Real Property Fall 2013- Curran (C. Thomson)

IntroductionThe 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 lawyere. Closing date

- When the transaction actually happensf. Challenges After Closing

- If fraud or misrep is discovered later

Volume of Transactions- 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 claimsGreatest 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. 6.1-36.1-1: Direct supervision of staff and assistants by the lawyer is required

- They must maintain actual and personal control6.1-3: 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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DefinitionsCondition: 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, etcConveyance: 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 houseEasement: 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 propertyLicensee: 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 endStrata 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 propertyTender: 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 KTitle (to the property): Proof of ownership – registered with the LTO – all public informationUndertakings: Personal promise, in capacity as a lawyer to do something.

- Must be in writing and in expressed in unambiguous termsVendor: The person selling the propertyWarranties 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 processKey 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 Title4

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 EvidenceA. 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 occupationA. DwellingsB. CultivationC. Enclosure of fieldsD. Regular use of defined tracts for: Hunting, fishing, other resourcesE. Consider: Group’s size, manner of life, material resources, technological abilities, character of land

claimed.

Infringement on Aboriginal TitleCan 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 delgamuukISSUE: Can Aboriginal Title by registered under the LTA?HELD: No

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RSNS:- 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 ColumbiaKEY 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 3 rd 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 3 rd 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- 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 ActStrata 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 unitIssues – 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 ActContains substantive rights and obligations of people in real property. Brings Equity into legislative law.

Family Law ActWhat 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 titleo Avoid conveying property only in one spouses without the other’s consent, could be fraudulent.

Fraudulent Conveyance Act & Fraudulent Preference ActDuties 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 informationPrepare & execute documentsReceive funds, tender documents for registration, pay out funds

Look at the Residential Conveyance Property Checklist

1. Initial contact2. 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 dealo Can be disclosure statements, addenda to the Ko 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 considerationo Then make sure there is clarity of the primary elements: Property, parties and the price o Completion: actual transfer of the property occurso Adjustment: the date where the liabilities associated with the property cease to be the responsibility of the

vendor and of the purchasero Possession: date after the transaction occurso Need to confirm the vendors representation of residencyo If new or renovated property, does GST or HST apply

3. Search title4. Other preliminary matters5. 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 cliento Confirm in writing what it is you told themo Provide a written assessment of your interpretation of the state of the their title, and a written confirmation of

the contracto This is so you have paper trail of what your advice was in case something goes wrong in the future

7. Prior to completiono Adjustment statement shows the various monetary requirements of both the vendor and the purchaser and

the way the accounts are accounted for in the dealo Discharge form: things not staying on title o Authority to pay out

8. Closingo 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-closingo 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 Co 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- 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 titleo Failing to obtain correct mailing address to be noted on title for purchaser

- Review of the purchase Ko Failing to notice or ascertain that more than one legal title to be conveyed as part of purchase

transactiono Failing to notice/explain holdbacks. Review K in detailo 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 propertieso 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 LTOo Courier fails to deliver closing documents on time due to weathero Assuming extensions will be granted as a matter of courseo Failing to review undertakingso 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 ActSection 2: Application

o All new properties which are marketed in BCo The property doesn’t have to be in BC

Section 14: Disclosureo Developer must prepare a disclosure statement, file it with the superintendent and include all material facts

Section 1: Definitionso “Material Facts” are defined as anything that affects or could affect the value, price or use of the property

Section 15: Providing Disclosureo Have to give disclosure statement before entering into K for p+s

Section 16: Amending Disclosure14o Have to amend disclosure statement as soon as aware that it is no longer correct or something has changedo Have to provide new disclosure statement to each purchaser who has yet to receive title

Section 23: Effect of Disclosureo A K for p+s is enforceable if you fail to disclose a material fact.

Ulansky v. Waterscape Homes Ltd. Partnership 2010 BCSCKEY 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 skyeo 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: NoRSNS: 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 BCo 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 viresRSNS:

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 BCo 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 27KEY FACTS:

o Disclosure under REDMA happened about a certain completion dateo 2 years after K for p+s the building is finished, which is 8 months after the completion date noted in the

disclosureo 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: YesRSNS:

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 statemento 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 protectiono 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 PrincipalAgent’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 information2. Duty not to be in conflict of interest with the Principle3. 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 purchaserSelling 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 itBuyer 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 principalDesignate 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 impartiallyDesignated 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 knownWill not negotiate on either party’s behalfDeJesus v. SharifA 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.

