Whether you are buying or selling, many people have questions about real estate law in Ontario. Even frequent real estate buyers and sellers can encounter new topics and issues they have not previously dealt with.

This post will outline some of the most commonly asked Ontario real estate questions. If you have questions that are not answered below, or need assistance with a real estate transaction, you are encouraged to speak with our experienced real estate lawyers for further guidance.  

What Does a Real Estate Lawyer Do? 

Real estate lawyers help clients with the legal aspects of a real estate deal. Typically, a real estate lawyer becomes involved once a contract of purchase and sale has been signed. A lawyer will review the contract and title to the property to ensure there are no legal issues, help the client meet their obligations under the contract of purchase and sale, and navigate any issues that may arise before the closing date. When the closing date arrives, the lawyer will complete and submit the documentation required to transfer the property title from one party to another. 

The above is a fairly simplified explanation of what a real estate lawyer does, however, there are many moving parts in a real estate transaction and real estate lawyers are necessary to ensure the deal closes smoothly. Beyond transactional work, real estate lawyers can also help by reviewing a contract of purchase and sale before it is signed, negotiating with other parties on various issues, and providing representation should a property dispute require litigation. 

Differences Between Real Estate Lawyers and Agents

Real estate lawyers and real estate agents (or realtors) might seem similar, but they fill very different roles in a real estate transaction. While a real estate agent is typically involved in the “front-end” work of finding a property to buy or managing the sale of a property, the real estate lawyer handles the “back-end” legal aspects and documentation of the purchase and sale. 

Do the Buyer and Seller Need Separate Lawyers? 

The Law Society of Ontario’s Rules of Professional Conduct do not generally permit lawyers to represent both a buyer and a seller in a residential property purchase due to conflicts of interest. However, some exceptions may apply. 

When Should I Hire a Lawyer for a Real Estate Transaction? 

Buyers and sellers should hire a real estate lawyer as soon as possible into their real estate transaction. Ideally, it is best to hire a real estate lawyer before a contract of purchase and sale is signed to obtain a review and become aware of any problematic clauses that may require amendments. 

However, many buyers and sellers hire a real estate lawyer after signing the purchase and sale contract. When hiring a lawyer, it is important to be aware of the closing date and ensure that the real estate lawyer is afforded sufficient time to work on the file and complete all of the necessary steps. 

What Questions Should I Ask an Ontario Real Estate Lawyer Before Hiring Them? 

Before hiring a real estate lawyer, a client may want to ask some questions to make sure they are hiring the right person. Some common questions clients ask a real estate lawyer include, but are not limited to: 

• What fees will be charged for the transaction? Understanding the legal fees involved is critical for budgeting purposes. 
• How long have you been practicing real estate? At Baker & Company, our residential real estate lawyers have over 30 years of experience representing clients in real estate transactions.
• Can I sign legal documents electronically? Real estate transactions often have tight turnaround times, so clients cannot always attend their lawyer’s office to sign documents in person. Law permitting, hiring a lawyer who can provide electronic registration and direct funds transfers can be extremely useful in some cases. 
• Can you assist me if something goes wrong? If a real estate dispute arises, it is important to know that your lawyer will be able to help you. Our firm has a comprehensive litigation practice and can represent clients in real estate disputes. 

What Costs Are Associated with Real Estate Transactions? 

Beyond the cost of purchasing a residential property, a party to a real estate transaction must be aware of additional costs including taxes and other closing fees. 

When buying a house in Ontario, a purchaser will need to pay the Land Transfer Tax. Depending on the location and type of property, they may also need to pay Harmonized Sales Tax and Additional Land Transfer Tax. 

Beyond property-related charges, it is also important to consider the lawyer’s fees, which can vary.

What Happens if I Cannot Complete My Purchase or Sale? 

Assuming the parties have already signed a contract of purchase and sale, different things might happen if one party is no longer able to complete their contractual obligations.  

When a buyer purchases a property, they will provide a financial “deposit” when they sign the contract of purchase and sale. If they are later unable to proceed, or choose not to complete the contract, that deposit will often be forfeited to the buyer. 

