Category: Real Estate Law

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Commercial Leases

Court Rejects Debtor’s Application for Commercial Rent Relief Due to COVID-19 Shutdowns

We have previously written about cases in which commercial tenants tried to avoid paying rent, citing the COVID-19 pandemic and the related shutdowns. 

In a first case, in a decision that made headlines, a Quebec court issued a ruling in which it excused a commercial tenant from paying rent during the closure of its business due to the COVID-19 pandemic.

In a second case, an Ontario court came to a different conclusion, ruling that the commercial tenant was not relieved from its obligation to pay rent despite the COVID-19 pandemic and the government shutdowns.

More recently, a Quebec court faced a similar issue, in which a debtor applied to be relieved of its rent obligations due to COVID-19 shutdowns.

Company Stores Shut Down Due to COVID-19 Pandemic

The company in the recent Quebec case operated over 300 retail stores in Canada and the U.S.  However, its business was severely impacted by the COVID-19 pandemic and the government-imposed restrictions which followed.   

As a result, the company filed an Application for an Initial Order and an Amended and Restated Initial Order for the purpose of pursuing a restructuring of its business under the Companies’ Creditors Arrangement Act (the “CCAA”).

The court issued an Initial Order, which imposed a stay to prevent the company’s creditors from bringing or continuing proceedings or enforcement orders against it or its assets. The stay period had been extended several times and it remained in force.  

The Initial Order also provided that no person who supplied goods, services or the “use of leased property” to the company after the Initial Order, could be prohibited from requiring immediate payment.  

On November 11, 2020, the government of Manitoba issued an order closing non-essential businesses to the public in order to stem the rise in cases of COVID-19 in the province. The company’s Manitoba stores were covered by the Manitoba Order and had been closed to the public since November 11, 2020.  

On November 22, 2020, the government of Ontario also closed non-essential businesses to the public in several areas of the province.  Certain of the company’s Ontario stores were covered by the Ontario Order and had been closed to the public since November 23, 2020.  

The company thus claimed that so long as the Manitoba and Ontario Orders were in place, it was not “using” the premises it leases in those provinces and post-filing rent was neither due nor payable.  

The company applied to the court, seeking a declaration that where it was unable to operate a store in leased premises as a result of a federal, provincial, state, county or city decree, regulation or order, and it did not use the leased premises as a result, no rent would be due or payable during the lockdown period. The company’s application was based on section 11 of the CCAA, which gives the court discretion to make any order that it considers appropriate in the circumstances, subject to the restrictions set out in the Act. 

The company’s application was contested by the landlords of its Manitoba and Ontario Stores, citing s. 11.01(a) of the CCAA, which reads:

Rights of suppliers

11.01 No order made under section 11 or 11.02 has the effect of

(a) prohibiting a person from requiring immediate payment for goods, services, use of leased or licensed property or other valuable consideration provided after the order is made […].

In response, the company argued that for a debtor to be making “use” of property within the meaning of section 11.01 (a) of the CCAA, it must necessarily be carrying on the activity for which the property was leased, which was not its case due to the government shutdowns.  

Court Rejects Company’s Application

The court rejected the company’s argument relating to its use of the leased premises, stating:

“The Court does not agree with [the company] that for a debtor to be making “use” of property within the meaning of section 11.01 (a) of the CCAA, it must necessarily be carrying on the activity for which the property was leased. If that were the case, a debtor could choose to temporarily shut down operations in leased premises and the landlord would not have the right to insist on immediate payment. This could not have been what Parliament intended. 

While there is no doubt that [the company’s]’s ability to operate the Manitoba and Ontario Stores is severely limited by the COVID Restrictions, it is still using those premises….[…]

[T]he Court agrees with the Landlords that under the terms of the leases, [the company] is not relieved of the obligation to pay rent even if a government regulation or a situation of force majeure prevents one of the parties from fulfilling its obligations.”

As a result, the court refused the company’s application.

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continue to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Commercial Leases

Court Takes Judicial Notice of Landlord’s Racism in Commercial Lease Dispute

In a recent Ontario decision, a court took judicial notice of the landlord’s anti-black racism in a dispute over a commercial lease.

Landlord Tries to Evict Tenant

In 2013, the tenant took assignment of the lease for a commercial unit located in a shopping plaza in Toronto. The tenant operated a restaurant and bar in the unit. It had spent $150,000 in installing improvements to the premises when it took it over in 2013.

The restaurant and bar are owned and operated by a husband and wife team, served what was described as African/Black/Caribbean cultural foods, was licensed by the LCBO to serve alcoholic beverages, and catered to a primarily, but not exclusively, Black community customer base. 

The tenant’s restaurant business was quite successful. Even during the COVID-19 pandemic, the tenant maintained its takeout business and had never missed paying any base rent or additional rent. 