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Duties to Principal

Statutory DutiesReal Estate Services Act

o Complete Code for the organization of Real Estate Agentso Very similar to the Legal Profession in the way they self-organizeo Establishes Real Estate Council

Section 1: DefinitionsReal 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, etcSection 2: ApplicationRESA applies to every person who provides real estate services, whether or not paidSection 3: Licence RequirementsYou must be licensed in order to provide real estate servicesSection 4: Licence RequirementsCannot request remuneration for these services unless licenced under the RESASection 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 skillRule 5-1(1-2) to 5-13: Duties for written agreements and disclosure to clientsRule 5-1(1-2): Requirement for written service agreement with clientRule 5-4: must deliver written offerRule 5-5: Licencee is prohibited from inducing a party to breach a K with intention of entering anotherRule 6-1: Payment to unlicensed person is prohibited

Duties in Contract and TortObey Instructions of Principal

Glasner 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.

Exercise reasonable care and skill

Nixon When giving a property valuation, must exercise the care of a reasonably skilled Licensee in that market

Fletcher

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)

Jakube (make sure that reno’s are actually done to code)Preparation of the Purchase K

Price Must create a legally enforceable K. (Failed here b/c allowed vendors to covenant something they could not deliver)

Marketing None Can’t misrepresent the property in the marketing material

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MaterialStandard of Care 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.

Fiduciary DutyTest Guerin The nature of the relationship gives rise to the fiduciary duty, not the category of actor.Presumptive Duty

Dejesus v Sharif

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.

Baillie Giving advice which is then relied on creates a fiduciary relationshipKnock Estate

If there is no interaction between the agent and the alleged beneficiary then there can be no fiduciary relationship.

Duty of Loyalty

Knock Estate

Cannot act for two principals without consent as this is a conflict of interest.

RESA Rule 5-11

(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.

Baillie A fiduciary cannot make secret profits from the principal’s property as this is a conflict of interest.

Ocean Realty

Must disclose all material facts that might influence the conduct of the principal. Reasonable person test.

RESA Rule 5 - 10

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).

Remedy Baillie A fiduciary that makes a secret profit must disgorge their profits to the ptf.

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Duties from Principal to Agento Must disclose all material facts about the property to the agento 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 Partieso Where there is no fiduciary or agency relationship, the party affected is said to be a “3 rd 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 Licensee’s owe a duty to exercise care when making representations that others will reasonably rely on.

Breach of the Duty via Misrepresentation

Betker v Williams

Vacant lot advertised as building site, but bylaw prevented this. Licenee liable to purchaser as a 3rd party in neg misrep.

Fletcher v Hand

Licensee failed to verify facts from vendor about amount of water from well, was liable to 3rd party for neg misrep

Bango v Holt Not reasonable to rely on incomplete info given by listing agent, neg misrep to communicate info to 3rd party without verifying.

Reasonable Reliance Hedley Byrne

The ptf must have reasonably relied on the misrepresentation to their detriment to successfully claim negligent misrepLoss Resulted

Remedy Bango v Holt As this is tort, only reliance damages (i.e. whatever the ptf lost).

High handed and duplicitous behaviour: Kuller v. Lee 2011 BCSC 1648

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Mortgages

Introduction

TermsMortgagor: The land owner, or the person who is in debt or debtorMortgagee: Creditor, the bank/lenderMortgage: 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 rateo The frequency of payment o The interest rateo The property has to be identified clearly and then the register or titleo Penalty or default provisionso 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 redeemo Section 44 of LEA: Rules of equity prevail over the rules of lawo 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

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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 ElementsRedemption

- 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 3 rd 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.

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Existence of a Mortgage

Legal MortgageIssue Case/ Section Ratio NotesWhat is a Legal Mortgage

LTA s.1 Charge: interest in land that is less than fee simple that includes an encumbrance.Encumbrance: includes a mortgage

Effect North Vancouver v Carlisle BCCA 1922

Old common-law rule: when giving a mortgage, the mortgagor actually transfers the property to the mortgagee. There is an actual conveyance.

