Land Title system
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Registered owner is owner without question. No document or instrument has any effect on the
owner unless it’s registered, except as between the two parties who made it (s.20).
S.23(2): exceptions to indefeasible title – exceptions for Crown Grant (minerals, etc), property
taxes, leases of <3 years, expropriation, statutory liens.
If you registered an instrument (lease, mortgage, etc), it is evidence of your entitlement to the
land but mere registration does not pronounce enforcement of that instrument (s.26)
Registering an instrument is notice to the world of the existence of that interest and the
contents of those documents, but only as they relate to the land (s.27)
Priority of registration is based on date and time of registration (s.28)
Unregistered documents are only enforceable as between the two parties who made it (s.20)
Unregistered document, whether you know about it or not, has no effect on you unless you, the
owner, has been involved in a fraud (s.29)
Equitable mortgages and equitable interests are not registrable (s.33)
Brokers
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Exclusive listing agreement: broker agrees to represent the vendor but vendor agrees to employ
no other agent for that property.
Open Agreements: seller can go to other agents for that property
Multiple-listing agreement: vendor hires an agency and that agency can allow others to help
them or bring offers to the vendor. The agency/broker you hired gets the commission but must
then split it with those who helped. It’s an agreement between vendor/agent and agent/all
other agents who are in the MLS.
Listing Agreements
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Real Estate Council Rules: must say how long the agreement will last for, how and when
commission is earned, what the commission is, give an adequate description of the services to
be given to the vendor. Broker must deliver a signed copy of agreement to his client before the
agreement becomes effective.
Requirement to Be Licensed
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S.3 of RSA: must be licensed if you are providing real estate services to or on behalf of another
for or in expectation of remuneration, which doesn’t have to be cash.
Real Estate Services = rental property management services, strata management services, or
trading services (advising appropriate price, making representations on real estate, finding a
party to acquire, showing, negotiating price).
S.4 of RSA: if you’re unlicensed, you can’t sue for remuneration for services you provided.
S.3(3)(f): exception for practicing lawyers providing services in course of their practice.
Deposit and Remuneration of the Broker
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Paid by purchaser usually as first condition to the PSA. Generally held in trust by the broker who
holds it in trust, unable to touch it unless:
If the transaction completes and they are entitled to a commission, RSA permits agent to deduct
their commission from the deposit money before handing it to the vendor, but only if they’re
entitled to it according to the triggers in the listing agreement.
If the transaction doesn’t close and falls apart, either of the parties can consent to its release to
the other party.
Or, s.33 of RSA, agent can pay it into court
S.31: can’t be paid from the deposit account unless earned in accordance with the rules.
Standard agreement usually says that if transaction falls apart, funds go back to purchaser while
if it completes, it is released to the vendor.
Classes of Agents
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S.5(a): brokerage – the real estate agency on behalf of which other licensees provide services.
S.5(b): managing broker – licensee responsible for the brokerage who manages the other broker
S.5(c): associate broker: licensee who meets education and experience requirements to be a
managing broker but is providing the services under m anaging broker
S.5(d): the representative: licensee providng services under broker. Can’t do as much (can’t sign
agreeemnts, etc, but can prepare marketing material, show house, etc).
S.6(1): every brokerage must have a managing broker and can only give the services he can.
S.7(1): brokers can only be employed by one brokerage.
Agents’ Accepting Notice and MLS Delegation of Agency Powers (Carmichael)
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Agent has the power to receive offers and receive communication of acceptance, which counts
as notice to the principle.
But under MLS, does communication to purchaser’s agent count as notice to the vendor? Under
MLS Agreements, sub-agents can accept communication of acceptance and do everything the
original agent can do. So if purchasing agent was also in the MLS, that’s enough to count as
notice to the vendor.
Agent must have express or implied authority from their principle or the principle must know
from the outset of relationship that there may be delegation of authority to sub-agent.
Statutory Duties of the Agent (Real Estate Council Rules)
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R.5-3.1: licensee must present all offers to his client.
R.5-4: after getting a signed acceptance of an offer, licensee must deliver a copy of it to each of
the parties and the brokerage.
R.5-5: must not induce any party to a trade in real estate to break the agreement to enter into
an agreement with another party.
R.5-6: can’t make any inducement representation unless it’s in writing.
Implied Contractual Duties of the Agent
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Implied duty to exercise duties with reasonable skill – h eld to the standard of the average
agent. Obey your principal’s instructions, acquire the info the property that a reasonable agent
would, do due diliegence, reasonable care in drafting agreements, comply with RESA, etc.
Implied duty to be diligent: do more to sell the property than planting a sign.
Tort duties: must act as a reasonable and prudent agent and if you fall below this standard, you
can be sued for negligence – it’s reasonably foreseeable principal would suffer if you screw up.