Ownership of the plaza changed during the term of the tenant’s lease, with a new landlord acquiring the plaza in 2016. 

The original lease was for a 5-year term, from August 1, 2012 to July 31, 2017, with options to extend the term for two additional 5-year periods. The lease’s option to renew clause stated that the cutoff date for the tenant to provide written notice of its desire to exercise the option to renew was January 31, 2017. 

While no written notice of exercise of the option was provided by the tenant prior to the cutoff date, the tenant did try on numerous occasions, both before and after the cutoff date of January 31, 2017, to get in touch with the landlord and the manager by phone in order to start the renewal process, but with no success. In fact, it appeared that their calls were deliberately avoided.

After nearly a year of unanswered calls, the tenant had its leasing lawyer write to the manager indicating that it wanted to exercise its option. In his letter, the tenant’s lawyer explained that his clients had been advising the manager by phone message that they wanted to renew the lease, and that all they had gotten in return was a voice message saying “We’re looking into it.” 

Then, on May 28, 2020, the landlord delivered a letter to the tenant, stating: “The landlord hereby exercises its right to terminate the lease now deemed a monthly lease”. 

In its court filings, the landlord stated that the tenant was not to its liking because it did not attract what he called “like minded family-oriented customers”. 

In addition, a contractor who had worked for the landlord in the plaza stated to the court that: “The customers visiting [the tenant’s restaurant] seemed to me to be quite unlike, in a negative way, the usual clientele visiting other tenants…” He went on to say: “the [tenant’s restaurant] does not attract family-oriented customers and detracts from the appeal of the Plaza for families.” 

Finally, the landlord argued that if the tenant were to vacate the premises and make way for a new tenant, the landlord’s rental income would increase.

In response, the tenant sought relief from forfeiture and moved to enjoin the landlord from evicting it from the premises.The tenant claimed that the landlord’s real point was that the “wrong” kind of families ate at its particular establishment. It submitted that there was a barely veiled tone of racism in the observations made by and on behalf of the landlord about a Black community restaurant. Additionally, the tenant submitted that the landlord had recently failed to renew leases when they came due of at least one other tenant owned or operated by persons of colour. It was the tenant’s perception that the plaza was gradually being transformed in a racially defined way. 

Court Rules in Tenant’s Favour

Citing previous case law, the court began by explaining that the power to relieve from forfeiture is discretionary and fact-specific and is predicated on the existence of circumstances in which enforcing a contractual right of forfeiture, although consistent with the terms of the contract, visits an inequitable consequence on the party that breached the contract. It found that  none of the usual factors weighing against a party seeking relief had come into play. The court then stated:

“Since the Tenant was not in breach of the Lease, and no financial loss has been established by the Landlord, there is little to balance on the Landlord’s side of the equation other than the Landlord’s subjective view of what it called an “unattractive” Tenant. […]

More importantly, the prejudice that would allegedly be suffered by the Landlord is not one which carries weight in considering a balance of equities. As already indicated, the Tenant is of the view that it is the fact that the Tenant is a Black-owned and operated business, and caters to an Afro-Caribbean community, that is the real issue for this Landlord. I have already observed that the Landlord’s stereotypical portrayal of the Tenant’s customers’ behaviour fits an established pattern in society. In the Tenant’s view, the only “prejudice” the Landlord will have suffered if the Tenant does not have to forfeit the Premises is that the Tenant and its African Canadian customer base, who, as the Landlord’s affiant said, are “quite unlike, in a negative way” the rest of those at the Plaza, will remain in the Premises. With respect, this is precisely what legal scholars have identified as the “‘Othering’ of minority people…in the guise of legal method.” 

Generally speaking, a trier of fact can take judicial notice of facts that are “so notorious or generally accepted as not to be the subject of debate among reasonable persons”. To this I would add the observation that, “The existence of anti-black racism in Canadian society is not the subject of debate among reasonable people”.”

While the court observed that its decision in the matter at hand could not address society’s many challenges with respect to racial justice, it stated that it could equally not ignore them. It stated that, at the very least, the societal realities pertaining to Black businesspeople like the tenant had to be factored into the exercise of the court’s discretion in considering equitable remedies like injunctions and relief from forfeiture. 

The court then explained that s. 98 of the Courts of Justice Act provides that a court “may grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just” and that the justice considerations entails, among other things, an assessment of the good faith of the parties. Ultimately the court held:

“The equities, as well as the balance of convenience, weigh in the Tenant’s favour. There is, objectively speaking, no prejudice to the Landlord in allowing the Tenant to remain as a rent-paying tenant of the Premises at the present base rent and additional rent, plus any applicable HST. Terminating the Tenant’s tenancy under present circumstances risks giving force to the Landlord’s subjective, if perhaps unconscious prejudices. 