Over-ruled by statute: LTA s.231

LTA s.231(1) and (2)

(1) Takes care of the “transfer” problem and says that a mortgage is just a charge not a conveyance

(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”

To Create LTA s.225(1) Have to comply with this sectionLTA s.225(2) Mortgage must be in 2 partsLTA s.225(3) Part 1—single sheet of paper, basic

info(a) Parties(b) Legal description of land(c) Signatures of mortgagor and witness(d) Terms that are required by regs to be

included in part 1(e) Anything else the director requires

LTA s.225(5) Part 2—contain all the other terms, either (a) standard terms (b) standard filed terms (c) unique terms that have to be exactly written out in this part.

Can adopt standard terms under s.227 or can file your own standard terms to use every time s.228 (i.e. a big bank would do this). In either case you 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

Register LTA s.29(2) Someone that is transferring land is NOT affected by unregistered interests…

So gotta make sure you register!

LTA s.238 Can’t register a mortgage UNLESS it complies with the LTA (creation rules above)Richmond Savings BCSC 2000

“Mechanical errors of form should not be allowed to undermine the registration, binding effect or validity”. All that is required is to have a transparent agreement between the parties—so that it is clear how the mortgage was intended to operate.

Thus can’t say something isn’t a mortgage due to mechanical failure under s.238 LTA

Also, a mortgage can secure more than one obligation.

LTA s.28 Important to register because whoever registers first (date and time) gets priority.

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Equitable MortgageIssue Case/ S. Ratio NotesExistence LEA s.44 The rules of equity take precedence over the rules of law

LTA s.231(2)

Preserves equitable mortgages

Registration LTA s.33 Equitable mortgages cannot be registeredLTA s.28 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.Creation Notes Can be created three ways:

1. Equitable or future interest2. Legal mortgage fails3. Deposit of duplicate indefeasible title

1. Equ/future Notes Usually this is when the right of redemption is itself mortgaged.2. Legal Fails Royal

Bank v Mesa

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 forNguyen Unregistered mortgage (home-written) on

property civilly forfeited. Failed legal mortgage requirements so is it an E.M.?

Held: NO just a contract between two people not attached to land.

Reasons it WASN’T an E.M.:- Purpose of loan was not to finance

the purchase of the property- Nowhere in agreement does it

mention a charge or encumbrance- No lien mentioned- Nothing would prevent owner

from selling landKreick 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 Rabson

Where document is clear and unambiguous that it is NOT an E.M. difficult to claim that it is—turns on credibility of oral evidence of the parties.

Argued here that it was an E.M. so that the defaulting party could get the right to redeem.

Duplicate of Indefeasible

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. 187(b)

Must return duplicate of indefeasible title to the land title office in order to register a 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:

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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.

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Statutory ProtectionsInterest: 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 Case/ Section Ratio Notes“Blended” payments

s.6 Interest Act Unclear what types of mortgages this applies to, but basically you can’t recover interest unless it shows the principal and rate of interst calculated yearly/half yearly

Old statute… since no one knows who it applies to everyone just complies with it.

Kilgoran Hotels The purpose of s.6 of the Interest Act is to protect the mortgagor by preventing mortgagee from concealing the true rate of interest.

Thus as long as there is disclosure of the principal, rate of interest and how it is calculated you will comply with s.6.

How Much Interest?

s.7 Interest Act You can only get the interest rate that is stated in the mortgage agreement.

What Happens at Default?

s.8 Interest Act Cannot charge a fine, penalty or greater rate of interest on default: default is the triggering event.

Reliant Capital Where an increased rate of interest just happens with the passage of time, it is not in conflict with s.8. To trigger s. 8, the higher rate of interest must occur on default so as to be a fine or penalty.

Court also recognizing that the parties are sophisticated business people, and that it is reasonable to charge a higher rate of interest one month before finishing because if you aren’t paid off by then risk is substantially increased (high risk short term loan)

Over Charging s.9 Interest Act An interest overcharged can be recoveredLength of Indebtedness

s.10 Interest Act

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.