Agent can be found liable in tort for not exercising degree of care and skill expected of an agent
in such circumstances – expected to look into things to some extent. Where a sale is lost as a
result of negligence, agent is liable for the difference between the market at the time of the
failed sale and the market when the property eventually was solid (Price).
Fiduciary Duties Owed by Agent
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Must make full disclosure of all potential conflicts of interest, must act in principal’s best
interest, can’t make secret profit, can’t allow actual conflicts of interest to arise during the
fulfilling of your duties.
Can be hit with disgorgement of profits or losss of right to commission.
Knoch Estate: purchaser’s agent can be found to owe a fiduciary duty to the vendor even
without privity of contract if the vendor hands him a notice that he’ll waive conditions
precedent (agent has duty to communicate that). A duty between these parties can only exist in
very narrow circumstances: can’t deceive or mislead the vendor and may also owe a duty in
presenting offers to purchase, receiving notice, etc. Still, no privity may mean no fiduciary.
Generally, MLS does not create privity between principal and sub-agent and so MLS won’t
create privity between selling agent and vendor through this route.
Exceptions to this are if acts of the sub-agent wer authorized by the principal (the nhe’s bound
by them as though the agent performed them) or if the agent was authorized by the principal to
establish a relationship between principal and sub-agent. An authorization under MS
agreement to have sub-agents isn’t enough in itself – need explicit authorization of sub-agents
or authorizing agent to authorize sub-agents on my behalf, or no privity. (Winners)
Fiduciary duties CAN exist between vendor and selling agent depending on facts: h ow closely
were they working together? Were any of his actions authorized by the vendor? (Winners)
Agent’s Disclosure Requirements
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5-9(1): if licensee is to indirectly or directly acquire real estate or an associate of the licensee is
to do so (and the licensee provides real estate services to the associate), licensee must make
disclosure to the owner of the real estate before any agreement on disposition. Must disclose
that you are a licensee and, if you’re acquiring real estate, disclose the amount of money or
remuneration you expect to receive and if the offer is accepted, whether the property will be
held for persona or rental use or resold.
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5-10: must disclose the nature of representation the licensee will give and whether it expects to
provide services to any other party to the same trade or get remuneration from that person.
5-9: agents must disclose their interests in a trade promptly before any agreement. Must
disclose if the agent is himself a purchaser or if the agent has a relative buying it.
A failure to disclose may not form a separate cause of action, it may not necessarily void a
contract, particularly where the party alleging it is sophisticated (Manning Family Trust)
Agents’ Liability to Third Parties (Defects and Misstatements)
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5-13: a licensee working for a vendor must disclose to all parties to a trade any material latent
defect in the real estate known to the licensee before agreement is reached. A serious hidden
defect that can’t be discerned by a reasonable inspection of the property.
5-13(3): if client instructs licensee to withhold disclosure, licensee must refuse to provide any
further services with respect to that trade.
Misrepresentation: representation is inaccurate, representor acted negligently in providing the
representation, the representee relied on it in a reasonable manner, and reliance was
detrimental the representee.
Liable for knowingly making false declarations (fraudulent misrep). Agents may also be liable for
negligent misrep if they do not exercise the necessary skill and expertise to make sure the
representation was true before making it. Both agents can be liable, irrespective of privity
(Bango). Vendors can also be liable for misrepresentations of their agents (principals are bound)
Remuneration of the Agent
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Person must be licensed to get remuneration
S.31 RESA: moneys are paid when earned/triggered by listaing agreement and are paid out in
accordance with sharing that is typical in such a transaction.
5-15: triggers for payment include, for leasing, earlier of the date of the lease being submitted
to LTO for registration, date the tenant can take possession, or date tenant lawfully occupies.
For sales, it’s the time the transfer is submitted to the LTO for registration.
Agreement can set out other triggers for remuneration, but to be triggered, it must occur during
the term of the agreement, not after the agent’s services have already ended (Block Brothers).
Agent has no right to remuneration if he’s been found guilty of negligence, even if he wasn’t the
only one responsible for the loss (Academy Aluminem).
Letter of Intent
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Informal communications between parties that is expressly stated not to be a binding
agreement. A binding deal requires price, property, parties, each clearly described or with a
clearly described method for determining it.
Can a letter of intent be a binding agreement: must have those three terms above. It’s not an
inquiry into actual state of mind but rather how the promisor’s conduct would strike a
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reasonable person – look at all the circumstances and weight them and see if a reasonable man
would’ve though the parties intended to be bound by the terms.