On the other hand, if the tenancy were ended now, while the Tenant is in good standing in every respect, the Tenant would suffer irreparable harm. That is, it would lose not only its substantial investment in the Premises, but the goodwill associated with its well-established location. Its owners and customers would also suffer the indignity of being excluded from the Premises based on what can be seen as a form of bias which Ontario law rejects.”

As a result, the court found that the test for injunctive relief had been met and ordered that the tenant’s term under the lease would continue until July 31, 2022, which was the date when its first 5-year extension would have ended. It further ordered that all other terms and conditions of the ongoing tenancy would remain the same as in the lease, including the tenant’s option for a second 5-year renewal.

 Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continue to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Real Estate Law

Ontario Introduces New Legislation for Real Estate Market

Earlier this fall, the Ontario government announced the coming into force of new regulations intended to modernize the province’s real estate market.

What is TRESA?

The Trust in Real Estate Services Act, 2020 (“TRESA”), formerly known as the Real Estate and Business Brokers Act (2002), was passed by the Ontario legislature on February 28, 2020 and received Royal Assent on March 4, 2020. TRESA is intended to modernize the rules for registered real estate brokerages, brokers and salespersons. 

The changes to the Act are meant to:

  • Enable regulatory changes to improve the information consumers receive about what a real estate professional and brokerage must do for them, which would give consumers more choice in the real estate purchase and sale process. 
  • Improve professionalism among real estate professionals and brokerages by allowing for regulatory changes to enhance ethical requirements.
  • Update the Real Estate Council of Ontario’s (RECO) regulatory powers, including allowing it to levy financial penalties (also known as administrative penalties) to promote compliance with the Act — and allowing RECO’s registrar to take into account a broader range of factors when considering eligibility for registration.
  • Create a stronger business environment by laying the foundation to allow real estate professionals to incorporate and be paid through the corporation while maintaining measures that protect consumers, as well as by enabling the creation of a specialist certification program that may be developed by government or by RECO.
  • Bring the legislation up to date and reduce the regulatory burden.

First Phase

In a press release on October 1, 2020, the Ontario government announced the first phase of regulatory changes related to TRESA, which included regulations to align real estate brokerages and professionals with modern business practices. The new measures will:

  • Allow real estate professionals to incorporate and be paid through Personal Real Estate Corporations (PRECs).
  • Let salespersons and brokers use additional advertising terms such as “real estate agent” and REALTOR® in their advertisements, better reflecting the services they provide to consumers across the province.

A PREC is a form of business incorporation that allows real estate professionals to obtain the same tax and income benefits that other businesses benefit from. 

Second Phase

The expected second phase of regulatory development will include public consultations with consumers and real estate professionals that focus on further measures to support trustworthiness and the highest ethical standards in the real estate sector, including:

  • Updating and modernizing the Code of Ethics for real estate professionals;
  • Implementing disclosure requirements to better protect consumers; and
  • Improving regulatory efficiency and enhancing professionalism in the industry by updating the authority and powers of the Real Estate Council of Ontario.

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continue to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Commercial Leases

Ontario and Quebec Courts Order Commercial Tenants to Pay Rent Despite COVID-19 Pandemic in Two New Cases

We have previously written about a Quebec decision in which the court excused a commercial tenant from paying rent during the closure of its business due to the COVID-19 pandemic.

In that case, the court concluded that superior force caused by the COVID-19 pandemic had prevented the landlord from fulfilling its part of the lease, thus relieving the tenant from paying rent and the court ordered a reduction of rent in the amount of $26,950.

Ontario Court Rejects Tenant’s Claims

In a more recent Ontario case, the court came to a different conclusion.

In that case, the commercial tenant had closed its business from March 18, 2020 to May 25, 2020, due to public health mandated closures related to COVID-19 in Ontario. It later opened with limited operations and only resumed full operations in August 2020. 

At trial, among other issues, the tenant asked the court to relieve it of its obligation to pay rent during the shutdown period and pay a prorated amount of rent during the period of limited operations. The tenant based its claim on frustration and force majeure, arguing that the lease had been frustrated during the shutdown and was a force majeure.The tenant further submitted that the lease contained a force majeure clause and it should correspondingly be relieved of its obligation to pay rent.

The landlord disputed the tenant’s claim.

The court found that the force majeure clause in the lease did not relieve the tenant from the obligation to pay rent, stating:

“The obligation of the Landlord to provide quiet enjoyment is always subject to the payment of rent by the Tenant, as stated [in] the Lease. As [the tenant] did not pay rent during the subject periods, the Landlord’s obligation to provide quiet enjoyment correspondingly did not arise. […]

Government legislation enacted during the shutdown and the [limited operation period] to ensure the survival of small businesses focused on preventing eviction by landlords but did not suspend the payment of rent.”

