)
TEST: can the vendor convey
- large easement that prevented building a
substantially what is required by
pool (affected use and enjoyment) (Price v
the K? (depends on the terms of
Malais)
the encumbrance, not what would - financial encumbrances (Norfolk)
likely happen)
- registered lis pendens (Norfolk)
Parties agree that a discharge does This is the reverse of much of the common-law
not have to be registered for
below so important.
financial encumbrances where the
vendor is relying on the purchaser
funds to discharge it.
Title is clear when registrar has
Suggests title may also be clear if the
endorsed the register with a note
encumbrance were to be totally paid off but
of cancellation, i.e. when
just not registered yet. (Shut down in Campbell
discharge of encumbrance
v Frolek)
registered.
Vendor has until the end of the
Ok if they don’t have it clear in the morning, as
day on closing to clear title.
long as they get it done by end of day closing.
Need “clear evidence” that title
W/o undertakings, mere letter saying it would
will be discharged if the discharge be easy and likely happen not enough.
has not been registered to
consider title clear.
Title is not clear when registerable instrument is not produced—even if in reality the
encumbrance has been paid off.
30
Purchase Price
-
A purchaser’s primary responsibility is to pay the purchase price
Need to have the full amount in the Lawyer’s trust fund to show they are RWA
Clause 12- seller may terminate if purchaser can’t pay as agreed.
Time is of the Essence
Issue
Where
Where
Clause 12
LEA s. 31
What it means
Salama
When it ceases
to have effect
Reinstatement
Norfolk v
Aiken
Shaw
Industries
Discretionary
Nature
Salama
Effect of
amendments
Ambassador
Sorenson
Ratio
Notes
Time is of the essence
Where contracts say or do not say time is of the essence, they must receive the
same construction and effect as they would receive in equity
When time is of the essence, parties
Thus failure to perform on time signifies
must perform their obligations on time
a repudiation of the contract and the
or they breach the contract.
other party can make their election to
pursue their remedies.
If neither party RWA at closing, then time is of the essence ceases to be of effect
Where T/E has lapsed due to the fact
neither party RWA on closing, EITHER
party can reinstate T/E by giving
reasonable notice and setting a new
closing date.
The court can refuse to give effect to T/E
where it would be inequitable to do so
Must specifically restate that time is of
the essence at each amendment for it to
continue to have effect.
Whether T/E remains after an
amendment depends on the context.
31
Parties here casual, didn’t communicate,
later one party claimed relying on T/E…
couldn’t. Had to give notice if wanted to
do that.
Here extension of time was not due to
fault, but rather needed to fulfill
essential condition of subdivision
therefore other party couldn’t rely on
T/E
Everyone fulfilled their duties, RWA, but
no one reasserted T/E after amendment
so no longer had effect
Explicitly reasserted T/E after
amendments, so purchaser allowed to
rely on it.
Condition of the Property: General Framework
Issue
Caveat Emptor
Applies to all
Contracts
Where
Cardwell
Hanslo
Curtin v
Blewett
Redican v
Nesbitt
Redican v.
Nesbitt
Notes
“Buyer be Ware” means a purchaser cannot recover for patent or latent defects
UNLESS:
1. The vendor fraudulently misrepresented or concealed a patent or latent
defect
2. The vendor knew of a latent defect rendering home unfit for human
habitation
3. The vendor was reckless as to the truth or falsity of statements relating to the
fitness of the house for habitation
4. The vendor breached a duty to disclose a latent defect which renders the
premises dangerous
No recovery for patent defects even if they are only discoverable with a thorough
inspection
Ex: Vendor not guilty of “concealing” a defect b/c the caulking and rubber mats put
down were for the comfort of the home, and done way before they were selling.
If you want to rely on a condition of the property as a Breach of warranty in the K
purchaser, you need to write this expressly into the
is exception to Caveat
contract as a warranty.