Criminal Rate s.347 CCC (1) If you enter into an agreement at a criminal rate, or(2) you receive payment at a criminal rate then you are guilty of an indictable offence.

Criminal rate is defined as exceeding 60%. Interest is defined not just as the percentage listed, it is the sum total of everything received.

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Degelder For the purposes of s.347(1) interest rate is 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?

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.

However, By act of a debtor, the 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.

Banks Bank Act s.450 Requires banks to disclose non-commercial borrowers the cost of borrowingResidential credit transactions

Business Practice and Consumer Protection Act (BPCPA)

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 creditConsumer transaction: must be for a household purpose

BPCPA s.9 (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

BPCPA s.8 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.

BPCPA part 5 s.66 & 67

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

BPCPA s.72 - 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.BPCPA s.10 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

Mortgage Brokers

Mortgage Brokers Act Part 2

- Requires protection in the context of consumer protection

- Applies to mortgage brokers and some types of transactions

- Requires disclosure and conflicts of 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

Disclosure: they have to disclose any interest. They get paid by the banks, so they get a commission and if they get any fee above that they have to disclose it

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mortgage broker).

Mortgage PitfallsIssue Case/ Section Ratio NotesAssignment LTA s.209 Transfer must be in a proscribed form, gives the person all the rights and benefits of

the mortgage. Transfers all the associated rights and equitiesLTA s.27 You cannot assign more than is due to you, the transferee takes subject to the equities

remainingLEA s.36 Have to give notice to Mortgagor in writing to assign your interest to another party

Assumption Property Law Act 20-24

- 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*

Priorities LTA s.22 Interests must be registered, and interests past at the date of registration NOT execution of instrument.

LTA s.28 Priority is given based on date and time, subject to contrary intention in the instruments themselves

Can register a priority agreement on title to change order, need agreement of all affected parties.

LTA s.23 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

LTA s.25.1 A void instrument upon registration does not create an interest in land.

Thus there aren’t the same protections for lesser interests as there are for fee simple

LTA s.26(1) Registered owner is deemed to be entitled to the estate/interest/claim created or evidence by the instrument in respect of which a charge is registered, subject to some exceptions

Therefore registration for lesser interests only creates a rebuttable presumption… not conclusive protection like indefeasible title for fee simple.

Gill v Bucholtz (1) Under s.23, Registration creates indefeasible title, with the exception under s.23(2)(i) of an action by a true owner to recover where the second owners is part of fraud

(2) LTA does not give the registered owner of a charge the same quality as an owner. They are deemed to be entitled, but this is a 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

The torrens system in BC is not absolute: so if you are dealing with a lesser interest need to be more diligent against fraud.

Currently this is dealt with by requiring more extensive client verification.

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don’t have.o Therefore if you acquire interest in

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.

Foreclosure n/a 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.

Requirements of Lenders

n/a - Often banks require lawyers to do things which are outside their expertise as lawyers

- You have to be very careful that you don’t agree to do something which is outside your realm of expertise

- Read the instructions very carefully and 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

Example:-Ensure there is “adequate” insurance… only an insurance broker could do that

-“value of property at closing”—you have no knowledge of this

Conflict of Interest

Appendix C Code of Professional Conduct

Lawyer can act for both purchaser and the lender in a simple conveyance under certain circumstances.

But if lawyer acts for both they cannot act in any foreclosure 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.

Fraud n/a Mortgage Fraud has become more important in the last decade: client verification and avoiding delay are solutions to this problem.

Law society Rules have changed to reflect this, have to know report w/n five days to get a discharge, if you haven’t received registerable mortgage w/n 60 days have to report it.

Homewood mortgage v Lee

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

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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

Pre-Closing ClaimsWhen 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 PromiseIssue Case/

SectionRatio Notes

What type of promise is “fundamental”?

n/a There are two types of promises: conditions and warranties

Conditions Clause 8

Vendor promises to maintain property in condition “as viewed”

Clause 7

What will be staying with the property as a fixture and what is going as a chattel.

n/a Size of the property, ability to use land for the purpose you want etc.Warranties n/a Fixable amount, or where damages would be

appropriate, i.e. presence of screen doors, number of rose bushes

What is a condition and what is a warranty all depends on what is important to the purchaser and how significant the impact is on the property.