As a result, the court rejected the tenant’s claim and ordered it to pay the rent.

Quebec Court Rejects HBC’s Claims

Similarly, in a Quebec decision this week, the court also rejected a commercial tenant’s claim that it should not have to pay rent due to the COVID-19 pandemic.

In that case, Hudson’s Bay Co. (“HBC”) was ordered to pay rent at six malls in Quebec after the company had ceased to pay rent in April. The landlords for the mall locations had gone to court to obtain safeguard orders to force HBC to pay rent. 

HBC had stated that it believed that the burden posed by the pandemic should be shared fairly by both landlords and retailers.

However, the interim safeguard orders did not decide whether the pandemic restrictions could be cited as a legal disturbance to justify not paying rent, so the issue will still need to be decided in court at a later date. Rather, the orders are intended to force HBC to keep paying as an emergency measure until the fundamental issue is settled.

The six safeguard orders require HBC to pay 100 per cent of the rent for a period of up to six months, starting in the month in which the landlords’ petitioned the court for help.

As a result, HBC must now pay upwards of $1.8 million in unpaid rent for the properties.

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continuing to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Residential Real Estate

Court Dismisses Fraudulent Misrepresentation Claim Arising from Refinancing

In a recent decision, the Ontario Court of Appeal dismissed an appeal arising out of a lawyer’s claim that a mortgage broker had committed the torts of fraudulent misrepresentation and/or inducing breach of contract arising from refinancing efforts on a residential property.

Mortgage Broker Becomes Involved in Refinancing of Couple’s Home 

In 2012, a couple bought a house, financed partly with an $80,000 loan from a lawyer. However, the couple did not make their monthly payments on the loan and their debt to the lawyer grew with interest to over $100,000. 

As a result, the lawyer registered the debt as a charge on the property and later obtained an order for possession. A notice of sale was issued to be effective June 24, 2014, but the sale was stayed on a temporary basis by a court order issued on June 23, 2014. 

Subsequently, a mortgage broker became involved and tried to arrange for mortgage financing for the couple, whose debt to the lawyer had grown to about $160,000. The lawyer and the couple agreed to settle the debt (the “first settlement”) on the basis that the couple would pay the lawyer $115,000, with costs of the motion to stay the sale proceedings to be fixed or assessed by the court.

In a schedule to the settlement agreement for the first settlement, dated August 28, 2014, the couple signed a promissory note for $115,000 in favour of the lawyer. The mortgage broker also signed the promissory note as guarantor, though he claimed that he thought he was only signing as a witness and later admitted to not reading the document first.

The mortgage broker continued to seek financing for the couple, but disputed his role as guarantor as well as the costs award. He and the couple sued the lawyer for fraudulent misrepresentation, claiming $2 million and $1 million respectively. 

The lawyer and the couple ultimately agreed to settle the actions on the basis that they would pay the lawyer $140,000 (the “second settlement”). 

The lawyer then counterclaimed against the mortgage broker, alleging that the broker’s fraudulent misrepresentation induced him to enter into the first settlement with the couple, and that the mortgage broker later induced breach of contract by undermining that settlement.

At the subsequent hearing for summary judgment, the mortgage broker acknowledged he had suffered no damages and that the lawyer had settled his claims with the couple, rendering the guarantee issue moot; as a result, the mortgage broker’s claim against the lawyer was dismissed. However, the court found the mortgage broker raised genuine issues requiring a trial regarding the lawyer’s counterclaim and ordered those claims to proceed to trial. 

At the ensuing trial, the judge dismissed the lawyer’s counterclaim against the mortgage broker. He concluded that the lawyer had not established that the mortgage broker was liable for either fraudulent misrepresentation or inducing breach of contract. The trial judge also held that the lawyer’s second settlement with the couple relieved the mortgage broker of any obligation as guarantor for the couple’s debt.

As a result, the trial judge ordered the mortgage broker to pay the lawyer costs for the main action of $20,000, and ordered the lawyer to pay the mortgage broker costs for the counterclaim of $18,000, for net costs to the lawyer of $2,000.

The lawyer appealed the decision, raising at least 14 grounds of appeal. 

Court of Appeal Dismisses Lawyer’s Appeal

The Court of Appeal found that the trial judge had correctly cited the five elements of fraudulent misrepresentation as follows: 

  1. that the defendant made a false representation of fact; 
  2. that the defendant knew the statement was false or was reckless as to its truth; 
  3. that the defendant made the representation with the intention that it would be acted upon by the plaintiff; 
  4. that the plaintiff relied upon the statement; and 
  5. that the plaintiff suffered damage as a result.