If a seller is unable to proceed or chooses not to complete a contract, they may be sued by the buyer, as there is no deposit to forfeit. 

Does the Foreign Buyer Ban Affect Me? 

As of January 1, 2023, non-Canadians have been banned from buying residential property in Canada for two years (until January 1, 2025) to help cool off Canada’s housing market. 

However, this temporary ban comes with some exceptions. Individuals who are either a permanent resident of Canada, a temporary resident who satisfies prescribed conditions, a refugee, or a foreign individual who is purchasing residential real estate with their spouse or common-law partner who is a Canadian citizen or permanent resident, may still be eligible to purchase residential property. 

Contact the Real Estate Lawyers at Baker & Company in Toronto for Comprehensive Advice and Representation in Real Estate Matters

At Baker & Company, our trusted real estate lawyers ensure that residential and corporate real estate transactions run smoothly. If a dispute arises during the transaction, our lawyers are prepared to advocate on behalf of clients and obtain the best possible outcome. Our real estate team will review all documentation related to your file and will provide comprehensive advice throughout the transaction or dispute. Whether you are a Canadian or a non-resident looking to purchase property, or are a property owner looking to refinance, our real estate team is ready to assist. Contact us online or at 416-777-0100 to learn how we can help you.

Real estate breach of contract is becoming increasingly common as the market heats up. As a seller, it is important to know what happens if you choose – or are unable – to complete a contract. 

This blog post will review what sellers need to know about real estate contracts and what happens if they fail to comply with a signed contract. Sellers need to keep in mind that different real estate contracts will have different terms and subject clauses, and therefore, different complications may arise depending on the specific contract. If you have questions regarding a real estate contract, consult with an experienced real estate lawyer. 

What is a Breach of Contract in Real Estate? 

Real estate breach of contract refers to a situation where one or both of the parties to a real estate contract fail to complete a term of their contract and are unable to carry out the agreement. 

For buyers, common examples of a breach include:

• failing to secure financing,
• failing to transfer funds,
• failing to complete legal documentation, or
• Cchoosing to breach the contract. 

Common examples of real estate breach of contract for sellers will be outlined below.   

Real Estate Breach of Contract and Subject Clauses

Subject clauses are often included in real estate contracts allowing the buyer to escape the contract if something goes wrong before the subject removal date. These clauses make the contract conditional (“subject to”) certain things being done. 

Some common examples of subject clauses in real estate contracts include the contract being subject to the buyer obtaining financing, selling another property, or obtaining a satisfactory home inspection. 

While subject clauses aren’t normally used to protect sellers, sellers must understand the subject clauses in their real estate contracts. It’s also important to note which subject clauses are not in the contract. For example, if the contract does not contain a “subject to financing” clause and the buyers cannot complete the deal because they cannot obtain financing, the deal will collapse, and the buyer will breach the contract. 

Common Examples of Real Estate Breach of Contract 

There are a variety of reasons why a seller may ultimately breach the terms of their real estate contract, such as: 

• Choosing to breach the contract: sellers often breach a real estate contract by choice. For example, the seller may get a better offer on the property after signing a contract with the buyer, or a change in circumstances may otherwise motivate them not to proceed with the deal. Depending on the circumstances, it may be worthwhile for the seller to breach the existing contract. 

In these circumstances, the seller’s breach will result in the deal collapsing. It is important to remember that a seller can breach a real estate contract in ways that do not necessarily result in a collapsing deal. Some examples include the following: 

• Removing fixtures: “fixtures” (any property that is permanently attached to the property, often including objects like chandeliers, ceiling fans, or other affixed items) are considered to be a part of the property unless the contract specifies otherwise. If a seller removes “fixtures” before providing possession to the buyer, they may have breached a term of the contract. 
• Failing to provide vacant possession: standard real estate contracts will typically require the seller to remove all moveable objects (like furniture and waste) and to have all inhabitants vacate the property by a certain date. Failing to vacate or remove moveable objects may result in the seller breaching a term of the contract. 