Breach of promise of “size”

Perrell article

If the sale of land is by ‘block’, a deficiency in size must be material to allow the purchaser to refuse to close. Where the size on paper differs from the actual size, but the purchaser viewed the property and saw the clearly demarcated boundaries of the actual size, the deficiency is likely not material (Lamb)

If the sale of land is on a per unit basis, then a deficiency in size is relevant as long as it is more than de minimus and depending on the circumstances.

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Failure to Convey Good TitleGood 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 NotesVendor’s Obligation Clause 9 Vendor promises to provide title

free and clear of all encumbrances.

With the exception of conditions, provisos, restrictions, reservations etc. that appear in the 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 Hsu

To fit a restrictive covenant held by a utility into the exception, must be something that is necessary for the operation of the holder as a public utility.

Where “defects” may come from

LTA s. 23 Registered owner has indefeasible title (which would be clear title).

Looking to see if there are any of the exceptions and make a determination of the title is clear or not.

Except:o reservations to Crowno Federal/Prov. taxeso Municipal taxeso lease for less than 3 yearso highways and public easementso expropriations and escheatso registered charges on titleo incorrect boundarieso fraudo restrictive conditions imposed by Forest

Act.LTA s. 20 No transfer of land occurs except if

it is registeredHowever, doesn’t mean that agreement is not 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 parties

So anything registered may cause you a problem

LTA s. 29 Anyone who is taking an interest in land is not affected by unregistered interests even if they had notice

So if something isn’t registered, may be difficult to claim that it is a defect.

LTA s. 26(2)

Just b/c an interest is registered, doesn’t necessarily mean it is a valid interest

So even if there is something registered on title, it may not be a defect, for example if it isn’t valid. Lawyer has to make the call whether something is valid and thus may be a defect…LTA s.

221(2)Registration of a restrictive covenant is not evidence of its enforceability

What the Parties Must Do to Fulfil Obligation

Clause 13 & 14

Parties agree to close on undertakings of lawyers should vendor need purchaser’s money to discharge a financial encumbrance (i.e. their mortgage) or should the purchaser require the transfer of property before their mortgage can be released to

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Can’t say there is a defect in title if this is due to your failure to uphold your own duties

the vendor.PLA 4-6 Purchaser has an obligation to prepare transfer documents. Vendor must supply

Purchaser with the signed transfer instruments.PLA s. 3 Either party may apply to the Supreme Court to decide on transfer issuesPLA s. 6 A person who is transferring land

must first register their own title, make sure that it is their own name, otherwise transferor cannot sue.

Note: Recent exception to this in Mariner Towers, Court allowed purchaser to contract out of their s.6 property rights where pre-sale condo K signed with shell corp but transfer coming from main developer

LTA s. 185 Must use approved form to transfer

Which is form A freehold transfer

LTA s. 186 Covenants incorporated by reference unless exempted

Basically, the terms from the Land Transfer Form Act apply to the transfer doc. Shortens the doc considerably.

Norfolk v Aiken

Can’t force a party to agree to close on undertakings or in any manner that is not stipulated by the interm agreement… must be written in the K to say they had to do it.

Important b/c here, before clause 13 & 14 – so one party couldn’t fulfil obligations b/c other party refused to close on undertakings—but this was OK b/c no agreement to close that way.

Is the defect sufficient to entitle the purchaser to refuse?

Chen v Hsu

Only a material defect entitles a purchaser to refuse to complete.

TEST: can the vendor convey substantially what is required by the K? (depends on the terms of the encumbrance, not what would likely happen)

Examples:- restrictive covenant requiring approval of

architecture (chen)- large easement that prevented building a

pool (affected use and enjoyment) (Price v Malais)

- financial encumbrances (Norfolk)- registered lis pendens (Norfolk)

Has the defect been cleared?

Clause 13 & 14

Parties agree that a discharge does not have to be registered for financial encumbrances where the vendor is relying on the purchaser funds to discharge it.

This is the reverse of much of the common-law below so important.

Norfolk v Aiken

Title is clear when registrar has endorsed the register with a note of cancellation, i.e. when discharge of encumbrance registered.