Pursuant to these criteria, the court found the trial judge was entitled to conclude that the lawyer had failed to establish that the mortgage broker had made any false or reckless representation inducing the lawyer to enter the first settlement with the couple. It also found the trial judge was correct in finding that the terms of the settlement agreement vitiated any tangible claim that the mortgage broker had represented anything to the lawyer he knew to be false or reckless and which the lawyer would have relied on or acted on to his detriment.

The court also found that the trial judge had made no error in dismissing the claim for inducing breach of contract when he concluded that the lawyer had failed to prove the third of the four elements required for such a claim. The four elements are: 

  1. the plaintiff must have a valid and enforceable contract with the defendant;
  2. the defendant was aware of the existence of the contract; 
  3. the defendant intended to and did procure the breach of the contract; and
  4. because of the breach, the plaintiff suffered damages.

Further, the court found that the trial judge had been correct in dismissing the claim to enforce the mortgage broker’s guarantee. While a lender may have separate claims against both the borrower and their guarantor, it had not been a term of the lawyer’s settlement with the couple that he could pursue the mortgage broker and the lawyer had accepted $140,000 in full satisfaction of the debt owed to him by the couple.

Finally, the court found no basis to interfere with the trial judge’s costs ruling. 

As a result, the appeal was dismissed. 

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continuing to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

Baker & Company’s lawyers have a reputation for closing residential purchase, sale and refinance transactions smoothly and without surprises. Whether you are buying or selling your home, cottage, investment property or vacant land, we can assist you from the beginning to the end of your transaction. We represent individuals and families in all kinds of real estate matters. We act diligently to ensure you have a positive and stress-free experience.

At Baker & Company in Toronto, we take the time to meet with you and understand your unique needs in order to guide you through your next residential real estate transaction.  We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Residential Real Estate

Purchasers Awarded $150,000 After Sale of Unique Home Falls Through

In a recent Ontario case, a court awarded damages to purchasers for a failed real estate transaction of a home they claimed to be unique. 

Sellers Renege on Sale of “Unique” Home 

The purchasers entered into an agreement of purchase and sale to buy the sellers’ property on June 28, 2016. The purchase price was $940,000. The agreement was to close on September 28, 2016. 

However, on September 7, 2016, the sellers breached the agreement by rescinding it and the deposit was returned.

Following this, the purchasers had their real estate agent look for another home. However, the real estate agent found that there were no properties available that could be considered a suitable substitute, at the price range of $940,000 to $950,000, having the characteristics similar to the characteristics of the original property.  

As a result, the purchasers were forced to pay $5,000 more for a home that did not have many of the attributes of the property that they had originally wanted to buy from the sellers. For instance, the home they purchased did not have a finished basement, was around 400 square feet smaller and on a lot that was nearly 44% smaller. The purchase of the new home was completed on December 20, 2016 for the price of $945,000.

The purchasers sued the sellers seeking specific performance or, alternatively, damages. They claimed that the sellers’ property was unique and had more attractive attributes than the home they eventually purchased. Additionally, following an appraisal of both properties, the purchasers claimed additional damages of $160,000 for the amount that the original property had increased in value over the increase in value of the property they ended up buying. 

Court Finds that Property Was Unique

The court began by reviewing the purchasers’ claim that the property they had attempted to buy was unique to them. The purchasers claimed they had wanted to buy that property for the following reasons: 

•         It was in the area they wanted;

•         It was close to a religious temple;

•         It was close to a school;

•         It was close to the golf course;

•         It was close to a highway;

•         It had 4 bedrooms;

•         It had a finished basement; and

•         It had a large lot size. 

The court observed that, while none of the listed characteristics were unique by themselves, when such characteristics were considered together with the sole availability of a property with such characteristics during a “hot” and rising market, the property was in fact unique. The court further recognized that there had been no other property, including the one they eventually bought, that met the purchasers’ “wish list”. The court observed that the purchasers had been forced to settle in purchasing their home, particularly given their budget, the fast rising prices in the area and the lack of availability of another home with similar characteristics.

The court then noted that the sellers had not presented any evidence that their property was not unique or that there were other comparable substitute properties available at the time. 

The court concluded as follows:

“Uniqueness must take into account all the surrounding circumstances, including the purchaser’s “wish list”, the market conditions, the location, the type of home, the condition of the home, the lot, the finished areas of the home, the quality of finishes, the availability of comparable homes with the same attributes in the same price range, the proximity to certain amenities and so on.  

The [sellers] chose not to lead any evidence on any of these issues. 

On the record before me the only conclusion I can reach is that the Property was unique.”

As a result, the court awarded $150,000 in damages to the purchasers.

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continuing to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Residential Real Estate

Husband Granted Possession of Home After Wife Fails to List It for Sale

In a recent Ontario decision, a court granted a husband possession of the matrimonial home the wife had been living in, after she failed to comply with an order to sell the home.