What are the remedies for a breach of a real estate contract? 

Unlike a buyer breaching a real estate contract, there is no deposit for the buyer to collect. This means that if a seller breaches a real estate contract, the buyer may bring legal action against them for monetary damages, termination of the contract and return of the deposit, or specific performance requiring the seller to complete the terms of the agreement, depending on the circumstances. 

Given the various impacts of a seller’s breach of a real estate contract, the remedies available to the buyer may vary significantly. If you have concerns about the potential impact of a breach, consult with an experienced real estate lawyer for further information. 

Final Thoughts on Real Estate Breach of Contract in Ontario

Entering into a real estate contract is a big step, so it is critical to ensure that you are able to fulfill your obligations under the contract. 

Unfortunately, it is common for both buyers and sellers to move quickly in a competitive real estate market. However, quick decisions may cause a seller to regret their decision to sign a contract or, simply make errors when vacating the property, which can create a dispute with the buyer. 

As a seller, there are additional steps that you can take in an effort to mitigate potential breach of contract issues, such as: 

• Taking your time: don’t jump into a real estate contract before critically considering whether you are ready to sell. While life can throw us unexpected curveballs, ensuring you are happy with the contract terms, and that your financial and personal situation aligns with selling your property and moving on, is essential.  
• Not overlooking the small details: seemingly insignificant clauses can create disputes down the line if you don’t understand your obligations. Don’t hesitate to ask your realtor or real estate lawyer for clarification if you aren’t sure about what a particular clause covers (for example, what qualifies as a “fixture”), and to work with the buyer to ensure that everyone is on the same page. 
• Retaining a lawyer as soon as possible: retaining an experienced real estate lawyer early is critical. They will be able to advise you on your obligations, gather documents, and get ahead of any issues or disputes that might arise before the closing date.  

Contact the Real Estate Lawyers at Baker & Company in Toronto for Advice on Residential and Commercial Real Estate Matters

The skilled real estate lawyers at Baker & Company work closely with clients to provide tailored, dynamic advice and legal solutions on various real estate disputes, such as residential real estate, real estate development and land title issues. With over 30 years of experience, our real estate team has successfully helped clients navigate and resolve complex property issues. Contact us at 416-777-0100 or contact us online to schedule a confidential consultation.

The federal Prohibition on the Purchase of Residential Property by Non-Canadians Act (the “Act”) received royal assent on June 23, 2022, and came into force on January 1, 2023. 

What is the Prohibition on the Purchase of Residential Property by Non-Canadians Act? 

The federal Prohibition on the Purchase of Residential Property by Non-Canadians Act prohibits non-Canadian residents from purchasing any residential property in Canada for two years. This legislation aims to stabilize Canada’s housing market and make housing more affordable for Canadians. It is also important to note that this Act targets purchases in population centres rather than rural areas.

Once the two-year prohibition expires on December 31, 2024, the legislation and its accompanying regulations will be automatically repealed. 

What buyers does this prohibition apply to?

The Act applies to certain individuals, corporations, and entities. 

The Act applies to individuals who do not meet one of the following criteria:

• Hold Canadian citizenship,
• Have permanent residency status in Canada, or
• Are registered under the Indian Act. 

The Act applies to corporations based in Canada that meet the following criteria:

• Are privately held;
• Not listed on a stock exchange in Canada; and
• Are controlled by a non-Canadian.

The Act applies to entities formed under Canadian law or provincial law, that are controlled by a non-Canadian, and entities formed under non-Canadian law.

The definition of control is used to determine whether a privately held corporation or entity is controlled by a non-Canadian. The Regulations define “control” as:

• The non-Canadian has direct or indirect ownership of shares or ownership interest in the corporation or entity representing 3% or more of the value of equity in it, or carrying 3% or more of its voting rights, or
• Control in fact of the corporation or entity, directly or indirectly, through ownership, agreement, or otherwise.

Are there exceptions to the prohibition? 

