From time to time, a real estate purchaser`s lawyer finds problems with title to the property their client wants to buy. Unfortunately, these types of issues cannot be resolved by negotiation alone. Often times, the purchaser will ask whether it is the type of issue that gives them the right to exit the transaction. Although this is a valid question, it’s almost impossible to answer with certainty. Furthermore, such concerns are often resolved by a court in answer to a claim for breach of contract long after the transaction has been closed.
One option may be to apply to a Court under vendors and purchasers legislation to determine the issue prior to closing. As there are obvious benefits to doing so, these applications should perhaps be used more often than they are. This type of proceeding is most commonly used where a party is dissatisfied with a written complaint or demand (known as a “requisition”) made about a title issue or feels that a response to such requisition is unsatisfactory. These issues are often discovered after your lawyer examines the title search they performed and may involve encroachments, easements, potential Planning Act violations (i.e. breach of the statute which governs the division of land in Ontario), mortgage enforcement proceedings and other title issues.
Procedural issues to bear in mind for these applications which can have a significant impact on the outcome of a transaction include:
- It is wise to issue the application in the jurisdiction where the property is located.
- Consider the hearing date for the application since most are time sensitive. Many jurisdictions have local rules as to scheduling which should be confirmed. Often, the first available dates are as much as six weeks away which can be way too late. It may be possible to convince a judge to allow for an earlier date on an urgent basis.
- Only judges have jurisdiction to hear applications.
- A closing date is not extended because a court application is pending. The matter must be resolved before closing or the parties must agree to an extension.
- Such applications do not normally involve contested factual disputes.
- There are limits to the court’s jurisdiction in that a contract must already be in place, the matter must affect title to the property and, with rare exceptions, third parties cannot be added nor bound by the decision the court ultimately renders. For example, a third party may have an interest in a dispute regarding a boundary if the boundary overlaps on their land.
The court will then decide whether or not the answer to the requisition is sufficient and if so, a copy of the court order can be registered on title and be available for examination if a dispute about the same subject arises after closing. If it is decided that the response to the requisition is not sufficient, the successful party may either seek another more appropriate answer or seek another remedy under the agreement of purchase and sale or pursuant to general contract principles under the common law.
For assistance resolving a title concern for a real estate transaction or completion of purchase, sale and refinance closings, please contact Andrea Kelly.
Andrea Kelly, Lawyer, has extensive experience in wills, trusts, powers of attorney and estate administration matters. She provides clients with a high standard of timely professionalism and expertise, incorporating a very thorough fact finding process. This is quite often enlightening for her clients and facilitates individually tailored services. If you would like to know more, feel free to use the easy contact form or read Andrea’s bio.