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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.

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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.

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