There are limited exceptions to the application of the Act, which include:

• International students. An individual must be enrolled in a program of authorized study at a “designed learning institution” under the Immigration and Refugee Protection Regulations; have filed income tax returns for all of the 5 taxation years before the purchase is made; have been physically present in Canada for a minimum of 244 days in each of the 5 calendar years preceding the year of the purchase; have not previously purchased residential property in Canada during the prohibition; and purchase property for a price that does not exceed $500,000;

• Temporary residents working in Canada that hold a work permit or are work permit exempt. To be exempt, a temporary resident working in Canada must hold a valid work permit or be authorized to work in Canada; have worked in Canada for at least 3 of the last 4 years before the purchase; have filed income tax returns for 3 of the last 4 taxation years before the purchase; have not previously made a purchase of residential property in Canada during the prohibition;

• Refugees. To be exempt, a refugee must have been given refugee protection or be a protected person under the Immigration and Refugee Protection Act. Refugee claimants are also exempt if they have made a claim for refugee protection and their claim has been eligible and referred to the Refugee Protection Division, or the refugee claimant has received temporary resident status based on humanitarian public policy considerations;

• Accredited members of foreign missions in Canada. To be exempt, an accredited member of a foreign mission must hold a passport that has a valid diplomatic, consular, official, or special representative acceptance issued by the Chief Protocol of Canada; and

• Non-Canadian spouses and common-law partners. To be exempt, a non-Canadian spouse or common law partner must purchase residential property in Canada with their spouse or common-law partner who is: a Canadian citizen, a person registered under the Indian Act, a permanent resident, or a non-Canadian who is exempt from the prohibition. 

What is considered a “residential property” for the purposes of the purchase prohibition? 

“Residential property” is defined in the Act as including real or immovable property in Canada of up to three dwelling units and parts of such property, such as a condominium unit or semi-detached house. 

The Regulations clarify that the purchase prohibition applies to vacant land that does not contain a habitable dwelling, however, is zoned for residential use or mixed-use and that is located within a Census Metropolitan Area or a Census Agglomeration.

What kinds of properties are not considered “residential properties” for the purposes of the purchase prohibition?

The Act does not apply to multi-unit buildings of more than three dwelling units.

Further, residential properties located outside of Census Metropolitan Areas or Census Agglomeration areas are exempt. A Census Metropolitan Area or Census Agglomeration is one or more adjacent municipalities which are centred on a population core. A Census Metropolitan Area must have a total population of at least 100,000 of which 50,000 or more must live within the core. A Census Agglomeration requires a core population of at least 10,000.

Census Metropolitan Areas and Census Agglomeration are identified in Statistic Canada’s Standard Geographical Classifications 2021, which has reference maps online. Statistics Canada also has an interactive mapping tool, also available online. 

What kinds of purchases are barred by the Prohibition on the Purchase of Residential Property by Non-Canadians Act?

The Act bars both direct and indirect purchases of residential property. Therefore, it prohibits purchases through partnerships, trusts, or other kinds of entities. There are certain exceptions to this prohibition, enumerated in the Regulations, which account for situations where:

• The person’s interest in the property is acquired because of divorce, gift, separation or death,
• The rental of a dwelling unit to a tenant for the purpose of its occupation by a tenant,
• A transfer under the terms of a trust that was created prior to the Act’s effective date (which was January 1 ,2023), or
• When the person acquires the interest as a result of a secured right by a secured creditor or the exercise of a security interest.

What are the penalties for violating the Prohibition on the Purchase of Residential Property by Non-Canadians Act?

A violation of the Act is a criminal offence. The fine associated with a violation by a non-Canadian, or any person who knowingly assists the non-Canadian in the violation, is up to $10,000. If a corporation or entity violates the Act, the officers, directions, senior officials, or other representations of the corporation or entity can be held liable. 