Suggests title may also be clear if the encumbrance were to be totally paid off but just not registered yet. (Shut down in Campbell v Frolek)

Seguss v Fawcus

Vendor has until the end of the day on closing to clear title.

Ok if they don’t have it clear in the morning, as long as they get it done by end of day closing.

Chen v Hsu

Need “clear evidence” that title will be discharged if the discharge has not been registered to consider title clear.

W/o undertakings, mere letter saying it would be easy and likely happen not enough.

Campbell v Frolek

Title is not clear when registerable instrument is not produced—even if in reality the encumbrance has been paid off.

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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 Ratio NotesWhere Clause 12 Time is of the essence

LEA s. 31 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

What it means Salama When time is of the essence, parties must perform their obligations on time or they breach the contract.

Thus failure to perform on time signifies a repudiation of the contract and the other party can make their election to pursue their remedies.

When it ceases to have effect

Norfolk v Aiken

If neither party RWA at closing, then time is of the essence ceases to be of effect

Reinstatement Shaw Industries

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.

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.

Discretionary Nature

Salama The court can refuse to give effect to T/E where it would be inequitable to do so

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

Effect of amendments

Ambassador Must specifically restate that time is of the essence at each amendment for it to continue to have effect.

Everyone fulfilled their duties, RWA, but no one reasserted T/E after amendment so no longer had effect

Sorenson Whether T/E remains after an amendment depends on the context.

Explicitly reasserted T/E after amendments, so purchaser allowed to rely on it.

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Condition of the Property: General FrameworkIssue Where NotesCaveat Emptor Applies to all Contracts

Cardwell “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

defect2. The vendor knew of a latent defect rendering home unfit for human

habitation3. The vendor was reckless as to the truth or falsity of statements relating to the

fitness of the house for habitation4. The vendor breached a duty to disclose a latent defect which renders the

premises dangerousHanslo No recovery for patent defects even if they are only discoverable with a thorough

inspectionCurtin v Blewett

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.

Redican v Nesbitt

If you want to rely on a condition of the property as a purchaser, you need to write this expressly into the contract as a warranty.

Breach of warranty in the K is exception to Caveat Emptor

Redican v. Nesbitt

Error in Substantialibus is an exception to Caveat Emptor

Condition of the Property: Tort ClaimsNegligent 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.

Fraudulent misrepresentationDerry 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.

PDS NOT incorporatedIssue Where NotesContractual Hurdle

Clause 18 No representations other than those contained in the contract

Effect Bains v Bhullar

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.

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PDS incorporatedArsenault 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 Blewitt

PDS can give rise to fraudulent misrepresentation. See requirements above

o Here fraudulent misrep was NOT made out b/c the statement of the vendor’s was not untrue when it was made.

o Just turned out to be untrue latero 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 misrepBUT: Once a purchaser has obtained a home inspection, then unless you fit into one of the caveat emptor exceptions, reliance shifts to the home inspector and cannot claim against the vendor. This because the requirement for “reasonable reliance” is no longer met after you get a home inspection.

Here purchasers couldn’t claim against Vendor for neg misrep b/c had home inspector who should have noted all the obvious patent defects i.e. mold, sink hole, cracks etc.

Hanslo However, may be entitled to rely on both the PDS and the building inspector… just looking for reasonable reliance, so building inspector could render reliance on PDS unreasonable. Depends on circumstances.

Here, entitled to rely b/c defect was about an unregistered easement which is outside the area of the inspector’s expertise.*** remember, not warranting a state of affairs so vendor only liable if they lie

Gronau v Schlamp

o Active concealment of a patent or latent defect is fraudulent misrepresentationo 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 Colbeck

o Vendor’s liable for negligent misrepo 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 Bhullar

o Vendor falsely misrepresented the type of blueberry plants, which was a fraudulent misrepo Important b/c this type of blueberry is impossible to harvest mechanically so made a big difference

to the purchasers.

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Condition of the Property: Contractual ClaimsIssue Where Ratio NotesContractual promises

Clause 18 There are no warranties or representations except those that are contained within the contract

So see if any of the contractual warranties below apply.

Clause 8 Warrants that the property will be in substantially the same condition at the possession date as when viewed by the buyer.

This therefore applies to patent defects, Vendor warrants there will be no new patent defects at the time of possession.