Emptor
Error in Substantialibus is an exception to Caveat Emptor
Condition of the Property: Tort Claims
Negligent misrepresentation:
Queen v. Cognos (1993 SCC)
(1) there must be a duty of care based on a "special
relationship" between the representor and the
representee
(2) the representation in question must be untrue,
inaccurate, or misleading
(3) the representor must have acted negligently in
making said misrepresentation
(4) the representee must have relied, in a reasonable
manner, on said negligent misrepresentation; and
(5) the reliance must have been detrimental to the
representee in the sense that damages resulted.
PDS NOT incorporated
Issue
Where
Contractual
Clause 18
Hurdle
Effect
Bains v
Bhullar
Fraudulent misrepresentation
Derry v. Peek 1889 H.L. (see a more modern iteration in
Ross v. Hobbis as followed in Curtin v. Blewitt)
(1) A false representation or statement made by the
defendant;
(2) Which was knowingly false;
(3) Which was made with the intention to deceive the
plaintiff;
(4) And which materially induced the plaintiff to act;
and
(5) Which caused the plaintiff damage.
Notes
No representations other than those contained in the contract
General exclusion clause cannot override a specific representation that was intended to
induce parties to enter into the K UNLESS it can be shown that the effect of clause 18 was
brought to the purchaser’s attention.
32
PDS incorporated
Arsenault
PDS statement merely warrants the vendor’s knowledge NOT a state of affairs. So statement on PDS do not
necessarily give rise to a claim… but may.
Hanslo
Contents of PDS may give rise to a claim for negligent misrepresentation. See requirements above.
Curtin v
PDS can give rise to fraudulent misrepresentation. See
o Here fraudulent misrep was NOT
Blewitt
requirements above
made out b/c the statement of the
vendor’s was not untrue when it
was made.
o Just turned out to be untrue later
o But to the best of everyone’s
knowledge was true at the time…
o This was statement that there was
no infestation, terminates had been
dealt with two years ago and
exterminator gave ten year
warranty so vendor’s though they
were gone.
Thandi
Can rely on PDS to support claim of neg misrep
Here purchasers couldn’t claim against
BUT: Once a purchaser has obtained a home inspection, then
Vendor for neg misrep b/c had home
unless you fit into one of the caveat emptor exceptions, reliance inspector who should have noted all the
shifts to the home inspector and cannot claim against the
obvious patent defects i.e. mold, sink
vendor. This because the requirement for “reasonable reliance” hole, cracks etc.
is no longer met after you get a home inspection.
Hanslo
However, may be entitled to rely on both the PDS and the
Here, entitled to rely b/c defect was
building inspector… just looking for reasonable reliance, so
about an unregistered easement which
building inspector could render reliance on PDS unreasonable.
is outside the area of the inspector’s
Depends on circumstances.
expertise.
*** remember, not warranting a state
of affairs so vendor only liable if they lie
Gronau v
o Active concealment of a patent or latent defect is fraudulent misrepresentation
Schlamp
o Also constituted an error in substantialibus here b/c Purchaser thought they were getting an
excellent condition apartment building when really the building had a serious defect with huge
financial consequences.
Aldred v
o Vendor’s liable for negligent misrep
Colbeck
o Didn’t meet the standard of care—a reasonable person would not say an oil tank was
decommissioned before checking to make sure the work had been done.
o Here it was obvious a bad job had been done… guy only charged them 900$ and it only took him a
day.
o Court spends most time on standard of care and reasonable reliance… duty of care is pretty much
assumed in these cases.
Bains v
o Vendor falsely misrepresented the type of blueberry plants, which was a fraudulent misrep
Bhullar
o Important b/c this type of blueberry is impossible to harvest mechanically so made a big difference
to the purchasers.
33
Condition of the Property: Contractual Claims
Issue
Where
Ratio
Notes
Contractual
Clause 18
There are no warranties or representations
So see if any of the contractual
promises
except those that are contained within the
warranties below apply.
contract
Clause 8
Warrants that the property will be in
This therefore applies to patent
substantially the same condition at the
defects, Vendor warrants there will
possession date as when viewed by the
be no new patent defects at the time
buyer.
of possession.