If party continues to call documents “offers” after the letter he’s alleging is a binding agreement,
if the ltters state they were non-binding or subject to some condition, then it’s not likely to be a
binding agreement (Canada Post)
Formalities for Binding Agreements on Real Estate
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S.59(3) of L&E Act: a contract to do with land is unenforceable unless in writing and signed by
the party charged OR doctrine of part performance: party to be charged has done an act or
acquiesced to an act that indicates that there is a contract not inconsistent with one being
alleged (Nicol – vendor sold to someone else even though he paid deposit, got documents done,
performing obligations) OR person alleging contract has in reasonable reliance on it changed his
position so that an inequitable result occurs if contract is unenforceable (Doctrine of reliance)
S.59 is usually relevant to amendments which are made orally to a written agreement. Runs
into parole evidence rule: oral evidence about a contract is inadmissible.
Exception to PER: if the oral evidence is not inconsistent with the written agreement or if it only
supplements the written agreement.
Certainty of Terms
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For a binding agreement to exist, must be certainty in price, property, parties or a clear method
for determining what they are.
Arnold: court will try as hard as possible to come up with a meaning for uncertain terms while
staying within the four walls of the agreement/what was said. Look at substance and not mere
form of what’s in the contract + wording of the uncertain clause and find a meaning.
First City: step further – court will just find evidence of an intention within the four walls of the
agreement and then imply provisions into the agreement that fit that intention.
Canada Post: not only can they imply terms, they can create agreements/contracts if, after
looking at circumstances and actions of parties and docs, court sees an intention to be bound
Parties: not just who’s registered, this element requires every party with an interest in the land
be named in the contract (including equitable interests).
Price: if you can’t be clear on exact number, give a clear method of calculation.
Deposits
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Forfeitable to the vendor if purchaser breaches and returnable to the purchaser if V breaches.
No breach warranting forfeit of deposit if conditions precedent remain unfulfilled.
Deposit must be a genuine estimate of damages you think you’ll suffer – if it’s extreme or
extravagant, it’s a penalty clause (Stockloser) and it is not forfeitable.
Vendor can only keep deposit if the agreement is terminated and if the contract contains a
forfeiture clause permitting vendor to keep deposit upon purchaser’s breach/not paying. If you
take the deposit, no more access to specific performance.
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Even if it’s not a penalty, it must be not unfair or unconscionable for the vendor to keep it
(Stockloser). Also, just saying “deposit is forfeited as liquidated damages” isn’t enough to stop
vendor from claiming more if damages suffered are more than the deposit. Instead, try
something like “deposit is forfeited to vendor in full and final settlement of all claims)
Risk Clauses
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Lysaght: moment purchaser and vendor sign the PSA and it’s enforceable, beneficial interest
passes to the purchaser and vendor is responsible to give it to the purchaser in the condition
agreed in the contract. V is like a trustee – if land blows up, it’s on him.
Risk clause makes this explicit: does away with argument that beneficial owner takes the burden
and benefit of the property. Clause says risk remains with V until completion date.
True Conditions Precedent
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Conditions hold contract in suspense.
True conditions are ones whose fulfillment depends in whole or in part on act or will of a third
party – suspends obligations under contract until satisfied. Existence of one makes it impossible
to find a breach or to enforce an obligation until it’s fulfilled, may turn the contract into mere
offer as a result (Turney)
As long as there’s evidence that parties intended to make the contract, these clauses don’t
affect existence of a binding agreement. Courts will also imply an obligation on a party to use
their best effort to bring its fulfillment. So presence of a true condition may not be enough to
kill the agreement – let you walk away. Implies a “best efforts” obligation. (Dynamic, mods
Turney)
Unless PSA says otherwise, these can’t be waived by either party.
Subjective Conditions
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Conditions where fulfillment is dependent on subjective state of mind of the parties with no
limit on discretion, eg “purchaser being satisfied with inspection.”
No commitment – at best, you have to exchange non-refundable consideration to turn this into
an option instead of no agreement at all. Put consideration clause in PSA – it’s then binding
agreement since one party is bound to do something if the party with discretion calls on it.
Even without such a clause, court can say the document is an offer and V is committing himself
to sell if P waives or fulfills the condition before the offer is withdrawn, then it’s binding.
Mixed Subjective/Objective Conditions
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Subjective conditions with the parties’ discretion limited by reasonableness.
Suspends obligations until it’s waived or satisfied but PSA IS enforceable: court has a reasonable
standard to determine whether the condition has been waived or fulfilled.
Courts are inclined to interpret subjective conditions as mixed unless PSA clearly says otherwise.
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PSAs with mixed conditions are enforceable because there is a reasonableness standard upon
which a court can determine whether the condition has been fulfilled
It’s not a subjective condition if the court can make an objective assessment for whether it’s
been fulfilled. “Sole benefit of purchaser” isn’t enough to release you from obligations to make
best efforts, not purely subjective. Also, “satisfactory” is satisfactory to a reasonable person
(Griffin).