Clause 10 Addendum 1

The seller acknowledges having provided separate written disclose of all known latent defects

This is in addition to the PDS statement

Clause 13 Addendum 1

Can incorporate the PDS statement into the contract if this clause is dated.

PDS Incorporates by reference RESA Rule 5-13 material latent defect definition.Breach of K: Warranty

Roberts v Montex

Escape Clause (18) does not bar reliance on a warranty not incorporated into the 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 Montex

A warranty occurs when a Vendor states a “fact” of which the buyer is ignorant.

If vendor merely states “opinion” ≠ warranty.

Fraser- Reid If the home is complete, need an express warranty

However see Statutory protection for NEW complete homes in post-closing claims

Breach of K: PDS Statement

Hanslo If PDS is incorporated through clause 13 addendum 1 a statement which did not reflect the Vendor’s true belief at the time can give rise to breach of contract.

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.

Connie v Sampson

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.

Rogalinski Where Vendor relies on professional inspector in order to fill out PDS, they cannot be liable for breach of K b/c they answered honestly.

Purchaser recovered against inspector though for neg misrep.

Curtin v Blewitt

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)

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Post Closing ClaimsIssue Case/ Section Ratio NotesContractual promises

Clause 18 There are no warranties except those that are contained within the contract

So see if any of the contractual warranties below apply.

Clause 8 Warrants that the property will be in substantially the same condition at the possession date as when viewed by the buyer.

This therefore applies to patent defects, Vendor warrants there will be no new patent defects at the time of possession.

Clause 10 Addendum 1

The seller acknowledges having provided separate written disclose of all known latent defects

This is in addition to the PDS statement

Clause 13 Addendum 1

Can incorporate the PDS statement into the contract if this clause is dated.

PDS Incorporates by reference RESA Rule 5-13 material latent defect definition.Warranty Fraser- Reid A warranty is part of the contract = a promise of a certain state of affairs.

Roberts v Montex

A warranty occurs when a Vendor states a “fact” of which the buyer is ignorant.

If vendor merely states “opinion” ≠ warranty.

Fraser- Reid There is no longer a presumption of merger. Absent proof of intention, warranties are NOT merged into the transfer.

Warranties survive closing.

Representation Fraser- Reid A representation precedes and induces the contract.

Tort claims can still be pursued post-closing: see condition of the property, tort claims above.

Effect of Exclusion Clause

Bains v Bhullar 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.

Roberts v Montex

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.

Definition:Error in Substantialibus

Hyrsky v Smith A mutual fundamental mistake as to the quality of the subject matter. Has to be a material, substantial element of the K.

Here there was a mistake of quantity of land, which isn’t necessarily ES but was here b/c it was over half the property.

Warranties & Vendor-Built Home

Fraser-Reid At common-law there is NO implied warranty for a COMPLETE home. However, for an incomplete home, there is an implied warranty that the home will be:

1. built according to building code2. built in good, workman-like manner3. fit for human habitation.

Policy: Courts say that implied warranties is an area best left to legislatures if they want them. Could have an impact on the housing market.

Homeowner Protection Act (BC) s. 22

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

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the warranty begins; and3. structural defects for a period of at least ten years after the date on

which the warranty begins.MANDATORY

HPA s. 23 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

So now in BC we have a statutory implied warranty for newly built homes whether they are complete at time of K or not.

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RemediesIssue Case/

SectionRatio Notes

Court’s Authority

s. 24 LEA o A court may relieve against all penalties and forfeitures

o Court has discretion for awarding reliefo Court can shape remedies as they see fit

Remedies are a discretionary power of the Court

******Always start with this with any discussion about Remedies*****

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Anticipatory Breach/Repudiation: For Pre-Closing ClaimsIf 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 NotesRoy v Kloepfer

- You don’t have to wait until closing to see if the other party will in fact breach- If there is a clear anticipatory breach, then the innocent party’s right to election arises

immediatelyNorfolk v Aikens

- However the innocent party must communicate their affirmation of the breach to the breaching 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 Disaffirmo 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 contracto 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.

TenderTender is good evidence to show readiness to performThe 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 NotesNorfolk v Aikens - A claim for SP can only succeed if you were able to tender at closing

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Specific PerformanceDefinition Semelhago Specific performance is an equitable remedy.