Additionally, the court may order that the property that was purchased illegally must be sold. If the property is sold, the non-Canadian who purchased it illegally will receive no more than the price they paid for the porperty. Proceeds of the sale can also be used to offset the costs incurred by the government in bringing the application to court. The non-Canadian who has violated the Act is not permitted to profit from the sale, so any remaining sale proceeds of the sale are given to the Receiver General of Canada. 

Contact Baker & Company for Experienced Advice on Real Estate Matters

At Baker & Company in Toronto, our exceptional team of real estate lawyers take the time to speak with you and understand your unique needs to guide you through your real estate matter. Whether you are involved in a commercial or residential property transaction, our lawyers are ready to help. We utilize our extensive experience to ensure that we provide clients with exceptional representation from start to finish of any matter. Call our office at 416-777-0100 or contact us online to schedule your consultation.

In a recent Ontario decision, buyers in a real estate deal were ordered to pay a real estate agent commission for the purchase of a property based on unjust enrichment, despite the fact that the parties had never signed a Buyers Representation Agreement (“BRA”).

In the real estate business, relationships between purchasers and real estate agents are almost always governed by a BRA. A BRA contains a series of standard form terms, including a term that the purchasers will not use the services of any other real estate agent in the time that the BRA is in effect. The time period that a BRA is in effect can be negotiated by the parties.

Couples Look For New Home

The appellants in the case were two brothers and their wives.

The respondents were a real estate brokerage firm and one of its employees, a real estate agent. 

In 2015, the appellants were looking for a house with some acreage that would allow both families to live in the same house. As a result, there were some unique features to the property that they were looking for, such as two kitchens.

One of the brothers met the real estate agent and, after discussion, the real estate agent began researching properties that would meet the unique needs of the appellants. He was able to find several properties for the appellants to consider, including one called the Gore Road property.

The parties did not sign a BRA or any other type of agreement. While a BRA was prepared, it was never signed.

Parties Part Ways 

Over several months in 2014, the appellants made a series of offers on the Gore Road property through the real estate agent, but none were accepted. Following the failed offers, the appellants told the real estate agent that they were going to stop pursuing the purchase of a new home or selling their current home until the following spring.

However, the Gore Road property came back on the market in early 2015. In February of 2015, one of the husbands signed a BRA with the listing agent for that property and made an offer to purchase the property, which was accepted.Thus, title to the property was taken in the name of all four appellants and commission was paid to the sellers’ real estate agent.  

Real Estate Agent Sues Appellants for Unjust Enrichment

Later that year, the real estate agent discovered that the home owned by one of the brothers had been sold and that the appellants had purchased the Gore Road property. As a result, the respondents pursued an action against the appellants.

At trial, the Deputy Judge rejected the evidence of the purchasers that they had ended the relationship with the real estate agent because they were unhappy with him.

Instead, the Deputy Judge inferred that the buyers had paid less than full commission to the sellers’ agent and that the reason the appellants went directly to the sellers’ agent was to cut out the real estate agent from the transaction and save on his commission.

Based on that finding, the Deputy Judge determined that the appellants had been unjustly enriched. She concluded that the amount of the unjust enrichment should be calculated based on the usual commission that the real estate agent would have received had the transaction been completed. The commission was fixed at $24,478, which was 2.5% of the price of the home plus HST.

The appellants appealed the decision. 

Court Rules Upholds Finding of Unjust Enrichment

On appeal, the court began by setting out thetest for determining the existence of an unjust enrichment, which requires:

a)       An enrichment of the defendant;

b)       A corresponding deprivation of the plaintiff;

c)        An absence of a juristic reason for the enrichment.

After reviewing the facts of the case, the court concluded:

“It was open to the Deputy Judge to conclude, from the evidence that she had, that the Appellants were able to purchase the Gore Road property for a lower price because the commissions would not be payable to the Respondents. The ability to purchase the property for a lower price is an enrichment. […]

Having determined that the Appellants were enriched by being able to purchase the house at a lower price because they did not have to pay the Respondents’ commissions, it follows that the Respondents suffered a corresponding deprivation of the commissions that they did not receive.”

In the result, the court therefore dismissed the appeal.

Get Advice

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.