On the other hand, “to the sole satisfaction of the purchaser” is purely subjective (Kitsilano)
“Purchaser shall have approved” is objective enough to be binding (Tau Holdings).
Unenforceability
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First: is there certainty of terms with respect to the 3 Ps
Second: are there any true conditions precedent or subjective conditions?
Statutory Waive of True Conditions Precedent (where no express waiver provision)
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S.54 of L&E Act: true conditions precedent can be waived if the condition precedent benefits
only that party to the contract trying to waive it, the contract is capable of being performed
without fulfillment of the condition precedent, AND if there’s a time stipulation for its
fulfillment, the waiver is made before that time has expired or if there’s no time stipulation,
waiver is made in reasonable time.
Representations and Warranties and covenants
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Reps are about state of the property in present or past, Warranties are statements about the
future (no debts that will become liens). Breaches = damages.
Common reps: environmental or status of tenants.
Covenants: pledge or promise that a party will do something or has done something. Common
one is vendor’s pledge that all reps and warranties will be true at closing. Breach of a covenant
is grounds for termination of the PSA.
Damages for reps = costs to fix what was misrepresented. Damages for warranties = change in
value of the property.
Implied warranty: property is fit for habitation (if recently constructed)
Common rep: vendor has all necessary permits to operate property the way it’s been operated.
Also, things about title (no liens, no bankruptcy of vendor pending, vendor has no debts, the
vendor is the owner, the vendor is duly incorporated with authority to sell) or vendor or physical
things (no structural problems, environmental, status of tenants)
075959 Ltd: if that’s the way the rep’s been drafted, a vendor can be held liable for things they
didn’t even know. Doesn’t matter if it’s a dumb or unreasonable rep. They agreed.
Aboriginal title
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When Crown grants land, it is likely subject to an aboriginal claim. Before making the grant, it
must engage the local first nation in deep and meaningful consultation and an accommodation
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of their rights (Delgamuukw). An interference with those rights must have strong justification
and be accompanied by consultation, the obligation of which is on the Crown, not private party.
Obligation carries through to private lands – if I get a Crown grant but it hasn’t properly gone
through consultation/accommodation, the first nation has a claim that can be satisfied on those
lands and if I transfer the property again to you, you inherit the issue of that claim.
Accommodation = financial reimbursement for rights affected, improvements to the
community, providing jobs.
Environmental (Environmental Management Act)
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Empowers govn’t to order a clean-up of the site with current and prior registered owners or any
entities who had control of that property being liable for it.
Third parties can claim against each other for losses suffered due to contamination. Owner who
discovers contamination may sue prior owners for damages or if contaminants migrate from
adjacent property, can sue owner of the adjacent property for clean-up of my land.
Govn’t can issue a clean-up order on current owner who then can make cost recovery actions
against all other prior owners or people who were in control of the property.
Vendor and purchaser can negotiate releases between each other so they won’t sue each other
Mortgages – Borrower’s Obligations
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Pay the principle sum owing and, at end of term, pay it all off or refinance for another term.
Keep the property in a reasonable state of repair
Pay the real property taxes
Insure the property for the entire term.
Mortgages – Hybrid Nature
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Remedies are available from the common law as though it were a transfer of title subject to
redemption (you can foreclose).
S.231 of the LTA allows mortgage to be registered like a charge even without words of transfer
Legal Mortgage
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Effectively a conveyance of land as security for payment of a debt.
S.225: Form B with the basic info (parties, description of the land) plus part 2: the actual terms
of the mortgage. Three types of terms: s.227 prescribed terms (on the Form B, just check
boxes), s.228: file standard mortgage terms (terms the banks use for all their mortgages), and
Express Mortgage Terms (this is what you attached to the Form B – terms specific to this
mortgage).
S.229: borrower must receive a full copy of any filed standard mortgage terms with lender
getting borrower’s signed acknowledgement of receiving it, otherwise only prescribed terms.
S.239: floating charges can’t be registered until they crystallize
Equitable Mortgages
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Mortgage of an equitable or future interest (a second mortgage granted on the right to redeem
the first mortgage; mortgage given by a beneficiary to a property in trust).
Via an instrument insufficient to convey a legal interest, like a mortgage on a condition or an
attempt to create a legal mortgage that was somehow flawed.
Deposit of duplicate title.
Equitable mortgages lose to legal mortgages in p riority.
Royal Bank and Mesa: if going the duplicate title route, must also give document saying that the
intention was to create an equitable mortgage. No presumption (North West Trust says there is
a presumption, but that’s Alberta).
Equitable mortgages take priority over subsequent registered judgments (Yvelt).
Right of Redemption
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Right of the borrower to redeem the borrower by paying the debt – this interest can be
mortgaged and cannot be contracted out of.
