Chapter 47
Agreement of purchase and sale
1. Introduction
Real property purchases and sales typically have three
stages: (1) negotiating, drafting, and signing the
agreement of purchase and sale; (2) the title search
process (“due diligence”); and (3) the closing. This
chapter deals with the first stage: agreement of purchase
and sale.
The agreement of purchase and sale with respect to real
estate (“agreement”) is a contract. The agreement brings
with it all the obligations, responsibilities, and
procedures of contract law. The elements of a binding
contract, being offer, acceptance, exchange of
consideration, and the meeting of the minds, must be in
writing in order to comply with the Statute of Frauds.
(See “Signatures,” below, regarding electronic
signatures.)
Every real estate board in the Province of Ontario has
adopted the Ontario Real Estate Association (OREA)
form of agreement for residential real estate
transactions (see Appendix A). This chapter focuses on
the OREA agreement. While this commonly used form
addresses the issues that arise in most real estate
transactions, a lawyer must be competent in drafting
additional clauses and revising the standard form to
accommodate local requirements as well as the needs of
the party the lawyer is representing. Additional clauses
are easily added with a schedule to the agreement.
Each section of this chapter has a corresponding part in
the agreement. For instance, the section “The parties”
corresponds to the first lines of the agreement, where the
names of the parties appear. The section “Describing the
property” corresponds to the next part of the agreement,
and so on until the end of the agreement.
This chapter deals primarily with the purchase and sale
of “used” homes, although much of its content also
applies to new homes. The unique aspects of new homes
are covered in Appendix C of this chapter and in
Chapter 62 (Understanding a new home agreement of
purchase and sale) of these Study Materials.
When reviewing an agreement, the lawyer should keep
in mind that most issues that arise in the course of real
estate transactions are dealt with in the agreement,
which spells out the rights and obligations of the parties
to the transaction. Sometimes lawyers will spend much
time and effort looking through statute and case law for
a solution to a problem that has arisen in the transaction
when the answer is in the contract
Certain terms are used in this chapter, which will be
elaborated considerably in later chapters:
ƒ transfer: At the closing stage, the ownership of
real property is conveyed from seller to buyer by
the registration of an electronic or paper
document called a transfer. Synonymous terms
such as “deed” and “grant” were used in the past.
ƒ untitled spouse: When a married person buys a
home that becomes the matrimonial home of the
person and the person’s spouse pursuant to
s. 18(1) of the Family Law Act (FLA), the buyers
may register ownership of the home in the name
of only one of the two spouses. In such a case, the
second spouse, who is not a registered owner, is
referred to as an “untitled spouse.”
ƒ easement: An easement is the right of the owner
or tenant of land (the “dominant tenement”) to
use nearby land it does not own (the “servient
tenement”) for a specified purpose that relates in
some way to its ownership. Examples include a
right to walk or drive over nearby land, a right to
install and maintain pipes or wires under nearby
land, and a right to use a ditch on nearby land for
water drainage.
ƒ incapable: A person who is incapable lacks
mental capacity to make decisions about the
person’s legal and financial affairs. For example,
someone who suffers from Alzheimer’s disease or
has had a severe stroke may be incapable.
ƒ power of attorney: This is an instrument in
writing that authorizes another to act as one’s
agent within a defined scope of authority.
2. The parties
2.1 Issues common to both buyers and
sellers
2.1.1 Identification of parties
Before proceeding with the review and negotiation of the
agreement, the lawyer must confirm the identity of each
client, whether buyer or seller (By-law 7.1, made under
the Law Society Act, ss. 21–23). This is part of the
ongoing need to know one’s client and guard against the
possibility of unknowingly assisting the client in
fraudulent or other illegal conduct.
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2.1.2 Capacity
When the contract is entered into, the buyer and seller—
be it individual, corporation, or partnership—must exist.
Natural persons must be 18 years old, not be incapable,
and not be undischarged bankrupts. If a party is
incapable or an undischarged bankrupt, for example, the
party may not have such capacity, in which case legal
representatives such as estate trustees, attorneys under
powers of attorney, the Public Guardian and Trustee, the
Office of the Children’s Lawyer, and others may be
required parties to the transaction.
2.1.3 Corporations
A purchase or a sale of land by a corporation must be
specifically authorized by resolution of its directors or,
in certain instances, by its shareholders. The full legal
name of the corporation and the names and offices of the
signing officers must be accurately set out where the
parties sign the agreement. The lawyer should ensure
that the corporation’s authorized officers sign the
contract.
Buyers and sellers will have some protection against
incomplete authorization by the opposite party from the
“indoor management rule” (Ontario’s Business
Corporations Act (OBCA), s. 19).
Where the purchase is made by a religious organization
as that term is defined in the Religious Organizations’
Lands Act, the purchase can only be made for one of the
purposes set forth in s. 2 of that Act. The trustees of the
religious organization are the persons with the authority
to sign on its behalf.
2.1.4 Partnership property
While the law provides that a general partnership acting
in the ordinary course of business requires only one
partner to execute a binding contract (Partnerships Act,
s. 6), in many instances the transaction is not made in
the ordinary course of business. It is prudent whenever
possible to have all general partners execute the
agreement; however, in the case of large general
partnerships, this may not be practicable.
2.1.5 Powers of attorney
The use of a power of attorney by a party to a real estate
transaction raises serious issues. Fraudulent use of
powers of attorney is a growing problem for lawyers. If
any party (buyer, seller, or untitled spouse of the seller)
will sign the agreement by way of power of attorney, it is
essential to ascertain the validity of the power of
attorney document:
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ƒ Is the power of attorney authentic? Can the
grantor’s signature be verified? Can the witnesses
be located and their signatures verified?
ƒ Does the power of attorney comply with the
requirements as to grantor capacity and formality
of execution in ss. 8 and 10 of the Substitute
Decisions Act, 1992?
ƒ If the grantor is incapable, is the power of attorney
a continuing power of attorney pursuant to s. 7 of
the Substitute Decisions Act, 1992?
ƒ Is the power of attorney in effect?
— Does it contain an expiry date?
— Does it come into force only upon the
happening of a specific event?
— Does it contain any conditions?
— Does it impose limits on what the attorneys
have authority to undertake?
— Has it been revoked?
— Has the grantor died?
If the consent of an untitled spouse to the sale of a
matrimonial home is to be provided (as required by
s. 21(1)(a) of the FLA) using a power of attorney, the
power of attorney must explicitly authorize this. While
an agreement can be signed by a consenting, untitled
spouse via power of attorney without explicit authority,
as a matter of practice, the land titles offices will not
register a transfer signed with a power of attorney unless
the power of attorney expressly authorizes the attorney
to provide the untitled spouse’s consent. See also “Seller
of a matrimonial home,” below.
2.1.6 Trustees and agents
A trustee (on behalf of a trust) or an agent (on behalf of
a principal) must have authority to enter into the
agreement on behalf of a party to the agreement.
Generally, unless the opposite party has actual notice
that such representative lacks authority to sign
agreements on behalf of its beneficial owner or principal,
that party’s rights against the representative will not be
limited by the lack of authority. However, before the
agreement becomes firm and binding, if a party knows
that the other party is a trustee or agent, then the best
practice is to require (1) proof of such authority, and
(2) a clause in the agreement that the trustee or agent
will be personally liable for performance of the
agreement at all times.
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2.1.7 Two-year ban on purchases of
residential real estate by non-
Canadians
(a) Overview of the legislation
On June 23, 2022, the federal government passed the
Prohibition on the Purchase of Residential Property by
Non-Canadians Act, which came into force on
January 1, 2023.