Clause 10
The seller acknowledges having provided
This is in addition to the PDS
Addendum 1 separate written disclose of all known latent statement
defects
Clause 13
Can incorporate the PDS statement into the contract if this clause is dated.
Addendum 1
PDS
Incorporates by reference RESA Rule 5-13 material latent defect definition.
Breach of K:
Roberts v
Escape Clause (18) does not bar reliance on a warranty not incorporated into the
Warranty
Montex
contract where the effect of the escape clause has not been brought to the
purchaser’s attention AND they have not been advised to seek independent legal
advice regarding it.
Fraser- Reid
A warranty is part of the contract = a promise of a certain state of affairs.
Roberts v
A warranty occurs when a Vendor states a
If vendor merely states “opinion” ≠
Montex
“fact” of which the buyer is ignorant.
warranty.
Fraser- Reid
If the home is complete, need an express
However see Statutory protection for
warranty
NEW complete homes in post-closing
claims
Breach of K:
Hanslo
If PDS is incorporated through clause 13 addendum 1 a statement which did not
PDS Statement
reflect the Vendor’s true belief at the time can give rise to breach of contract.
Connie v
Sampson
Rogalinski
Curtin v
Blewitt
Does not have to be about a latent defect that renders a home uninhabitable or
dangerous, just needs to be an untrue statement that caused harm.
The question on PDS that asks if vendor is aware of any defects that could render a
home uninhabitable or dangerous is BROAD. Must disclose any problems that have
arisen and were not dealt with in the past… otherwise you could be liable for breach
of K.
Where Vendor relies on professional
Purchaser recovered against inspector
inspector in order to fill out PDS, they cannot though for neg misrep.
be liable for breach of K b/c they answered
honestly.
Not liable for breach of k b/c vendor’s answered questions honestly (and seemed to
factor in that the purchaser’s waived the home inspection)
34
Post Closing Claims
Issue
Contractual
promises
Case/ Section
Clause 18
Clause 8
Clause 10
Addendum 1
Warranty
Clause 13
Addendum 1
PDS
Fraser- Reid
Roberts v
Montex
Fraser- Reid
Representation
Fraser- Reid
Effect of Exclusion
Clause
Bains v Bhullar
Roberts v
Montex
Definition:
Error in
Substantialibus
Hyrsky v Smith
Warranties &
Vendor-Built
Home
Fraser-Reid
Homeowner
Protection Act
(BC) s. 22
Ratio
Notes
There are no warranties except those that
So see if any of the contractual
are contained within the contract
warranties below apply.
Warrants that the property will be in
This therefore applies to patent
substantially the same condition at the
defects, Vendor warrants there
possession date as when viewed by the
will be no new patent defects at
buyer.
the time of possession.
The seller acknowledges having provided
This is in addition to the PDS
separate written disclose of all known latent statement
defects
Can incorporate the PDS statement into the contract if this clause is dated.
Incorporates by reference RESA Rule 5-13 material latent defect definition.
A warranty is part of the contract = a promise of a certain state of affairs.
A warranty occurs when a Vendor states a
“fact” of which the buyer is ignorant.
There is no longer a presumption of merger.
Absent proof of intention, warranties are
NOT merged into the transfer.
A representation precedes and induces the
contract.
If vendor merely states “opinion”
≠ warranty.
Warranties survive closing.
Tort claims can still be pursued
post-closing: see condition of the
property, tort claims above.
General exclusion clause cannot override a specific representation that was
intended to induce parties to enter into the K UNLESS it can be shown that the
effect of clause 18 was brought to the purchaser’s attention.
Escape Clause (18) does not bar reliance on a warranty where the effect of the
escape clause has not been brought to the purchaser’s attention AND they have
not been advised to seek independent legal advice regarding it.