Wife Does Not Comply with Order to Sell Home 

The parties were married on August 11, 2001. They separated after 17.5 years of marriage on January 15, 2019. They have two children, aged 17 and 14.

The parties jointly owned the matrimonial home in Toronto.  

In April 2019, the husband voluntarily vacated the matrimonial home. Since the separation, the husband had continued to pay 50% of the capital expenses associated with the matrimonial home, including property taxes and repairs. Since separation, the husband had paid the wife child support for the parties’ two children in the sum of $1,067 per month. 

After separation, the husband had initially rented an apartment close to the matrimonial home. However, he was unable to continue to afford to do so while still maintaining one-half of the capital expenses associated with the matrimonial home, paying his own housing and living expenses and supporting the children. As aresult, the husband moved to Brampton to reside in his brother’s apartment, in which he rented a bedroom.

In January 2020, the parties had attended a case conference, at which they agreed that the matrimonial home would be listed for sale and sold. 

Despite initially retaining a real estate agent, the matrimonial home was never listed for sale.

As a result, the husband sought a court order to compel the wife to comply with the consent order, an order granting him sole carriage of the sale of the matrimonial home and an order dispensing with the need for the wife to consent to and/or sign any sale documentation, to effect both the listing and sale of the matrimonial home.

The husband claimed that the wife was obstructing the sale of the matrimonial home by her willful refusal to respond to him and his counsel and that, as a result, she ought to not be involved in the listing and/or sale of the matrimonial home.

Finally, the husband sought a temporary order for exclusive possession of the matrimonial home, so that he may take the necessary steps to ready the matrimonial home for sale, including the decluttering, and arranging of the repairs needed. He claimed that he had no faith that the wife would take any steps to ready the house for sale, even if the court ordered her to do so. 

Court Grants Possession of Home to the Husband

The court found in favour of the husband, stating:

“The wife provided this court with no evidence in regard to the motion. Had the wife had a reasonable explanation for her lack of participation in the case since the spring, she could have provided that information to the husband’s counsel or taken the minimal steps necessary to inform the court of any issue that prevented her from participating. The court can only reasonably infer from the husband’s evidence that the wife willfully breached the court order in several ways. Without question, the wife is aware that she is in breach of the Court order.  She participated in the January 24th, 2020 case conference. She had a lawyer present at the case conference acting as her agent. The wife took some steps to comply with the terms of the final consent order, albeit, only to provide the husband with a key to the matrimonial home and to choose a listing agent and sign a listing agreement. I am satisfied that the wife has received the husband’s emails and texts and the correspondence from the husband’s lawyer as well as the motion material. She has chosen not to respond to or attend the last two events in this case – the urgent case conference and this motion. In the absence of any information that would support otherwise, I find that the wife has intentionally failed or refused to comply with the consent order in the respects mentioned above.” 

Having found that there would be little hope that the wife would follow the terms of the consent order in terms of the sale of the matrimonial home, the court granted exclusive possession of the home to the father so that he could ready the home for sale.

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continuing to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

Baker & Company’s lawyers have a reputation for closing residential purchase, sale and refinance transactions smoothly and without surprises. Whether you are buying or selling your home, cottage, investment property or vacant land, we can assist you from the beginning to the end of your transaction. We represent individuals and families in all kinds of real estate matters. We act diligently to ensure you have a positive and stress-free experience.

At Baker & Company in Toronto, we take the time to meet with you and understand your unique needs in order to guide you through your next residential real estate transaction.  We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Real Estate Law

Ontario Court of Appeal Refuses to Hear Appeal on Moratorium on Residential Evictions

We had previously written about a case in which the termination of Ontario’s moratorium on residential evictions was challenged.

In that case, the Advocacy Centre for Tenants Ontario (“ACTO”) and two residential tenants brought a motion for an order setting aside Chief Justice Geoffrey B. Morawetz’s order dated July 6, 2020 which varied his order dated March 19, 2020. 

The March 19, 2020 order had effectively placed a moratorium on residential evictions in Ontario. As a result of the order made on July 6, 2020, the moratorium ended July 31, 2020. 

ACTO sought to reinstate the moratorium by obtaining an interim stay of the July 6, 2020 order.

While ACTO and the two residential tenants argued that it was premature to lift the moratorium on evictions and that the Chief Justice was not told of the continuing risks to individuals facing eviction and to others in the community, the court refused the motion. 

Ultimately, the court found that the ACTO and two tenants’concerns were not properly directed at the Chief Justice’s order re-opening court enforcement services. The court concluded that while there may be individual concerns for individual eviction proceedings and there may be systemic concerns that are properly addressed with the government, it did not find any issue raised that could properly lead to a stay of the Chief Justice’s order.