Starting January 1, 2023, non-Canadians are prohibited
from directly or indirectly purchasing residential real
estate in Canada, including, without limitation
residential condominium units, for a period of two years.
Individuals who are neither Canadian citizens nor
permanent residents of Canada, as well as corporations
that are not incorporated in Canada and corporations
that are controlled by foreign individuals and/or
corporations, are deemed “non-Canadian” under the
Act. The regulations enacted under the Act also include
other persons and entities that are deemed to be “non-
Canadian.” Some exemptions are available, including for
refugees and non-Canadian individuals who purchase
residential property with their spouse or common-law
partner if the spouse or common-law partner is eligible
to purchase residential property in Canada.
The restriction applies to detached homes or similar
buildings containing not more than three dwelling units,
as well as any part of a building that is a semi-detached
house, row-house unit, residential condominium unit,
or similar premises that is intended to be owned apart
from any other unit in the building. The regulations
enacted under the Act also include other properties that
are captured by this restriction, including vacant land
that is zoned for residential or mixed uses in a census
metropolitan area or census agglomeration.
(b) Impact on existing and future
contracts
The two-year prohibition on the purchase of residential
properties by non-Canadians does not apply where a
non-Canadian becomes liable or assumes liability under
a contract of purchase and sale prior to January 1, 2023.
The Act does not impact the underlying validity of the
agreement of purchase and sale. Purchasers and vendors
are still legally bound to comply with their obligations
under contracts that contravene the Act unless contracts
contain termination provisions or other protective
measures. It is expected that these contracts are still
enforceable by usual legal means. Presumably,
assignment and assumption contracts are similarly
enforceable, notwithstanding any contravention of the
Act.
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(c) Enforcement and penalties
The Act provides that anyone who knowingly counsels,
induces, aids, or abets in a contravention of the Act by a
non-Canadian, or attempts to do so, is guilty of an
offence and liable on summary conviction to a fine of up
to $10,000. Furthermore, if a corporation or entity
commits an offence, its directors, officers, managers,
supervisors, agents, and others who have directed,
authorized, assented to, acquiesced in, or participated in
the contravention may be personally liable.
The broadly worded offence provisions may have a wide
reach. Liability could arise not only for non-Canadian
purchasers but also for developers, vendors, assignors,
real estate agents, lawyers (and their staff) and
professional advisors, and others involved in the
contravention. For instance, a vendor who enters into an
impugned contract or consents to an assignment of a
contract to a non-Canadian may be “aiding” or
“abetting” the impugned purchase. Furthermore,
services ordinarily offered in connection with residential
conveyancing by real estate agents, notaries, lawyers,
mortgage brokers, and other professional advisors may
constitute “counseling” or “aiding” in a purchase by a
non-Canadian.
An issue may arise where it is later discovered that a
purchaser under a binding contract is a non-Canadian.
Completing the conveyance in accordance with the
purchase contract and providing services in connection
with the conveyance may be an offence under the Act. At
the same time, refusing to complete or advise in the
completion of the conveyance may be a breach of
contractual and possibly professional obligations.
In addition to imposing penalties, the federal Minister of
Housing and Diversity and Inclusion may apply to the
Superior Court of Justice for an order to sell a property
that has been purchased in contravention of the Act. The
regulations enacted under the Act address the manner
and conditions for this type of sale. The Act provides that
in no event may the non-Canadian seller recover more
from the sale of the property than what the non-
Canadian seller paid for it.
2.2 Issues unique to buyers
2.2.1 Title directions
The buyer who signs an agreement need not become the
sole owner at the closing. Such buyer may decide to take
title to the property together with another party (for
example, a spouse). A written “title direction” signed by
the original buyer and the added party can routinely be
given to the seller at closing, authorizing the seller to
prepare the transfer of title in the two names. An
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amending agreement to add the second buyer to the
agreement is not usually required.
Alternatively and less commonly, before closing, the
named buyer may formally assign and sell the agreement
to a legal entity that is not an original party, unless the
agreement specifically prohibits such a step. This is one
way for a buyer to resell, or “flip,” a property before
closing without ever taking title, often earning a profit in
the process. This situation, while often quite legitimate,
may constitute a red flag for possible fraud.
2.2.2 Trustees and agents as buyers
Sometimes a buyer will submit an offer to purchase “in
trust for (or on behalf of) a corporation to be
incorporated,” which the buyer will own. Such a buyer
will want the right to assign the agreement to such new
corporation before closing. The seller need not object
provided it is clear in the agreement that the original
buyer remains personally liable for performance of the
agreement at all times.
Even if the agreement says nothing regarding the
original buyer’s continuing liability, if the new
corporation defaults in completing the transaction, the
original buyer will probably be liable to the seller for
damages because a buyer can only assign its rights, not
its obligations (OBCA, s. 21). The original buyer can only
avoid liability if the seller explicitly releases that buyer
from further liability.
2.2.3 Multiple buyers and co-ownership
Where two or more individuals together buy or inherit a
home or other real property, then depending on the
nature of their relationship, issues may arise. For
example, when a group of heirs (often the adult children
of the deceased) inherit a family cottage, disputes among
them regarding possession, cost-sharing, and so on are
not unusual. The term “buyers” used in this section
should be read as including beneficiaries who have
inherited, wherever applicable.
Assuming there are two buyers both of whom want to be
registered as owners, before closing they will have to
decide whether to register ownership as “joint tenants”
or as “tenants in common.”
“Joint tenancy” will be used where the buyers desire that
if one of them should die, the survivor is to become the
sole owner by right of survivorship. Joint tenancy is
commonly used by spouses for their matrimonial home
as a simple form of estate planning.
“Tenancy in common” is typical in other situations.
Examples include unmarried buyers who will share use
of the home and its facilities, business partners buying
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for investment purposes, and children of a deceased
owner inheriting cottage property. Tenants in common
each own a percentage of the registered title. For
example, three tenants in common may respectively own
interests of 40%, 40%, and 20%. If one owner dies, that
owner’s share of the property becomes an asset of that
owner’s estate. The surviving tenants in common must
then deal with a new tenant in common (the estate
trustee of the deceased) and potentially with the heirs of
the deceased if the deceased’s share is specifically
bequeathed to heirs.
The following are some issues that may arise over time
among tenants in common:
ƒ Rights of possession: Do all owners have the right
to inhabit the home? May they do so with a third
party who is not an owner?
ƒ Carrying costs: Is each owner required to pay the
owner’s proportionate share of the property taxes,
insurance premiums, utilities, maintenance, and
repair costs? Who will decide what maintenance
and repairs should be done? To what standard
should these be done?
ƒ Common areas: Who will have the right to use the
common areas?
ƒ Mortgage: Do the owners understand the
consequences of the joint and several liability that
will be required of them by mortgage lenders? If
one owner is wealthier than the other, is it in the
best interest of the wealthier owner to be jointly
and severally liable with the other? Should such
buyers have separate legal representation before
an offer to purchase is even drafted, due to the
differing interests?
ƒ Indemnity: Will the owners indemnify each other
against the possibility that the actions of one
owner may expose the other to liability for torts?
for breaches of contract?
ƒ Death: If a tenant in common dies owning, for
instance, a 50% interest, can that owner bequeath
this fractional share to an heir? or to multiple
heirs, resulting in smaller multiple ownership
fractions? Should the surviving owner have the
first right, or the obligation, to buy the interest of
the deceased? If so, at what price?