Quick claim deed: can be contracted o ut of by simply transferring the property and walking
away when there’s no chance of redeeming.
Must be free of any conditions that would prevent redemption – any such conditions are void.
Mortgage cannot be made irredeemable – condition or stipulation that clogs equity of
redemption will be unenforceable. Mortgage has to be redeemable at some point.
A really long term or postponement is not a clog (Knightsbridge Estates)
Collateral Advantages are acceptable unless they’re unfair or unconscionable or a penalty/clog
on redemption. Unfair = taking an interest in the business. Clog = advantage prevents the
borrower from getting the property back, like lender having an option to purchase.
Protection for Borrowers – Unconscionable Transactions
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Business Practices and Consumer Protection Act Part 2: court can relieve against unconscionable
transactions with burden of proof that it’s not unconscionbable being on the lender (s.9)
Unconscionable = debtor subject to undue pressure by the lender, debtor taken advantage of by
the lender due to inability or incapacity to protect their own interest/unsophisticated, or at the
time of the mortgage, there was no reasonable probability of full payment or monthly payment
of principle plus interest (s.8). If unconscionable, s.10, court can order repayment from lender,
set aside agreement, suspend rights and obligations of the parties under the mortgge.
Protection for Borrowers – Disclosure
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BPCPA Part 5: s.66 – disclosure statement must be given, in writing. If there’s an inconsistency
between disclosure statement and credit agreement, presumption is for the more favourable
rules to apply (s.70)
Protection for Borrowers – Interest Act
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S.10: if a mortgage is for a term greater than 5 years, the mortgge can be repaid at any time
after the expiry of five years with only penalty being 3 months’ interest in lieu of notice.
Potash: renewals don’t create one giant mortgage you can repay at any time past five years.
Each time you renew, the date resets to the date of maturation (if after five years you renew,
you’re going to have to ewait another 5 years before you can try to repay it all. It’s like two
separate 5 year mortgages, not one 10 year mortgage).
S.6: annual interest rate must be stated where there are blended payments (payments where
principle and interest are mixed so as to be inseparable and indistinguishable – Kilgoran Hotels).
S.7: the rate shown in s.6 is the maximum rate payable.
Interest Act’s Restriction on Increased Interest on Arrears
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S.8: lenders cannot charge more by way of penalty, fine, or increased rate for arrears.
S.8 applies even if prior to default, the loan was interest-free or very low interest (Re Weirdale)
Lenders may try to get around s.8 by having the interest rate jack up at various triggers, like
when it’s close to time of maturity, but not quite there. Raintree says that this is fine – it’s not
in default and intention of the lender (they’re penalizing you for a likely default) is irrelevant. TD
Trust, on the other hand, says such schemes are only enforceable where there’s a legitimate
commercial purpose behind it (undefined). Equitable Trust Co, on the other hand, says it’s only
a violation of s.8 where it amounts to an “abusive lending practice.”
Criminal Interest
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S.347 of Criminal Code: offence to either enter into agreement to receive interest at a yearly
rate exceeding 60% of the credit advanced or to receive actual or partial payment at that rate.
If s.347 strikes down a loan, lender may not be able to collect anything, may only get the
principle with no interest, or could recover principle and interest at rate specified by court.
Nelson: it’s only where the borrower is REQUIRED to pay interest at a rate of greater than 60%.
If he ends up paying that much because he’s chosen to pre-pay, that doesn’t count.
Purchaser’s Undertakings
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Purchaser’s lawyer will get a transfer document from V’s lawyer on undertaking not to use it
until they have the cash they need for purchase price minus the mortgage money AND know of
no reason why the lender will not fund the rest upon mortgage registration. When these
conditions are met, P’s lawyer will register the transfer
P’s lawyer undertakes that when they can show lender that title will transfer to P and their
mortgage will be registered, they’ll receive money from lender and will send balance to V..
MUST put an express provision in PSA agreeing to use system of undertakings to close,
otherwise the party to suggest it will be unilaterally changing agreement (Edward Wong)
Vendor’s Undertakings
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V promises to give clean title, but can’t get rid of V’s mortgage until they get money from the
sale. So V’s lawyer undertakes to use the purchase money to pay V’s lendor what is required to
discharge the mortgage and then will pursue V’s lender to get that discharge.
This way, P’s lender, thanks to undertakings system, will be comfortable knowing they’ll be the
only guys on title and will give P the mortgage money for the purchase price.
Enforcement of Mortgage – Redemption Period
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First thing upon default, lender will exercise acceleration clause demanding entire amount of
the mortgage be repaid.