Courts prefer to award damages. SP only available where damages would be an insufficient remedy—thus the availability of SP turns on the uniqueness of the property.It is no longer assumed that SP will be appropriate in all real-estate cases. The Court recognizes that not all property is unique.

The purchaser is therefore the one that usually claims SP, b/c they are getting something unique.Vendor just getting money so can K with anyone… hard to get SP unless there was a special circumstances.

How to Get John E Dodge Holdings

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)

Seren- brennikov

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?

Norfolk To get SP you must be RWA from the time of the anticipatory breach/ breach until SP awarded.

Seguss v Fawcus

To show you are RWA, don’t need to undertake the mechanics of closing, (the formal steps of tendering) as this is only required when both sides have demonstrated they are RWA.

Therefore, the Vendor does not need to have completely cleared all encumbrances, rather just having the forms ready to do so is sufficient to be RWA.

Norfolk You can bring an action for SP BEFORE closing date.Uniqueness Rostrum A property purchased for development will typically not be considered unique enough.

Cormack 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

Tropiano 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.

Seren- brennikov

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.

Damages in Addition

n/a - Out of pocket expenses only- Discretionary

Ansdell v Crowther:

The principles for these types of damages are the same as common-law damages

See Below

Damages in Lieu

Semelhago - Where SP is warranted, but can’t award for some reason i.e. b/c a bona fide 3rd party has bought the property

- Allows damages to be claimed in some circumstances where they otherwise would not be.

Abatement Seren-brennikov

- 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

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no guarantee that that will happen.

DamagesIssue Where NotesStatutory s.37 PLA Purchaser can get damages where there is a defect in title.Generally Mavretic v

BowmanGeneral Principle for damages for Breach of K: place the innocent party in the position they would have been in had the contract been performed.

Roberts v Montex

If a breach of warranty is discovered post-closing, the purchaser is entitled to damages.

Can only collect once even if you have a claim in both K and tort.

Assessment Ansdell v Crowther

There are no rigid rules when assessing damages. It is the Court’s discretion to fix the date that damages are assessed at.

Mavretic v Bowman

You normally assess damages at the date the K was breached unless circumstances make this inappropriate.

- Problem with using trial date is that length and timing of 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

Semelhago Where substituting damages in lieu of SP, the K has been kept alive until trial and therefore it makes sense to assess damages at date of trial instead of date of breach, b/c technically K never ended.

Have two options to assess damages at: Trial or Date of Breach

Mitigation Southcott 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.

Hargreaves v Brar

Test from Baud Corp:

Onus on offending party to prove:(1) after the breach, the innocent party failed to

do some act they reasonably could have doneAND

(2) if the innocent party had done the act, the loss caused by the breach would have been avoided or reduced.

Here, the innocent party was reasonable in selling house at $100,000 less two weeks after breach b/c:- rapidly falling market- needed $ to purchase new

home- getting interim financing not

rsnble b/c didn’t have the income

- AND offending party did NOT lead any evidence showing that loss would have been reduced or avoided had steps been taken.

Serebrennikov 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.

Southcott A single purpose corp is subject to mitigation just Thus, only relieved from

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like anyone else.

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.

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.

mitigating when seeking SP if the inaction was reasonable. With the higher threshold of uniqueness now, this will be much harder to prove.

Lien n/a - 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

*If either party is concerned, they should register their interest*

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RescissionDefinition Redican V

NesbittRescission is where the parties are restored to their original position pre-contract. Can get pre or post-closing.

If the transfer happened a long time ago, purchaser may need to pay occupation rent when getting rescission. (Allen)

Pre-Closing

Cherris Estate

Unmaking of the K – restore parties to pre-K stateRescission pre-closing for:

- Misrepresentations (neg/ fraud)- Error in Substantialibus

Rescission post-closing only for:- Fraudulent Misrep- Error in Substantialibus

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.

Post-Closing

Redican v Nesbitt

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.

This is the classic statement of rescission.

Hyrsky v Smith

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

*although they say you could rely on a warranty to get rescission, this has never happened so far.

Allen v. McCutcheon

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.

Here is was a statement regarding the size of an easement.

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