ƒ Events of default: What happens if an owner’s
fractional interest is seized by creditors or by a
bankruptcy trustee? What happens if an owner’s
marriage ends bitterly and the spouse asserts
claims to the property under the FLA? In such
cases, the other owners’ rights may be seriously
affected.
ƒ Sale: May one owner sell the owner’s fractional
interest to a third party? May an owner compel
another owner to sell his or her fractional interest
to the first? What procedure is there for managing
this?
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To deal with these issues and others, the buyers can
negotiate a comprehensive co-ownership agreement,
hopefully before the transaction closes and preferably
before an offer to purchase is even submitted. Each co-
owner (tenant in common) should have separate legal
representation in the negotiation and drafting of the co-
ownership agreement because their interests differ.
Such an agreement can anticipate the various issues and
provide procedures by which the parties agree to resolve
each such issue.
These issues are not exclusive to tenancies in common of
real property. Similar issues arise among the
shareholders of corporations, partners of a partnership,
and those in other relationships where similar
considerations exist.
2.3 Issues unique to the seller
2.3.1 Seller as an individual
It is critical to correctly identify the registered owners of
the property, all of whom must be named as sellers. If,
for example, only one of two registered owners signs the
agreement as seller, then the buyer may have no
contractual rights against the owner who did not sign. A
simple search of the registered title before an agreement
is entered into will quickly reveal who the registered
owners are. If all of those owners do not sign the
agreement as sellers, an amendment adding the
necessary parties as sellers must be prepared, assuming
that the other owners are in agreement.
2.3.2 Estate sale
Where a deceased person is a registered owner of the
property being sold, all the estate trustees must sign the
agreement on behalf of the estate.
The estate trustees are identified in the will of the
deceased, if any. Although the estate trustees named in
the will may have apparent authority to enter into the
agreement on behalf of the deceased, they will not be
able to complete the transaction by signing and
delivering a registrable transfer of the title until they
have been appointed estate trustees under R. 74 or 75 of
the Rules of Civil Procedure.
If there is a will but a certificate of appointment of estate
trustee with a will has not yet been issued, the agreement
must be made conditional (by way of either a condition
precedent or a condition of closing) upon the estate
trustees being so appointed.
If there is no will, estate trustees must be appointed
under R. 74 or 75 before the estate can agree to sell the
property. Until then, for practical purposes no one will
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have the legal authority to contract on behalf of the
estate.
2.3.3 Trustees as sellers
If the buyer has actual notice that the seller owns the
property in trust for an unregistered third-party
beneficial owner, consideration should be given to
obtaining the written consent of such beneficial owner to
the sale. If the trust property is also a matrimonial home
of the beneficial owner under s. 18 of the FLA, the spouse
of the beneficial owner may have an interest in the
property under Part II of the FLA and should sign the
agreement in order to consent to the transaction.
2.3.4 Seller not the registered owner
There are instances where the seller in the agreement is
not the registered owner. This may occur where the
property is being sold, for example, by a sheriff to satisfy
an outstanding judgment, by a mortgagee under power
of sale, or by a trustee in bankruptcy. In such
circumstances, it is important to identify the capacity of
the seller.
In these situations, the buyer also needs to understand
at the outset any limitations on the buyer’s contractual
rights against such a representative seller. For example,
before such a transaction can close, the registered owner
of the property may be able to make payments to the
mortgagee or sheriff which, pursuant to statute or
common law, will put an end to such seller’s right to sell.
Language describing any such possibility and the rights
of the parties in such eventuality should be clearly set out
in the agreement.
2.3.5 Seller of a matrimonial home
If the seller is the sole registered owner and the property
is a matrimonial home of the seller, s. 21(1)(a) of the FLA
prohibits the seller from disposing of the matrimonial
home unless the seller’s spouse consents to the
transaction. The untitled spouse must sign the
agreement of purchase and sale; otherwise, it may not be
possible to compel the untitled spouse to consent to the
transfer at closing, leaving the seller unable to complete
the transaction free of the untitled spouse’s rights under
the FLA.
2.3.6 Seller as a surviving joint tenant
Upon the death of any one of the joint tenants in a joint
tenancy, the surviving joint tenants become the owners
of the deceased’s interest.
There is an exception to this rule where a married person
dies owning a matrimonial home as a joint tenant with a
person who is not his or her spouse. Section 26 of the
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FLA states that the joint tenancy is deemed to have been
severed immediately before the time of death, in effect
creating a tenancy in common, as a result of which all
tenants in common must sign.
3. Describing the property
The real property is, of course, the primary subject
matter of the agreement. It must be accurately identified
and described.
The municipal address is the first component. This
address is a convenient reference point but has little, if
any, legal effect.
3.1 Legal descriptions
All real properties in Ontario have legal descriptions.
Every well-drafted agreement will contain a complete
legal description of the property. The OREA form has
limited space for this, so a schedule for long legal
descriptions may be needed. Legal descriptions contain
lot and plan, or lot and concession numbers, or variants
of these, at minimum. Where the property is not the
whole of a lot on a plan or concession, the entire detailed
description, whether parts on a reference plan or “metes
and bounds,” should be included. Lot dimensions are
also part of most legal descriptions. Buyers are entitled
to rely on every detail of the legal description, which
must therefore be accurate and complete.
Referring to and attaching a survey is a good way to
describe accurately a property’s dimensions and to
disclose the existence and location of easements,
building and fence encroachments, and other potential
problems and should be considered a best practice.
However, care must be taken to ensure that the survey is
up to date and shows all existing encroachments. For
example, after the date of an older survey, there may
have been changes to the buildings, structures, or other
improvements to the property. New fences may have
been installed in wrong locations, easements may have
been added, and building additions may have been built.
All of these will render an older survey outdated and
significantly reduce its usefulness.
3.2 Determining the dimensions
The person drafting the agreement must determine the
dimensions of a property’s boundaries from a survey, a
reference plan, a registered plan of subdivision, or the
seller’s registered transfer or deed.
3.3 “Minor” inaccuracies in dimensions
The dimensions of the land are set out in the agreement,
qualified by the words “more or less.” This qualification
makes it clear that the exact dimensions of the property
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are not of absolute importance to the parties and that
minor inaccuracies will not become a point of dispute.
This approach is most often used for purchases of
residential properties.
Case law over the years has attempted to define the
parameters of “more or less.” The focus of the decisions
has generally been on the buyer’s intended use and on
language that may indicate the significance or
insignificance of precise measurements to the buyer.
Generally, when a buyer views a home before submitting
an offer to purchase, if the property has apparent
boundaries marked by fences, landscaping, walkways,
driveways, or other physical features, the buyer will
often reasonably assume that those signify the
boundaries of the property. If the buyer relies on these
apparent boundaries, then the exact boundary
measurements should not become an issue as long as
those apparent boundaries are more or less the actual
boundaries and are not materially misleading. Minor
discrepancies in dimensions as well as minor fence and
hedge encroachments generally are covered by “more or
less” and, in these “visible boundary” situations, will
have no effect on the agreement.
On the other hand, boundary markers may deceive the
buyer into believing that the lot dimensions are
significantly longer or wider than they actually are.
Fences and landscaping may have been deliberately or
mistakenly located so as to enclose significant portions
of abutting land that the seller does not own. In such
cases, “more or less” will no longer be applicable, and the
buyer may have justifiable cause for complaint.
In the cases of physically large lot dimensions or the
absence of physical boundary demarcation, the buyer
can only be sure of the boundary locations by actually
measuring them and comparing them to the dimensions
of the land contained in the seller’s registered transfer or
deed or a survey. This will usually be done by an Ontario
land surveyor in the course of preparing a survey of the
property on the buyer’s behalf.