A mutual fundamental mistake as to the
Here there was a mistake of
quality of the subject matter. Has to be a
quantity of land, which isn’t
material, substantial element of the K.
necessarily ES but was here b/c it
was over half the property.
At common-law there is NO implied
Policy: Courts say that implied
warranty for a COMPLETE home. However,
warranties is an area best left to
for an incomplete home, there is an implied legislatures if they want them.
warranty that the home will be:
Could have an impact on the
1. built according to building code
housing market.
2. built in good, workman-like manner
3. fit for human habitation.
NOW: Vendor-builder has to provide coverage by a warranty provider within 10
years of occupancy permit or being ready for occupancy (unless exempt by
regulation) for:
1. defects in materials and labour for a period of at least two years after
the date on which the warranty begins;
2. defects in the building envelope, including defects resulting in water
penetration, for a period of at least five years after the date on which
the warranty begins; and
3. structural defects for a period of at least ten years after the date on
35
HPA s. 23
which the warranty begins.
MANDATORY
If Vendor fails to get new home insurance–
deemed to have agreed that new home is
free from defects in:
- materials and labour for at least 2
years
- building envelope for 5 years
- structure for 10 years
36
So now in BC we have a statutory
implied warranty for newly built
homes whether they are
complete at time of K or not.
Remedies
Issue
Court’s
Authority
Case/
Section
s. 24 LEA
Ratio
Notes
o
A court may relieve against all penalties
and forfeitures
o Court has discretion for awarding relief
o Court can shape remedies as they see fit
******Always start with this with any discussion about Remedies*****
37
Remedies are a discretionary power
of the Court
Anticipatory Breach/Repudiation: For Pre-Closing Claims
If one party to a purchase agreement, before the completion date, clearly indicates an intention not to complete, the
other party is entitled to treat them as being in default.
So if any of the claims above are made out pre-closing you can say this is an anticipatory breach, and go to your right
of election and immediately pursue remedies.
Case
Notes
Roy v
- You don’t have to wait until closing to see if the other party will in fact breach
Kloepfer
- If there is a clear anticipatory breach, then the innocent party’s right to election arises
immediately
Norfolk v
- However the innocent party must communicate their affirmation of the breach to the breaching
Aikens
party
- If they do not communicate their affirmation, the K continues and the innocent party must
continue their obligations under the K
Pavlis v HSBC
- What constitutes an anticipatory breach:
- Unequivocal refusal of the contract
- Must be something fundamental, that goes to the heart of the K
- Conduct must show that the breaching party no longer intends to be bound by the K
Election – Affirm or Disaffirm
o At the time of breach, the innocent party has the choice to accept (affirm) or reject (disaffirm) the breach.
o If they affirm the breach, the contract ends and the innocent party may pursue damages for breach of contract
o If they reject the breach, the contract stays alive and the innocent party may pursue specific performance. An
action for specific performance may be converted to an action for damages at any time before trial.
LoPresti:
When faced with a breach of a sale of land contract, an aggrieved party may treat the contact at an end by suing for
damages or, alternatively, keep the contract alive by suing for specific performance. If the aggrieved party chooses
specific performance, then the breaching party can avoid defaulting by performing its obligations under the contract
before trial. Because specific performance keeps the contract alive, in theory, it extends the breaching party's period for
performance. The aggrieved party must also be in a position to perform its end of the bargain at all times. If the
breaching party performs and the aggrieved party is unable to reciprocate with performance of its own, then the latter
will be in breach of contract. At any point before the commencement of the trial, the aggrieved party may drop its
claim for specific performance and ask for damages in lieu of specific performance.
Norfolk v
Aiken
At repudiation, the innocent party may:
(a) accept the repudiation in which case both parties are
relieved of obligations and the innocent party may
seek damages.
OR
(b) decline to accept, in which case the contract is kept
alive and the purchaser may sue for specific
performance
If they choose SP, any time before trial the
innocent party may convert to an action
for damages.