Borrower then has a short time to either get rid of the mortgage or find a way to pay the
amount before the lender can take these actions. It’s typically six months, but will depend upon
how much equity is in the land – the more there is, the longer a period the court will give. (Land
Value – Amount Owing on Mortgage = Equity). If the period ends and borrower hasn’t been
able to redeem, lender can than ask to either sell or take the land.
File a certificate of pending litigation when taking action to freeze the title – any subsequent
interests are subject to the outcome.
Conduct of Sale
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Court-ordered sale allowing lender to hire a broker, market, and then bring the offers to the
court to approve – if the offer is fair to all parties, the court will permit the deal to close.
Sale proceeds are used to satisfy remainder of the mortgage with excess going to the borrower.
Borrower remains liable for any amount still owing after sale of the property.
Foreclosure Absolute
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Other option is at end of redemption period, lender goes to court and asks to take the land in
settlement for the debt. This ends the debt – lender cannot pursue the borrower for any
deficiency if value of the land is less than the debt under the mortgage.
Court will consider if it’s a fair offer, is it close to what the market is at, what the fair assessed
value of the property is, how much equity the borrower has in it, how much mortgage was paid
already, and whether it’s unfair to take it away from the borrower, remembering that the
borrower knew the risks of entering the transaction.
Mortgage Priorities
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Mortgage-holder takes the lands with anything below that mortgage in priority getting wiped off
the title. Goes back to transfer of title idea: technically, owner couldn’t grant interests after
getting a mortgage, since they transferred. This is why often court will give the second
mortgage holder “conduct of the sale” – will join in on the foreclosure and take care of the sale
If first mortgagor chooses to sell and a subsequent mortgagor gets conduct of the sale, the first
mortgagor gets paid off first and then whatever’s left goes to subsequent mortgagors.
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S.28 of LTA: priority of charges on title is governed by date and time of registration, subject to
the lenders agreeing to priority agreements that change things between each other (can be
registered).
Hankin Furniture: registered judgments share ratably, irrespective of their priority between each
other or how much is one each of them, they divide the proceeds equally.
If any judgments are higher in priority than the mortgage, ALL registered judgments take first.
Liens: s.32 – liens, like contractors registering charge for amount they’re owed, take priority
over subsequent advances on the mortgage.
Transferring Mortgaged Land
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S.22 Property Law Act: if someone transfers mortgaged land, new owner is bound by the
mortgage with lender able to take direct action against new owner for repayment.
S.21 PLA: implied covenant by this new owner that they will make the mortgage payments and
indemnify the old owner.
S.23 PLA: old owner completely ceases to be liable three months after the mortgage term ends.
Novation
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Prospect Mortgage: constant amendments and changes to the mortgage can lead to a party
arguing that ther’s been novation of a mortgage: replacement of an old contract with a new
contract where if a party to the old contract hasn’t consented/gotten notice, it’s released (way
for covenantors to get out.
3 criteria: new debtor assumes complete liability, creditor accepts new debtor as principle
debtor, creditor accepts new contract in full substitution of the old contract.
“Ready, Willing and Able” – What Constitutes Default
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Must be ready willing and able at close to not be in default. For Vendor, this means being able
to convey the title as agreed, in the condition contracted for. For purchaser, this means being
able to pay the purchase price in the form agreed.
S.6: vendor must insure that they have the title to the property they’re seeking to convey.
Re Hughes: it’s whether the vendor can convey substantially what is required by the contract
(Ferreira). Minor encumbrances with no restrictive effect to normal use of property don’t give
rise to default. Neither does want of title to comparatively trifling portions of the land.
Camwell: an empty mortgage that’s been paid out but not yet discharged off title IS default.
Caplan: Not ready/willing/able as per s.6 if the title is registered under a company that vendor is
the sole shareholder of.
Defects in the Property
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Patent defects: obvious defects easily seen on reasonable inspection. Caveat emptor, vendor
isn’t obligated to draw attention to them and P can’t complain.
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Latent defects: can’t easily be seen on reasonable inspection. If vendor is aware of them and
tries to conceal them, this is fraud that can entitle P to rescission or damages (Gronau),
particularly if it’s a defect that goes to the root of the contract/what’s contracted for.
Misrepresentation
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If it was fraudulent and attaches to a fundamental term of the agreement, court gives rescission.
If it’s an honest/negligent misrepresentation but it attaches to a fundamental term, the court
MAY grant rescission, but likely to just get damages.
Fraud = misrep made knowingly or without belief that it’s true. Alleging party has onus and will
get damages or, if it’s attached to a fundamental term, rescission.
Roberts: innocent misrep couldn’t attach to a fundamental term (just soundproofing), so
damages.
Total failure of consideration: rescission is possible where the misrepresentation, fraudulent or
innocent, leads to the essence of the subject matter being different from what was contracted
for, particular if it’s now unsuitable for the purpose for which it was bought (Hyrsky).