3.4 Buying land for development
In the case of a property being purchased for
development (such as vacant land or land having an old
home to be demolished), the buyer must know the
minimum lot areas, street frontages, building setbacks,
and other criteria specified in the municipal zoning by­
law. These specifications in turn determine the number
and size of homes that the buyer may build on the land.
For example, a home builder may buy a large lot
containing one old house, intending to divide the lot into
three smaller lots and build a home on each new lot. The
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total area of land being purchased, in square meters,
acres, or hectares, along with the length of its frontage
on a public street and depth are critical to this buyer’s
purpose. On the basis of these requirements and the by­
law requirements, the buyer can plan to build a specific
number of homes of a certain size and will value the land
accordingly. Such a buyer should delete “more or less”
from the form, modify the description of the land to suit
its needs, and state that the dimensions are expected to
be accurate and that it relies upon the warranted
dimensions in valuing the property.
If the actual measurements are later determined by a
survey to be less than what the seller represents, the
buyer may be restricted to building fewer or smaller
homes, reducing in the buyer’s eyes the value of the
property.
Adding a condition precedent (see “Conditions
precedent,” below) allowing the buyer to satisfy itself as
to the accuracy of the measurements and to terminate
the agreement in case of significant inaccuracy is a good
way to protect the buyer’s interests and avoid later
disputes. During the condition period, a survey can then
be prepared to determine accurately the correct
measurements.
3.5 Legal description: disclosing
limitations of the seller’s title
Paragraph 10 (title) of the OREA form, discussed in
“Title clause — para. 10,” below, provides that the buyer
will accept title subject to certain easements and other
“minor” title qualifications. However, except for the
qualifications in para. 10, all other easements, rights of
way, restrictive covenants, and other registered
limitations on the seller’s title must be disclosed by the
seller in the legal description in the agreement. These
rights can limit the buyer’s intended use of the property
and significantly affect its value to the buyer. Shared
(mutual) driveways, private laneways, shared
passageways between houses, and sewer, pipeline, and
other underground easements for utilities crossing the
property must be disclosed by the seller in the
agreement, because they may prevent the buyer from
building an addition to the house or installing a
swimming pool or expensive landscaping.
The seller’s failure to disclose in the agreement
significant title constraints may result in the buyer,
before closing, demanding a price abatement, other
damages, or even termination of the agreement because
the buyer was not able to bargain on the basis of such
limitations when making the offer to purchase. On the
other hand, once a buyer has agreed to purchase a
property based on full, written disclosure in the
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agreement, the buyer will not later be in a position to
require that the seller remove such a constraint since the
buyer’s offer was made with full knowledge of it.
The most obvious way for buyers to avoid such problems
is to have a lawyer search the title before making the
offer, but this practice is typically followed only in
transactions involving unusually large amounts of
money, especially commercial transactions.
3.6 Disclosing known latent physical
defects and stigmatized properties
The principle of disclosure by a seller in the agreement
includes disclosure of some physical defects.
A patent defect is one that is readily discoverable either
by a buyer or a buyer’s professional home inspector. A
latent defect is unknown to the buyer and presumably to
the seller and is not easily discoverable on a physical
inspection, including an inspection by a professional.
Sellers have no duty to disclose patent defects. The onus
is on the buyer. The principle of caveat emptor prevails
in Ontario. The inspection clause (para. 13) of the
agreement makes this clear (discussed below).
Sellers have no duty to disclose latent defects that the
seller has no knowledge of.
Where a seller knows of a latent physical defect (such as
a seriously faulty foundation or large amounts of radon
gas in the basement), there is a duty to disclose this if
either (a) the defect renders the property unfit for
habitation or dangerous immediately or potentially, or
(b) repair of the defect will be so costly as to significantly
reduce the property value. Failure to disclose a latent
defect known to the seller may constitute fraud.
In recent years, a similar issue has arisen as to a seller’s
obligation to disclose in the agreement information
about the history of the property and the surrounding
neighbourhood that may materially affect the value or
desirability of the property. The issues of intangible,
subjective, or non-physical stigmatization of the
property raise similar concerns to those involving latent
physical defects. Examples include the past use of the
property for criminal purposes, the fact that a notorious
murder or death occurred in the house, and the fact that
a convicted pedophile lives down the street.
Circumstances of this class have to date not required
disclosure unless they render the property unfit for
habitation or dangerous. Accordingly, the past use of a
property for a drug “grow op” (seen by some as a
stigmatizing event) does not in itself require disclosure,
but the presence of dangerous consequences (for
example, black mold in an unremediated grow op) may
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in themselves create a latent defect that the vendor must
disclose.
The seller’s lawyer has a responsibility to advise the
seller as to what must be and what need not be disclosed.
Disclosure of latent defects of these kinds will usually be
made in a schedule to the agreement. The case law is in
a state of flux, so an up-to-date knowledge of the law is
required in order to give such advice. Buyers should
always investigate such issues themselves. Relying on a
seller’s duty to disclose such information is not practical
advice.
3.6.1 The OREA Seller Property
Information Statement
The OREA makes available to brokers an optional “Seller
Property Information Sheet,” which a broker may
present to a seller when a listing agreement is signed.
The form consists of many detailed, often technical
questions about the physical condition, history, and
legal status of the home being offered for sale. It requires
the seller who chooses to complete it to disclose every
defect known to the seller including defects that a buyer,
despite a careful inspection, would be unable to discover.
This form has become a basis for litigation by buyers
who discover problems after closing and then sue the
seller for allegedly failing to disclose them in the form.
Some sellers are insightful enough to seek legal advice
before agreeing to provide the information. The duty of
the lawyer in giving such advice includes explaining
ƒ the potential liability to which a completed form
exposes the seller in terms of errors and
omissions;
ƒ that many of the questions require complex legal
or construction-related information;
ƒ that physical conditions may be present in the
home that the seller is not aware of;
ƒ that completing the form fully and thoroughly may
require many hours and legal and construction-
related advice from experts;
ƒ that a seller with limited knowledge may not be
qualified to answer many of the questions;
ƒ that once this information is provided, the broker
must disclose it to all potential buyers.
The lawyer should point out (a) the limited nature of the
seller’s liability when only the standard OREA
agreement is signed by the parties, and (b) that in place
of receiving a Seller Property Information Sheet, buyers
are free to include a condition precedent in their offers
that gives them time to obtain a professional inspection
of the home before the agreement becomes firm and
binding. For these reasons, the great majority of
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residential real estate transactions in Ontario are
completed without a Seller Property Information Sheet.
4. The price
Ensure that the words and numbers match and are
legible, since the purchase price often undergoes
numerous alterations during negotiations.
5. The deposit
The deposit is security for the performance of the buyer’s
obligations. It will be credited to the buyer as partial
payment of the purchase price at closing.
The seller will want the largest deposit possible to deter
the buyer from default. The buyer will desire the smallest
deposit possible in case it has to default for unforeseen
reasons. Note that the amount of the deposit is not a
limitation on damages claims in case of a default.
Rather, as a practical matter, it is available cash to partly
or wholly satisfy a possible damages award to the seller
should the buyer default. The seller might otherwise
have difficulty collecting any damages award.
There are three alternatives provided in the OREA form
respecting the payment of deposits: (1) it may be
presented with the offer; (2) it may be paid upon
“acceptance,” which is a defined term; or (3) it may be
paid “as otherwise described in this Agreement.”