In a recent Ontario Court of Appeal decision, an award of $1,326,000 to the parents of a deceased tenant was upheld following a finding in negligence against the landlord.

Landlord Found Liable After Tenant Dies in Fire 

A residential tenant died from severe injuries following a fire in her basement apartment in 2013. The tenant had been asleep in a bedroom of the rooming house when the fire broke out. However, the tenant had no way of escaping because the windows were barred, and the only exit to the apartment was engulfed in flames and smoke. The interior access stairway connecting the basement apartment to the main rooming house was blocked off, thereby leaving only one potential exit and entry point to the basement apartment. As such, the tenant had to wait until the firefighters arrived on scene. 

The tenant was transported to the hospital but passed away as a result of her injuries. 

Subsequently, the tenant’s parents commenced an action against the landlord and his company for negligent conduct leading to the death of their daughter. 

Jury Finds Against Landlord

Following a trial, the jury found that the landlord and his company had fallen below the standard of care of a reasonable landlord and found them responsible for the tenant’s death. 

The jury made the following damages awards:

1. Loss of care, guidance, and companionship: $250,000 to each parent;

2. Mental distress: $250,000 to each parent;

3. Future costs of care for the father: $174,800; and

4. Future costs of care for the mother: $151,200.

As such, the landlord and his company were held liable for a total of $1,326,000.

The landlord appealed the Ontario Court of Appeal, alleging that the jury had been improperly selected, that the action was precluded under the Fire Protection and Prevention Act, 1997, that the jury’s verdict was unreasonable and that the damages were too high.

Ontario Court of Appeal Dismisses Landlord’s Appeal

After reviewing the landlord’s argument, the Court of Appeal dismissed his first three grounds of appeal.

Turning to the amount of damages, the court began by looking at the damages awarded for the parents’ mental distress. It stated:

“The quantum of damages reflected compensation for psychological injuries sustained by the [parents], not only because their daughter had died but also because she died in horrific circumstances witnessed by the [parents]. Ultimately, the [parents] had to make the difficult decision to remove [the daughter] from life support.

Also, there was clear, expert evidence supporting both [parents]’ claims involving the mental distress they suffered as a result of their daughter’s death. Notably, according to the psychological assessments of the [parents], following the death of [the daughter], the [mother] has “suffered a marked deterioration in her mood and daily functionality … and has also experienced passive suicidal ideation with previous serious contemplation of ending her own life”, while the [father] “is now experiencing exacerbated PTSD symptoms with persecutory anxiety”. The [parents] also testified in exquisitely painful detail at trial about what they saw, what they experienced, and how they had been impacted by the death of [the daughter]. Based upon all of that evidence, there is no basis to interfere with the award of $250,000 in mental distress damages to each respondent.”

The court further rejected the landlord’s objection to the damages for future costs of care, finding that the awards had been predicated on expert evidence and there were no grounds to interfere with the amounts awarded.

Finally, the court reviewed the jury’s award for loss of care, guidance, and companionship. The landlord relied on previous Court of Appeal case law that had established that $100,000 represented the “high end of an accepted range of guidance, care and companionship damages.” Therefore, according to the landlord, the $250,000 awarded to each parent went against the court’s own established case law.

However, noting that the courts have recognized a case-by-case approach to the quantification of damages for loss of guidance, care, and companionship, the court ultimately concluded: 

“[This] will necessarily result in damages awards that will fluctuate. Coming back to the standard of review on appeal, it is only where the quantum of damages set by the jury “shocks the conscience of the court” or is “so inordinately high” that it is “wholly erroneous” that appellate intervention will be appropriate….

Therefore, while there is no question that the jury award for loss of care, guidance, and companionship in this case is high, in light of the factual backdrop of this case, it does not constitute an amount that “shocks the conscience of the court”… Nor does it represent an amount that is “so inordinately high” that it is “wholly erroneous” in nature.”

The court therefore rejected the landlord’s final ground of appeal.

As a result, the landlord’s 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 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.

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.

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.

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