Tender
Tender is good evidence to show readiness to perform
The basic rule of closing procedure is that to sue successfully for specific performance, the plaintiff must show that he or
she was ready, willing and able to complete the transaction at the appropriate time.
Case
Notes
Norfolk v Aikens
- A claim for SP can only succeed if you were able to tender at closing
38
Specific Performance
Definition
Semelhago
How to Get
John E
Dodge
Holdings
Serenbrennikov
Norfolk
Seguss v
Fawcus
Uniqueness
Norfolk
Rostrum
Cormack
Tropiano
Serenbrennikov
Damages in
Addition
Damages in
Lieu
n/a
Abatement
Serenbrennikov
Semelhago
Specific performance is an equitable remedy.
The purchaser is therefore the one
Courts prefer to award damages. SP only available that usually claims SP, b/c they are
where damages would be an insufficient
getting something unique.
remedy—thus the availability of SP turns on the
Vendor just getting money so can K
uniqueness of the property.
with anyone… hard to get SP unless
It is no longer assumed that SP will be appropriate there was a special circumstances.
in all real-estate cases. The Court recognizes that
not all property is unique.
 Onus lies on the party seeking the remedy
 To provide there is no readily available substitute at the time of breach (this search
does not have to be exhaustive)
 Damages are inappropriate
 Subject to the mitigation principle (See damages below)
1. Is there evidence that the land is especially suitable for the purchaser?
2. Is there evidence that a “substitute” is not “readily available”?
3. Are damages “comparatively inadequate” to do justice?
To get SP you must be RWA from the time of the anticipatory breach/ breach until SP
awarded.
To show you are RWA, don’t need to undertake
Therefore, the Vendor does not
the mechanics of closing, (the formal steps of
need to have completely cleared all
tendering) as this is only required when both sides encumbrances, rather just having
have demonstrated they are RWA.
the forms ready to do so is sufficient
to be RWA.
You can bring an action for SP BEFORE closing date.
A property purchased for development will typically not be considered unique enough.
Purchaser desired to raise horses, so the size of the property (it was an acreage) made
the property unique enough for the purchaser to get SP
bare land unique in this case b/c next to a ravine. However no SP for K for vendor to build
house b/c you can get anyone to build you a house, that isn’t unique.
House NOT unique b/c
- Ptf purchased a different home, so proves that is an acceptable substitute
- Ptf didn’t bring any evidence that damages would be inappropriate
- House was in the same neighbourhood, and was relatively the same size, also was
new like house ptf wanted
- Differences such as vaulted ceilings and less closets not sufficiently unique.
- Out of pocket expenses only
Ansdell v Crowther:
- Discretionary
The principles for these types of
- Where SP is warranted, but can’t award for
some reason i.e. b/c a bona fide 3rd party has damages are the same as commonlaw damages
bought the property
- Allows damages to be claimed in some
See Below
circumstances where they otherwise would
not be.
- Can only get PRE closing
- An amount comes off the purchase price to reflect the decrease in value due to a
defect OR the cost of remedying defect.
- DISCRETIONARY: Will not be awarded if it will cause great hardship to the vendor
- Also, Court doesn’t want to award abatement for remedying a defect if there is
no guarantee that that will happen.
39
Damages
Issue
Statutory
Generally
Where
s.37 PLA
Mavretic v
Bowman
Roberts v
Montex
Assessment Ansdell v
Crowther
Mavretic v
Bowman
Semelhago
Mitigation
Southcott
Hargreaves v
Brar
Serebrennikov
Southcott
Notes
Purchaser can get damages where there is a defect in title.
General Principle for damages for Breach of K: place the innocent party in the position
they would have been in had the contract been performed.
If a breach of warranty is discovered post-closing,
Can only collect once even if you
the purchaser is entitled to damages.
have a claim in both K and tort.
There are no rigid rules when assessing damages. It is the Court’s discretion to fix the
date that damages are assessed at.