ACTO and the two tenants then appealed the decision, but the Attorney General for Ontario moved for an order quashing the appeal on the basis that the order appealed from was interlocutory and the Court of Appeal lacked jurisdiction. 

In response, the ACTO and the tenants submitted that the order under appeal finally determined the issues raised and was thus final. They argued that, while the order appeared interlocutory on its face, the exceptional nature of the order had to be considered because: (i) it had effectively determined that their case was not justiciable; and (ii) as the eviction orders had been enforced, the two tenants would have no further interest in the action. In other words, they claimed that the motion judge finally determined the issue of jurisdiction and disposed of the substantive rights of the individual tenants.

Court of Appeal Refuses to Hear Appeal

The court began by explaining that the general principle is that “an order granting a stay is final, but an order refusing one is interlocutory”and an order is interlocutory if the merits of the case remain to be determined. 

The court then noted that the motion judge had specifically stated that he was “not deciding the motion on its merits”. 

The court ultimately found that the order under appeal was in fact interlocutory, and the Court of Appeal therefore had no jurisdiction to hear the appeal.

As a result, the appeal was quashed. 

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continuing to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Residential Real Estate

Home Buyers Attempt to Rescind Agreement After Discovering Easements on the Property

In a recent Ontario decision, the purchasers of a home attempted to rescind the purchase agreement after discovering the existence of two easements on the property.

An easement is a right to use and/or enter onto the property of another without possessing it.

What Happened?

The purchasers and vendors entered into an agreement of purchase and sale (the “agreement”) for a property in Ontario, which was signed on February 13, 2020. The property included a two-storey home with five bedrooms and five bathrooms, a pool and a backyard area. The agreed-upon purchase price was $1,755,000 and the buyers paid a $75,000 deposit. The deal was scheduled to close on June 30, 2020. 

Part of the agreement set out as follows:

Provided that title to the property is good and free from all registered restrictions, charges, liens, and encumbrances except as otherwise specifically provided in this Agreement and save and except for …

(d) any easements for drainage, storm or sanitary sewers, public utility lines, telecommunication lines, cable television lines, or other services which do not materially affect the use of the property. 

If within the specified times […] any valid objection to title … or to the fact that the said present use may not be lawfully continued … and which Buyer will not waive, the Agreement, notwithstanding any intermediate acts of negotiations in respect of such objections, shall be at an end and all monies paid shall be returned without interest or deduction and Seller, Listing Brokerage and Co-operating Brokerage shall not be liable for any costs or damages. Save as to any valid objection so made by such day and except for any objection going to the root of title, Buyer shall be conclusively deemed to have accepted Seller’s title to the property. 

However, on June 1, 2020, the purchasers discovered two easements on the property. Both easements were in favour of the Town of Newmarket and related to the maintenance and inspection of sanitary and storm sewers. The easements required the owner of the property to keep the areas free of any trees, buildings, structures and obstructions and that they not be paved with hard concrete. While one of the easements was deemed inconsequential, the other bisected the backyard.

Having discovered the easements, the purchasers wrote to counsel for the vendors requesting, among other things, a Release of Transfer of both easements. Counsel for the vendors replied on June 9, 2020, indicating that the vendors were not required to remove the easements.

As a result, the purchasers brought an application for a declaration that they were entitled to rescind the agreement and for the return of their deposit of $75,000. The purchasers argued that the vendors had failed to show good title because, after the agreement had been entered into, a title search revealed two easements on the property for storm and sanitary sewers.

The purchasers argued that the easements were not disclosed prior to the signing of the agreement. They claimed that they never saw, were provided with nor asked for a copy of the survey. It was their position that the easements affected their intended use of the property in a material way and that had they known about them they would not have made the purchase. 

In response, the vendors claimed that the easements were disclosed to the purchasers in a schedule to the agreement. Because one of the purchasers was a licensed real estate agent, the vendors stated that the purchaser should have been able to ascertain the existence of the easements.

Court Refuses to Rescind Purchase Agreement

The court found that the easements were in fact described in a schedule to the agreement, though they were not specifically disclosed or provided for in the agreement. However, the court stated:

“[The purchaser], a licenced real estate agent, should likely have known that this meant there were easements on the property. Given his assertion that the home was purchased despite its alleged deficiencies because of the “potential of the backyard” one would have thought he would make inquiries about anything that might hinder his plans for the backyard. If it were of such importance to the purchasers to develop the backyard in the way they claim to have intended to, inquiries about any easements to the property and about the meaning of the title description should have been done.”

The court concluded that the purchasers’ actions were inconsistent with their expressed importance of being able to make such changes to the property; the court, therefore, inferred that the existence of the easements was not the real motive behind seeking rescission of the agreement.

As a result, the court found that the vendors had shown good title to the property and that the objection to the requisition of a release of the easement was not valid. The court dismissed the purchasers’ application.