Section 17 of O. Reg. 567/05, made under the Real
Estate and Business Brokers Act, 2002, requires that a
broker place the deposit in its trust account within five
banking days of receipt. As a result, it is possible for an
agreement not to be accepted but for the deposit to be
deposited into the listing broker’s trust account. If the
cheque was uncertified, the broker may have to wait for
clearance before returning the money, thereby delaying
the buyer’s ability to make an offer on another property.
Paying the deposit on acceptance of the offer avoids this
difficulty.
There is a space on the OREA form to insert information
as to whom the deposit is paid. Where a property has
been sold through a broker, in most instances the
deposit is paid to the listing broker in trust. If the
property was sold without a broker, the deposit is usually
paid to the seller’s lawyer in trust. In either case, the
recipient holds the deposit in trust for both buyer and
seller.
The payment of a deposit directly to a seller exposes the
buyer to the risk of losing the deposit if the seller is
selling fraudulently and is not the true owner, or if the
seller otherwise unjustifiably refuses to return the
deposit where a transaction is not completed. It is also a
“red flag” that a real estate fraud involving one or both
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parties might be occurring, which the lawyer should
investigate further.
6. Schedules and conditions precedent
6.1 Contents of schedules
Most agreements include schedules with additional
provisions such as warranties, conditions, covenants,
metes and bounds legal descriptions, or a copy of a
survey.
Examples of clauses often added by way of a schedule
can be found in Appendix B of this chapter.
Sometimes the OREA form of agreement for residential
real estate transactions will be adapted by small builders
for use in the sale of newly constructed homes. In such
cases, a lengthy schedule containing provisions
applicable exclusively to new homes, including the
statutory addendum required by the Ontario New Home
Warranties Plan Act, needs to be added to the OREA
form. A list of considerations that may require special
drafting for new home agreements may be found in
Appendix C. Refer also to Chapter 62 of these Study
Materials.
6.2 Conditions precedent
Conditions precedent are conditions that must be
satisfied or waived before the agreement becomes firm
and binding. They usually appear in a schedule.
Conditions precedent may, for example, deal with a
buyer’s need to confirm the availability of bank financing
for the purchase or a buyer’s requirement for a
satisfactory professional building inspection. Sample
conditions are found in Appendix B.
In drafting conditions precedent, it is imperative that the
language be precise and complete. There are at least five
elements required for a condition to be effective:
ƒ Time frame: The time frame must be clear. How
long does the party (for whose benefit the
condition is inserted) have to fulfill the
requirements?
ƒ Terms: The terms of the condition must be
defined clearly. Conditions as to financing or a
home inspection must accurately describe what is
being sought.
ƒ Notices: A means of notice of fulfillment, waiver,
or non-fulfillment of the condition should be
provided.
ƒ Deposit: Include a clause stating that if the
condition is not met, the deposit is to be returned
to the buyer, usually without interest or
deduction.
ƒ Waiver: Allow for a waiver (in place of
compliance) so that the benefitting party will have
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the option of continuing with the transaction even
if the condition is not fulfilled.
6.3 Paying the balance of the price
Just before para. 1 of the OREA form, the agreement
states that “Buyer agrees to pay the balance as more
particularly set out in Schedule A attached.” The terms
of payment should then be inserted at the beginning of
Schedule A. For example, where the buyer is to pay the
entire balance of the purchase price by certified cheque
or bank draft at closing, the agreement might say the
following:
The buyer agrees to pay the balance of the purchase
price, subject to adjustments, on completion.
6.3.1 Vendor take-back mortgage
In some cases, payment of the purchase price at closing
consists partly of a lump-sum cash payment by certified
cheque to the seller, and partly of a loan from the seller
to the buyer to be repaid by the buyer over time after the
closing. In the schedule to the agreement, the parties can
set out the terms of such loan—amount, interest rate,
maturity date, payment dates, and payment amounts—
and that the buyer agrees to give a mortgage to the seller
as security for such loan. See clause 10 of Appendix B for
an example.
Such a mortgage is commonly known as a “vendor take-
back” mortgage, abbreviated as “VTB.” The VTB
mortgage is registered at closing with the transfer.
If the buyer is also obtaining a first mortgage loan from
a bank, then the agreement must address two other
issues: first, it must describe the VTB mortgage as a
second mortgage; second, it must set out the basic terms
of the first mortgage to which the VTB mortgage will be
subject. The larger the principal amount of the first
mortgage relative to the total price, the riskier the VTB
loan becomes for the seller, so the principal amount and
other terms of the first mortgage may become the subject
of negotiation between seller and buyer. Failure to
specify the terms of the first mortgage in such
circumstances would be a serious omission.
Note that VTB second mortgages have become rare in
recent years because first mortgage lenders generally
require that the down payment be the buyer’s money.
6.3.2 Assuming an existing mortgage
Where the property is already subject to a first mortgage,
the buyer may agree to assume such first mortgage. In
this case, there are at least two issues to be concerned
about.
First, it is likely that the first mortgage prohibits its
assumption by the buyer unless the buyer is first
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approved by the lender. For this reason, clause 2 of
Appendix B is in the form of a condition precedent
requiring such approval. Second, suppose the buyer is
approved to assume the first mortgage and the
transaction closes. One year later the buyer defaults
under the first mortgage. The seller may still be liable for
repayment of the mortgage loan because of the seller’s
covenant to pay contained in the first mortgage. The
seller can be protected from this if the agreement is also
conditional upon the first mortgagee releasing the seller
from the first mortgage before the closing, when the
approved buyer assumes the mortgage.
7. Irrevocable date — para. 1
The agreement states that the offer will be void unless it
is accepted before a specific date and time. Since the
offer is stated to be irrevocable, the offeror cannot
withdraw the offer until the expiration of the time
period. The offeror must receive consideration for that
irrevocable promise because at this point no contract
exists and no consideration has exchanged hands. The
simplest method of providing consideration is to have
the buyer sign under seal (the OREA form contains a
pre-printed seal). On a counter-offer, the original
irrevocable date may need to be changed, and certainly
the offeror will change (seller or buyer as is appropriate).
8. Closing date and vacant possession —
para. 2
The completion date (also called “closing date”) must be
adhered to. See para. 20 of the agreement and “Time
limits — para. 20,” below. Completion cannot take place
on a Saturday, Sunday, or statutory holiday since,
among other things, all land titles offices are closed. The
first and last business days and Fridays of the month
may not be good choices. Traditionally, many
transactions are scheduled for those days, sometimes
resulting in closing and mortgage funding delays.
Upon completion, vacant possession is to be provided
unless otherwise stated in the agreement. In general
terms, “vacant possession” means that the property
must be unoccupied, with all of the seller’s chattels
removed except those bought by the buyer, and that keys
representing access must be delivered to the buyer. If
instead of vacant possession there is a tenancy to be
assumed by the buyer, this must be described in detail in
the agreement.
9. Notices — para. 3
This paragraph of the OREA form authorizes the listing
brokerage to give and receive notice on behalf of the
seller. The buyer’s brokerage is authorized to give and
receive notice on behalf of the buyer only where the
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buyer has entered into a representation agreement with
the brokerage. Where a brokerage represents both the
buyer and seller, the brokerage cannot be either party’s
agent for the purpose of giving and receiving notices.
Notice to the parties may also be given by delivery to the
address of service provided. This specific address is
located at the end of the form. Notice may also be given
by fax transmission where fax numbers have been
inserted.
10. Fixtures and chattels — paras. 4 and 5
The common law distinguishes between real property
(consisting of land and the buildings and other fixtures
attached to the land) and personal property (all property
other than real property). The OREA agreement reflects
this. Fixtures always remain with the land and building
unless specifically excluded. Chattels are not included in
the transaction unless specified in the agreement.