Time is of the Essence
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Clause in PSA that means that failure to adhere to specified time = breach of fundamental term
and repudiation.
Norfolk: if NEITHER party is ready willing or able at close, this is an implied waiver of ToE. Being
able to call on the monies or paying the mortgage but not yet registering discharge = default.
Can also be waived expressly or impliedly by both parties, or by the innocent party if the other
side isn’t ready, or the court can waive it where it’d be unjust/inequitable to enforce (Salama –
V had already granted extensions in the past, this was a tiny extension, and P had already
performed many of the obligations diligently and this extra extension had no significant effect
on V).
Time is of the essence only if explicitly stated in the PSA in which case it must be strictly adhered
to or it’s counted as repudiation.
Upon waiving, either party can set a reasonable new closing date, give notice to other side of it
and, if they want, reinstate time is of the essence. This reinstating must be explicit, not just
“same as last time” (Ambassador Industries).
Tendering
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Basically, what both parties have to do to complete the contract. The title in the state
contracted for (V) and the money in the form required (P). Must be perfect tender – no
conditions attached and no deviation from requirements under contract – amendments must be
made prior to completion date.
Tendering is proof of party being ready/willing/able. Even if one side is ready and the other
isn’t, so can’t complete, the ready side should contact the other in writing and say “I’m ready” –
this is providing formal tender.
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Standard practice is for the purchaser to prepare the transfer and mortgage documents for V’s
execution, but under the Property Law Act s.4, it’s V who must provide the registrable transfer.
So if P hasn’t delivered the docs, V should prepare them himself to have properly tendered
(Shaw). V must do it themselves to have clean hands and perfect tendering if P does nothing.
If one side tenders, that affirms the contract to be in full force such that if the other side doesn’t
tender, it’s repudiation.
Anticipatory Breach
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If one party makes an unequivocal statement to the other that they will not be able to
close/tender perfectly by the closing date, the other party is permitted to avoid the contract and
the responsibility to tender.
This statement MUST be unequivocal, otherwise guy can show up with the cash, you have
tendered, and suddenly you’re the one repudiating.
Specific Performance – Remedy for Default
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To get this remedy, you must have clean hands, be vigilant (apply for it quickly), and the
contract must still be alive/not terminated.
If you do anything that looks opposite to contract being alive, that’ll be an indication that you
shouldn’t get SP (like if you grab the deposit).
To get specific performance, must tender perfectly (ready/willing/able) and not touch deposit.
This is one of the options when the other party repudiates the agreement (like not tendering at
close): here, you’re rejecting the repudiation and claiming SP or damages. You could also accept
the repudiation and terminate the agreement, going for damages and/or the deposit.
Semelhago suggests that there must be something UNIQUE about the land in order for the
purchaser to get specific performance (harder in residential). “Unique” is not defined, and also
raises question of application to V’s getting SP (all they want is cash).
Summary of SP requirements: clean hands, didn’t wait long to claim SP, appear to have fulfilled
your obligations (ready/willing/able – best evidence is that you tendered), and contract exists.
Damages
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Generally assessed at the date of breach.
Typically, it’s the difference in the value of the property between what you paid for it and the
market value at the date of breach (the closing date). Facts may make date of assessment the
date of trial, given how the market can change.
Forfeiture of Deposit – Remedy for Default
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Counts as termination. There must a clause in the contract for forfeiture and if there isn’t, court
will look at this sum of money and see if it can be characterized as a deposit (Hirst).
Not forfeit if the court decides the deposit is extravagant.
Vendor’s Lien
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Where the vendor transfers title before being fully paid for the property. Eg: purchaser registers
transfer after delivering cheque to vendor, then cheque bounces or paid with personal property
that then gets seized for having been stolen goods (Gordon).
V can then claim a vendor’s lien for the unpaid amounts of the purchase price. This can be
registered on title as a caveat and/or V can start an action for the value of the lien and file a
certificate of pending litigation on the title.
Rescission
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Available upon error in substantialus: mistake in a fundamental matter respecting the land: V
gets title back, P gets his money back, contract is undone.
Also may be granted where a misrepresentation attaches to a fundamental term in the contract
– easier if it’s fraudulent. Knowingly not making a disclosure can also constitute fraud (Gronau).
Rescission will only be granted if it’s possible: won’t be ordered if property is now in hands of an
uninvolved third party.
Principles of Undertakings and Consequences of Breach of Undertakings
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Ch.11(7) of Law Society Handbook: lawyer is personally responsible for a breach of undertaking,
regardless of whether it was on behalf of client. Civil liability to those who relied on the
undertaking (the other side) and professional discipline by Law Society.
13(1): a breach of an undertaking MUST be reported to the Law Society.