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continuing to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

Baker & Company’s lawyers have a reputation for closing residential purchase, sale and refinance transactions smoothly and without surprises. Whether you are buying or selling your home, cottage, investment property or vacant land, we can assist you from the beginning to the end of your transaction. We represent individuals and families in all kinds of real estate matters. We act diligently to ensure you have a positive and stress-free experience.

At Baker & Company in Toronto, we take the time to meet with you and understand your unique needs in order to guide you through your next residential real estate transaction.  We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Residential Real Estate

Court Finds Tenant’s Appeal of Eviction an Abuse of Process

In a recent Ontario decision, the court found a tenant’s attempt to appeal her eviction was an abuse of process that allowed her to continue not paying rent and stay her eviction while awaiting the appeal hearing.

Landlord Takes Possession of Condominium Unit

The landlord owns a rental unit in a condominium building in Toronto, which she bought on March 1, 2018.

The landlord took over the lease when she purchased the unit. The rent was $2,072 per month payable on the first day of each month.

After the landlord took possession of the unit, she became aware that the tenant did not reside in the apartment, but, rather, that she was using it for short term rentals. At that time, the condominium agreement allowed for short term rentals in the building.

However, in 2019, the condominium corporation notified condominium owners that it intended to amend its rules to prohibit the sub-leasing of condominiums for short term rentals. The landlord notified the tenant of these changes, but the parties were unable to resolve the issue.  

The landlord subsequently received notices from the condominium corporation that she was in breach of the new condominium rules.

The Order of the Landlord and Tenant Board

The landlord brought an application to the Landlord and Tenant Board (the “Board”) to terminate the tenancy based on the tenant’s violation of the condominium’s rules. The notice of termination was served on the tenant on November 21, 2019. The tenant then stopped paying rent as of December 1, 2019.

Following the hearing, on February 4, 2020, which the tenant did not attend, the Board issued a decision in which it found that the tenant operated a short term rental business that interfered with the landlord’s “lawful right, privilege or interest” because it exposed the landlord to sanctions from the condominium corporation. In addition, the Board found that the tenant had not paid her rent since December 1, 2019. Based on these findings, the Board ordered that the tenancy was to be terminated as of February 15, 2020 and that the tenant was to pay outstanding rent. 

On February 15, 2020, the tenant requested that the Board review the eviction order, which it refused to do.

By notice of appeal dated February 28, 2020, the tenant appealed the eviction order and the review decision to the Divisional Court. The tenant claimed that her lease explicitly allowed her to use the apartment for short term rentals. In addition, she claimed that she had been traveling between December 26, 2019 and February 4, 2020, and that she therefore did not receive the notice of hearing.

The commencement of the tenant’s appeal resulted in an automatic stay of the eviction. After serving her notice of appeal, the tenant continued to not pay rent.

In response, the landlord argued that the appeal should be quashed on two grounds:

  1. It was devoid of merit because it did not raise a question of law; and 
  2. It was an abuse of process because the tenant’s failure to pay rent demonstrated that the appeal was only brought for the purpose of obtaining an automatic stay of the eviction.

Court Orders Eviction of Tenant for Abuse of Process

First, after reviewing the tenant’s arguments, the court agreed with the landlord that the appeal was devoid of merit because it did not raise a question of law.

Turning to the landlord’s second argument, the court reviewed the relevant principles relating to an argument of abuse of process:

“This Court has consistently held that launching an appeal for the sole purpose of obtaining the stay of an eviction in the context of landlord and tenant proceedings is an abuse of process […] 

[O]ne of the key indicia that a party is trying to “game the system” is a circumstance where the Tenant persistently fails to pay rent prior to and throughout the appeal period without any explanation for the failure to pay rent or any evidence of an intention to remedy the situation.”

At the hearing, the tenant had admitted to not using the apartment as her own residence but rather as part of a short term rental business. As soon as it became evident that she may not be able to continue using the apartment for her business, she stopped paying rent.  The court found that her failure to pay rent had nothing to do with any hardship caused by the COVID-19 pandemic but was a clear attempt to avoid making payments she may not be able to recoup through her business. 

The court found that such circumstances were particularly abusive given that the tenant appeared to continue sub-letting the premises without paying any rent to the landlord.

As a result, the court found that the tenant’s appeal was a clear abuse of process and quashed the appeal. In addition, the court vacated the automatic stay of the Board and stated that the landlord may file the Board’s eviction order with the Sheriff on August 31, 2020. Finally, the court ordered the tenant to pay costs to the landlord in the amount of $7,000. 

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continuing to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company in Toronto, our real estate lawyers take the time to speak with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential. We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of leasing issues. Call us at 416-777-0100 or contact us online for a consultation.