In describing chattels to be included in the transaction,
the rule to follow is “when in doubt spell it out.” Detail
in the chattel section (i.e., model, colour, and serial
number) is recommended. Detailed descriptions can
help avoid the following: a seller asserts that the
refrigerator in the garage is the one included in the
transaction, not the new one the buyer saw in the
kitchen, which the seller removed before closing. Also, a
buyer’s lawyer might include a warranty in the
agreement as to the “working order” of the chattels on
closing. Try to avoid subjective terms such as “good” or
“proper” working order, since these mean different
things to different people. In the case of fixtures, any
fixtures that the seller wants to remove must be
accurately described.
11. Rental items — para. 6
Some fixtures in a home, such as hot water tanks and
furnaces, may be leased rather than owned. Each leased
fixture must be listed so that the buyer knows there will
be monthly payments, agrees to assume the lease, and
does not erroneously believe that the buyer will become
the owner of such fixtures at closing.
If a fixture is leased, the lease is probably in writing, and
there will be questions:
ƒ can the lease be assumed? how? is the lessor
entitled to approve the buyer (in case the buyer
has bad credit)?
ƒ how much are the payments?
ƒ is there a fixed term? how may payments remain?
are the payments up to date?
ƒ is there an option or obligation to purchase for a
lump sum?
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ƒ which party is responsible for maintenance and
repairs?
The contract may also require that, until the buyer
assumes the lease in writing, the seller remains
responsible for all payments, and a lessor may continue
to take payments from the seller’s bank account until the
buyer is approved and signs an assumption agreement.
For this reason, the agreement should explicitly require
the buyer to assume such a lease. It is up to the lawyers
to contact the lessor and implement the assumption of
the lease before the closing.
12. Harmonized Sales Tax (formerly Goods
and Services Tax) — para. 7
This paragraph contains a blank space that is to be
completed by inserting either “included in” or “in
addition to.” This space is usually completed with
“included in,” on the assumption that the tax will not
apply because the property is used residential property.
But if a home has been extensively renovated, and
particularly if the seller is in the construction business,
the transaction may well be taxable. This is a potentially
complex issue. If there is any doubt, advice should be
obtained from professionals with relevant knowledge of
the tax legislation.
If the sale is not subject to HST, the seller must certify in
writing at closing that this is the case.
13. Title searches — para. 8
After the agreement is firm and binding, the buyer’s
lawyer must proceed with its “due diligence” inquiries:
(1) examine the title;
(2) determine whether there are government work
orders or deficiency notices against the property;
(3) confirm that the present use as specified may be
lawfully continued; and
(4) confirm that fire insurance can be obtained.
Title issues arising from these title and off-title searches
are called “requisitions.” Requisitions are submitted by
the buyer’s lawyer to the seller’s lawyer with a
“requisition letter.”
13.1 Timing: examining the title
Searches must be completed and requisitions submitted
within one of two periods depending on the type of
search. First, the time limit for examining title, item (1)
above, is the “requisition date,” which must be inserted
into para. 8. Item (1) is very broad and covers searching
the registered title, completing off-title searches other
than items (2), (3), and (4), and submitting any
necessary title requisitions.
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13.2 Certain off-title searches and
insurability
The second time period reflects the fact that the off-title
searches and questions of insurability in items (2), (3),
and (4) may need more time to complete. The time limit
for completing these searches and submitting any
resulting requisitions is (a) 30 days after the requisition
date, or (b) five days before the closing date, whichever
occurs first.
Regarding the continuation of the present use, item (3)
above, it is imperative to accurately identify in the blank
space or elsewhere what use the buyer expects when the
transaction is completed. For example, the present use
of a house might be described as “residential,” but that
would be a serious error if the buyer expects that the
basement apartment with its own stove is a legal use. In
such case, the present use should at least be “two self-
contained residential dwelling units that comply with all
zoning and building by-laws and other government
requirements.” If the use is described as merely
“residential,” the buyer is not entitled to expect anything
more specific to be legal. There are a number of
requirements before an accessory apartment with a
stove will be considered “legal” since such an apartment
increases the risk of fire. These additional requirements
should be separately addressed in a schedule to the
agreement.
Regarding insurability, item (4) above, obtaining fire
insurance may be challenging for older homes where
issues such as outdated electrical wiring are present.
Consequently, for older buildings, consider including in
the agreement a condition precedent that allows the
buyer to investigate the availability of insurance at the
outset of the transaction.
13.3 Requisition date not specified
If the agreement fails to provide a specific time period
for submitting requisitions, s. 4 of the Vendors and
Purchasers Act prescribes a 30-day period from the date
of the contract.
14. Future use — para. 9
If the buyer is contemplating a use different from the
permitted (legal) use, the buyer should make the
agreement conditional upon being able to obtain
permission for the change of use (a by-law variance) or
being able to determine that the current zoning will
permit this use.
15. Title clause — para. 10
Paragraph 10 is sometimes called the “annulment
clause” because it expressly provides the parties with the
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ability to terminate an agreement in certain agreed
circumstances.
15.1 What the buyer must accept on title
The seller agrees to provide a title free from all registered
restrictions, charges, liens, and encumbrances except
those that are listed in subparagraphs (a)–(d). These are
commonly known as “permitted encumbrances.”
Subparagraph (a) excepts any registered restrictions or
covenants that run with the land provided they are
complied with. For example, many residential
subdivisions have restrictions prohibiting the operation
of businesses, the placing of television antennas on
properties, the parking of large trucks, and so on.
The buyer may not be aware of these restrictions when
submitting an offer to purchase. Note also that under the
default language, any restriction on title is a permitted
encumbrance, and the buyer’s only escape from the
contract would come if the restriction has not been
complied with. This clause may therefore result in a
buyer taking title to a property that is contrary to their
expectations. For example, if a vacant lot of 80 feet x
80 feet were subject to a restriction that no building
could be constructed within 100 feet of the lot line, any
future plans of the purchaser for construction on that
property would be defeated by the restriction. If the
buyer has a specific need in mind, consider making the
offer conditional upon being able to accommodate that
need or delete or limit the exclusions in
subparagraph (a).
Subparagraph (b) requires that the buyer accept
registered municipal and utility agreements without
complaint provided that the agreements have been
complied with and sufficient security has been posted to
ensure compliance. It is not unusual in new construction
that the title is subject to these agreements, which will
remain on the title and are rarely released or discharged.
Under subparagraph (c), the buyer must also accept the
property subject to any minor domestic utility or
telecommunication easements for the supply of services
to the property or to adjacent properties.
If the property is subject to any easements as set out in
subparagraph (d) (for drainage, sewers, power cables,
etc.), the buyer must also accept these, provided they “do
not materially affect the use of the property.” Keep in
mind that the existence of this kind of easement may
limit the buyer’s ability to build on the land or to install
improvements such as a building extension or a
swimming pool. In some cases, therefore,
subparagraph (d) should be modified to accommodate
the buyer’s future intentions.
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If the buyer intends to construct a new dwelling on the
lot, it is important that there be no limitation on the title
that restricts the buyer’s ability to build a structure to
particular specifications. Before the buyer submits an
offer, the buyer’s lawyer should review a title search and
contact the municipality to determine whether there are
limitations. Alternatively, the lawyer should revise
subparagraphs (a)–(d) before submitting the offer.