You normally assess damages at the date the K was
- Problem with using trial date
breached unless circumstances make this
is that length and timing of
inappropriate.
trial may be uncertain…
- Here, by trial date vendor’s
would have suffered no loss
b/c house worth much more.
- However that was not a
sufficient reason for shifting
damage assessment from
date of breach
- Policy: Court wants to ensure
there are consequences for
breaching a K
Where substituting damages in lieu of SP, the K has
Have two options to assess
been kept alive until trial and therefore it makes
damages at: Trial or Date of
sense to assess damages at date of trial instead of
Breach
date of breach, b/c technically K never ended.
The principle of damages is to compensate for any loss flowing naturally from the
breach. Therefore, the innocent party can’t claim any damages that arose due to the
innocent party’s own neglect to take all reasonable steps to mitigate their loss.
Test from Baud Corp:
Here, the innocent party was
reasonable in selling house at
Onus on offending party to prove:
$100,000 less two weeks after
(1) after the breach, the innocent party failed to breach b/c:
do some act they reasonably could have
- rapidly falling market
done
- needed $ to purchase new
AND
home
(2) if the innocent party had done the act, the
- getting interim financing not
loss caused by the breach would have been
rsnble b/c didn’t have the
avoided or reduced.
income
- AND offending party did NOT
lead any evidence showing
that loss would have been
reduced or avoided had steps
been taken.
PROBLEM: If you mitigate though, like the ptf did in this case by buying another house
on the same block, you may effectively destroy your claim for SP b/c you show there is
an acceptable substitute.
A single purpose corp is subject to mitigation just
Thus, only relieved from
like anyone else.
mitigating when seeking SP if the
inaction was reasonable. With
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The mitigation principle only requires the innocent
party to take “reasonable” steps. Therefore, where
an innocent party has “fair, real, substantial
justification” or a “substantial and legitimate
interest” in SP it may be reasonable for the innocent
party NOT to mitigate.
Lien
n/a
If offending party proves innocent party failed to
take steps to find a reasonable substitute AND that
a substitute could have been found, the innocent
party will have failed to mitigate their loss even if
they did so b/c they were seeking SP.
- Generally recognized that the purchaser has
an equitable lien on property for the
amount of their deposit
- The vendor is also seen as having an
equitable mortgage if they have transferred
title but have not received the purchase
price
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the higher threshold of
uniqueness now, this will be
much harder to prove.
*If either party is concerned,
they should register their
interest*
Rescission
Definition
Redican V
Nesbitt
PreClosing
Cherris
Estate
PostClosing
Redican v
Nesbitt
Hyrsky v
Smith
Allen v.
McCutcheon
Rescission is where the parties are restored to
their original position pre-contract. Can get
pre or post-closing.
Unmaking of the K – restore parties to pre-K
state
Rescission pre-closing for:
- Misrepresentations (neg/ fraud)
- Error in Substantialibus
Rescission post-closing only for:
- Fraudulent Misrep
- Error in Substantialibus
Caveat Emptor applies post-closing unless
there is an error in substantialibus or
fraudulent misrepresentation.
If you want a warranty to survive closing you
have to write it into the K.
To get rescission post-closing, purchaser may
rely upon:
(a) breach of (express) warranty
(b) breach of condition
(c) error in substantialibus
(d) fraudulent misrepresentation
A representation that is made recklessly to
induce a contract w/o knowing if it is true is
fraudulent and the purchaser is entitled to
rescission post-closing.
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If the transfer happened a long time ago,
purchaser may need to pay occupation
rent when getting rescission. (Allen)
Here error in substantialibus b/c
purchaser thought they were buying
something habitable. This penthouse was
not habitable b/c the windows were not
the right kind and the apartment was
consistently 40c. K rescinded POST
closing.
This is the classic statement of rescission.
*although they say you could rely on a
warranty to get rescission, this has never
happened so far.
Here is was a statement regarding the size
of an easement.