Ch.11(8): law society deems an undertaking that by issuing a trust cheque, lawyer undertakes
that it’ll be paid except in unforeseen circumstances. Also deemed to undertake that where
he’s holding purchase money in trust and receives a registrable conveyance, he’ll pay the money
to V on completion of registration.
4(2): never give an undertaking unless wholly within your power to comply with it.
11(11): if undertaking nis imposed on you that you are unable/unwilling to accept, get the other
side to change it or immediately return anything that was the subject of the undertaking and
inform the other side. If you’re not quick enough, you’ve accepted the proposed undertaking.
11(10): prohibition from imposing impossible, impractical, or unfair undertakings – don’t impose
undertakings you wouldn’t give.
Never give an undertaking based on performance by a third party
11(7.1): undertakings must be in writing, including alterations, and should be unambiguous.
Steps in Closing
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Step 1: P’s lawyer prepares closing documents (Form A and new mortgage) and sends to V’s
lawyer. V’s lawyer than has them executed and returns to P’s lawyer.
2: P’s lawyer has all the docs and on day of close, registers Form A and B.
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3: After registration, you get pending registration number, allowing P’s lawyer to request closing
funds from the bank and pays V’s lawyer.
4: V’s lawyer upon receipt of these closing funds pays out the existing mortgage and provides
the balance of the funds to V.
5: V’s lawyer secures the discharge of V’s mortgage and registers it.
Purchaser’s Lawyer’s Undertakings
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1: not to register the Form A transfer until they have in their trust account sufficient funds that
when added to the new mortgage proceeds will equal the full purchase price.
2: to the best of their knowledge, P has fulfilled all conditions for funding except the
registration of the new mortgage.
3: will disperse the closing funds when satisfied that after Form A and mortgage are registered
and after satisfactory post-search, P is owner as contracted (title clear as contracted for).
4: to return the transfer unused or, if already registered, apply to have it withdrawn with the
new mortgage if they cannot uphold the undertakings/deal falls through
PSA must explicitly allow for the use of undertakings.
Vendor’s Lawyer’s Undertakings
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1: payout the existing mortgage when they get the closing funds.
2: use diligent/commerciall reasonable efforts to obtain discharge of existing mortgage.
3: provide registration particulars of the discharge to the P.
PSA MUST explicitly allow for use of undertakings (Edward Wong)
Post-Wirick: V’s lawyer must report to Law Society if the bank doesn’t give you the discharge
within 60 days of paying them. P’s lawyer must report if V’s lawyer hasn’t filed the registrable
discharge within 60 days.
Doctrine of Merger
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All pre-closing reps (those in the PSA) are gone once title is transferred. Redican says this is the
presumption without a survival clause or clause saying no merger, while Fraser-Reid says they
won’t be merged unless the parties say so in the PSA.
First exception: survival clause.
Second exception: error in substantialus: if the misrepresentation leads to a total failure of
consideration, rescission can still be granted post-closing (Hyrsky)
Third exception: Fraud – if a rep or warranty was fraudulent, you can still get rescission based
off of it regardless of merger (Allen)
Fourth exception: can still be sued for tort of misrep post-close
Collateral Warranties – Another Exception to Doctrine of Merger
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warranties that were made outside the four walls of the PSA can survive merger/live past
closing. This is when the court elevates pre-contractual representations to give them force of a
representation, usually when equities smell bad.
Collateral Warranties exist where a statement is made during course of dealings that led up to
the contract that has contractual force – becomes part of the contract and was intended by the
parties to be a warranty AND was a statement of fact on something the purchaser is ignorant of
and the vendor has special knowledge of (Roberts)
Parole evidence would bar this (no evidence is permitted to add to or vary an agreement
reduced in writing) but a court will say agreement wasn’t TOTALLY reduced to writing.
S.59 of L&E: Warranties dealing with land must be in writing – must be in writing to get this.
Entire Agreement Clauses can stop collateral warranties from being found, but only if the party
received legal advise and was made aware of the clause and the court finds that the parties
intended the clause to preclude reliance on collateral agreements. (Roberts)
Other Actions that Exist Post-Closing
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Undue influence: influence exerted that prevents party from exercising independent judgement.
Warranty of Fitness for Incomplete Homes: a cause of action exists for latent defects in a home
if the purchase/sale commitement was made prior to the building’s being complete and the
work was not done in a good workmanlike manner, the materials were not suitable, or the
materials were not fit for the purpose of habitation. MUST be an incomplete home – caveat
emptor applies for complete homes.
Substantially complete isn’t enough. If anything work remains to be done when PSA is entered
into, there’s a warranty of fitness. Taylor even said that the house is incomplete if there are
ANY latent defects in the home that made it not fit for habitation at time of purchase (Oak Tree
Construction).