It might be difficult to determine whether an easement
materially affects the use of the property. The seller
should disclose any easement that could reasonably be
raised later as significant and outside the parameters of
subparagraphs (c)–(d). Such disclosure in the
agreement of purchase and sale may prevent a later
dispute. Refer also to “Legal description: disclosing
limitations of the seller’s title,” above.
15.2 Consequences of unresolvable
requisition
Paragraph 10 next provides that, if timely searches
reveal a valid problem with title, work orders or
deficiency notices, lawful use of the property, or
insurability of the principal buildings that the seller is
unable or unwilling to remove, remedy, satisfy, or obtain
title insurance for and that the buyer will not waive, then
the transaction is over. The language in the agreement
permits the seller’s lawyer to obtain title insurance to
resolve a problem or to insure a potential problem in
order to facilitate the completion of the transaction.
Both parties must act reasonably and in good faith in
completing their obligations under the agreement. The
term “unwilling” cannot be utilized in a capricious or
arbitrary manner. If, for example, the seller will be
required to expend large sums of money in order to
correct a problem, then in those circumstances, the
seller may rely upon the “annulment clause” to
terminate the agreement.
15.3 Objections going to the root of title
The last sentence of para. 10 states that buyer is deemed
to have accepted the seller’s title, except for valid
objections made in a timely manner and “any objection
going to the root of title.” Objections going to the root of
title may be submitted at any time before the registration
of the transfer at closing.
Strictly speaking, an objection (a requisition) goes to the
root of title if its subject matter is so fundamental that
unless it is resolved, the seller has no title to convey. For
example, because of s. 50(21) of the Planning Act, many
breaches of s. 50 of that statute go to the root of title and
invalidate any purported transfer of land that results in
a breach. Similarly, at common law, because the
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registration of a first mortgage included a conveyance of
the title to the lender subject to the borrower’s right of
redemption, the existence of a first mortgage also goes
to the root of title. Today, most loans and debts secured
by real property are viewed as going to the root of title.
After all, what can justify a buyer having to assume a
monetary liability of the seller without having agreed to
do so?
16. Closing arrangements — para. 11
Most Ontario real estate transactions are completed by
way of electronic registration using computers. To
accommodate electronic registration, para. 11 reflects
the effect of the “escrow” terms under which such
transactions are completed. It is an acknowledgement
and agreement by the parties that (a) the transfer of
funds and registration of documents may not occur
simultaneously, and (b) there will be an agreement
between the parties’ lawyers called a “document
registration agreement,” which will govern the closing of
the transaction. Both parties must be represented by
lawyers to comply with para. 11.
17. Production of documentation and
mortgage discharges — para. 12
17.1 Documentation generally and surveys
The seller is to provide the buyer with title
documentation in the seller’s possession; and upon
request, the seller is to supply any sketch or plan of
survey in the seller’s possession.
Paragraph 12 may not be sufficiently specific in respect
of the survey, because surveyors produce a variety of
surveys for various purposes. Therefore, a buyer’s lawyer
should consider adding a paragraph in a schedule
requiring the seller to deliver a new building survey or,
in the alternative, an existing survey showing the current
location of all the buildings, improvements, fences,
decks, swimming pools, additions, or changes to the
property or to the buildings and structures on it.
17.2 Producing mortgage discharges
Paragraph 12 provides that if there is an outstanding
mortgage that is not to be assumed by the buyer and that
is held by one of the institutional lenders listed, then a
discharge of such mortgage will not have to be provided
on closing. Instead, the seller has the option of delivering
ƒ a mortgage statement from the lender for
discharge purposes;
ƒ a personal undertaking of the seller’s lawyer to
obtain and register a discharge of such mortgage;
and
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ƒ a direction that part of the balance due on closing
be made payable by a separate certified cheque to
the mortgagee, such cheque then to be delivered
by the seller’s lawyer (real-time cleared funds
transaction may not require such a direction).
The buyer’s lawyer must insist that the seller and seller’s
lawyer follow this procedure: it is critical for fraud
prevention and to protect the buyer’s interest. See
Chapter 68 (Fraud in real estate transactions) of these
Study Materials.
The language of the personal undertaking by the seller’s
lawyer will depend on the circumstances. If the
discharge of mortgage will be registered by the
institutional lender, then the seller’s lawyer should
undertake to “cause to be registered” a discharge within
a reasonable period of time after closing. If the seller’s
lawyer will register the discharge, then that lawyer
should undertake to obtain and register a discharge
within a reasonable time after closing. In either instance,
the undertaking should also state what happens if the
lender does not produce or register its discharge of
mortgage. Commonly, if the lender fails to discharge its
mortgage, the seller’s solicitor must bring an application
expeditiously pursuant to s. 12 of the Mortgages Act for
a court-ordered discharge.
Mortgages other than those held by the listed financial
institutions (generally, mortgages held by private
lenders) must be discharged on closing. In such cases,
the lawyer for the private lender will be a third lawyer
involved in the electronic registration process, and a
multi-party escrow agreement is needed. The Law
Society has prepared and published a multi-party
document registration agreement in contemplation of
such scenario.
18. Inspection clause — para. 13
In Ontario, the common-law doctrine of caveat emptor
(“let the buyer beware”) applies to the sale of real
property, except to the extent that the doctrine is
qualified by terms set out in the agreement. Buyers take
such property subject to “patent defects,” that is,
building defects that would have been patently visible or
easily discoverable on a physical inspection of the
property. Refer back to “Disclosing known latent
physical defects and stigmatized properties,” above, for
a discussion of latent defects.
The first part of para. 13 is an acknowledgement that the
buyer has had the opportunity to inspect the property
prior to submitting the offer. The second part is an
acknowledgement by the buyer that once accepted by the
seller, the offer will become a binding contract.
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The last part of this provision addresses the matter of a
home inspection by the buyer who, in a competitive
market, may decide against requiring a property
inspection as a condition precedent. This part of the
provision contains an acknowledgement by the buyer of
the opportunity to obtain an inspection and the decision
not to obtain one.
The buyer’s lawyer should add a clause to the offer that
allows the buyer to inspect the property on one or more
occasions prior to closing. Buyers should be encouraged
to reserve one such inspection for the day of closing or
as close to it as possible in order to verify before closing
that the property is in substantially the same condition
it was in when the agreement of purchase and sale was
entered into and that chattels are in working order.
19. Insurance and risk of loss — para. 14
Upon the agreement between the parties becoming firm,
the common law provides that the seller is a trustee
holding the property in trust for the buyer who is then
the beneficial owner. Thus, the buyer becomes
responsible and obligated at common law to accept the
property despite any damage that has occurred before
closing.
The provision in para. 14 transfers the risk of loss to the
seller. If the seller insures the property, then the seller is
a trustee of the policy and any proceeds from it, for both
the seller and the buyer. If the property incurs
substantial damage before closing, the buyer may either
terminate the transaction or accept any insurance
proceeds and close the transaction.
20. Compliance with the Planning Act —
para. 15
An agreement made in contravention of the Planning
Act does not create or convey any interest in land unless
it is entered into subject to compliance with the
Planning Act (s. 50(21)). Paragraph 15 accommodates
that requirement. This paragraph also provides that, if
necessary, the seller will diligently proceed to obtain any
consent under the Planning Act.
21. Preparation of documents — para. 16
The Transfer/Deed is prepared by the seller’s lawyer at
the seller’s expense and registered by the buyer’s lawyer.
A VTB Charge/Mortgage (see “Vendor take-back
mortgage,” above), if any, is prepared by the buyer’s
lawyer at the buyer’s expense and registered by the
seller’s lawyer. Each party pays the registration fees for
the documents it is responsible for registering.
Finally, this paragraph entitles the buyer to require that
the statements in the Transfer/Deed contemplated by
614
REAL ESTATE
s. 50(22) of the Planning Act be completed by the seller
and the seller’s lawyer. Where the Transfer/Deed
contains the completed statements of the seller, seller’s
lawyer, and buyer’s lawyer, then any previous
contravention of the Planning Act does not prevent the
conveyance of any interest in the property.
22. Residency of the seller — para. 17
Section 116 of the Income Tax Act (ITA) imposes upon a
non-resident seller potential income tax liability for
profits earned from selling real (and other) property and
imposes the same liability on the buyer if a non-resident
seller fails to pay the tax. “Non-resident” is a defined
term in the ITA; “resident” is not defined.
Because the buyer may become liable for payment of the
tax if it is not remitted by a non-resident seller, the
buyer’s lawyer must protect the buyer against this
possibility. There are two ways to do this.
22.1 Seller is not a non-resident
The buyer is obligated by s. 116(5) of the ITA to make
reasonable inquiry as to the residency of the seller. The
standard for such inquiry is that “after reasonable
inquiry, the buyer had no reason to believe that the non­
resident person was not resident in Canada.”
Subparagraph 17(a) of the OREA form contains the
seller’s warranty that the seller “is not and on completion
will not be a non-resident.” If the seller is in fact not a
non-resident, then a statutory declaration confirming
this fact must be signed by the seller and delivered to the
buyer at closing. This should be sufficient to satisfy the
buyer’s obligation under the ITA, unless circumstances
of notice give rise to higher due diligence obligations to
satisfy the “reasonable inquiry” requirement. For
example, if a seller signs all documents outside of
Canada and also provides an address for service outside
of Canada, the buyer’s lawyer may be required to make
additional inquiries as to the reason for such
circumstances to satisfy the “reasonable inquiry”
standard (see Kau v. The Queen).
A statutory declaration that the seller is not a non­
resident cannot be relied upon if the buyer or buyer’s
lawyer has actual notice that the seller is a non-resident.
If the seller is a non-resident, then the seller cannot give
the warranty, and subparagraph 17(b) of the OREA form
applies.
22.2 Seller is a non-resident
If the seller is a non-resident, then to protect the buyer
from liability, the seller must deliver to the buyer at
closing a “certificate of compliance” (Canada Revenue
Agency (CRA), Form T2062), also often referred to as a
LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
AGREEMENT OF PURCHASE AND SALE
“s. 116 certificate” or a “clearance certificate,” certifying
that all tax has been paid or security given for payment.
To obtain the certificate, the seller must provide the CRA
with information about the sale and other matters. If the
seller receives the certificate from the CRA before
closing, then it can deliver the certificate to the buyer at
closing, and no other steps need be taken.
However, if a large amount of tax is payable, then the
seller may not be able to remit the tax until after it
receives the balance of the sale price at closing. Under
current practice, the CRA sends a letter (a tax statement)
to the seller’s lawyer or accountant stating that upon its
receipt of the unpaid tax, it will issue a certificate of
compliance. This statement, if available, is delivered to
the buyer’s lawyer at closing, and part of the purchase
price is redirected by separate cheque delivered to the
CRA to cover the tax liability. The seller’s lawyer
undertakes to deliver the certificate of compliance to the
buyer upon its receipt.
In practice, the CRA may take several months to process
the matter and provide the certificate or tax statement.
If the seller does not apply to the CRA for the certificate
well ahead of the closing date, then neither a certificate
of compliance nor a tax statement may be available at
closing. In such case, under subparagraph 17(b), the
buyer is entitled to a credit for the amount of the tax.
Since the exact amount is not yet known, the buyer’s
lawyer must at closing withhold in trust from the sale
price the maximum amount of the tax (currently 25% of
the sale price) for which the buyer would be liable if the
seller failed to pay the tax. When a tax statement
becomes available, then the buyer’s lawyer can pay the
tax out of the 25% holdback in its trust account and
release the balance to the seller. This satisfies the buyer’s
obligations under s. 116(5). The buyer will eventually
receive a certificate of compliance from the CRA.
The terms of the withholding should be set out in a
closing agreement by the lawyers that remains in effect
either for a specific number of days (for instance, 120
days) or until the buyer’s lawyer receives the CRA
statement and pays the tax, whichever occurs first.
If the seller fails to provide the certificate or tax
statement within the terms of the closing agreement, the
buyer’s lawyer will, in accordance with the closing
agreement, remit all the money (the full 25% of the
price) to the CRA to satisfy the buyer’s legal obligation.
23. Adjustments — para. 18
Under para. 18, certain prepaid expenses (for example,
realty taxes, local improvement charges, unmetered
utility charges such as prepaid water bills, unmetered
cost of fuel such as prepaid tanks of heating oil) and
LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
CHAPTER 47
prepaid income (such as rents) will be credited to the
appropriate party as a price adjustment at closing.
The seller is responsible for the expense items (such as
realty taxes) up to the day before closing and similarly is
entitled to revenue items (such as rent) until the day
before closing. The buyer assumes responsibility on and
after the day of completion, a fact that is always reflected
in the calculation of the closing adjustments.
24. Property assessment — para. 19
Under the Assessment Act, the Province of Ontario may
reassess properties for municipal tax purposes as often
as annually. Assessments are made on the basis of
market value. Thus, there is always a possibility that the
assessed value (and therefore the property tax bill) for a
property may increase after a transaction has closed.
This paragraph is an agreement by the parties that no
party will have a claim arising from such a chain of
events. The only exception is that if a reassessment
results in a tax increase retroactive to a date before the
closing date, then the seller will be responsible for the
increased taxes up to the day before the closing date.
25. Time limits — para. 20
The date and time for completing all matters set out in
the agreement must be strictly adhered to. If a party to
the agreement defaults in the party’s obligations under
the agreement, the non-defaulting party may be entitled
to damages for breach of contract if able to demonstrate
that the non-defaulting party was ready, willing, and
able to complete the transaction in accordance with the
terms of the agreement at the stipulated date and time.
The date for completing a matter may be altered in one
of two ways. First, the parties to the agreement may
amend the terms by agreement in writing. Second, if
specifically authorized to do so, the lawyers for the
parties by agreement in writing may also change the
closing date. In either case, in addition to the
amendment being in writing, the other terms of the
agreement must be confirmed, including that time
remains of the essence.
26. Tender — para. 21
If for any reason a transaction will not be completed,
then the party not at fault may want to sue for damages
or specific performance. In order to pursue any
remedies, the party to the agreement must be able to
demonstrate he or she was ready, willing, and able to
complete, as required under the terms of the agreement.
To evidence this, delivery and presentation (a “tender”)
to the other party of all the documentation and funds is
required. For the seller, this will also require keys to be
615
CHAPTER 47
produced. This paragraph permits the tender to be made
to a party directly or to that party’s lawyer.
27. Family Law Act — para. 22
Part II of the FLA deals with the concept of the
“matrimonial home,” and is therefore of fundamental
importance in residential real estate transactions.
The term “spouse,” for the purposes of real property, is
defined in s. 1(1) of the FLA as a married spouse.
Matrimonial home is defined in s. 18 of the FLA.
Where ownership of a matrimonial home is registered in
the name of one spouse only, the consent of the untitled
spouse to a sale of the matrimonial home is required.
The untitled spouse signs for the purpose of consent in
the signature area following para. 28.
The provision in para. 22 of the agreement is in the form
of a warranty by the seller that such a consent is not
necessary unless the untitled spouse has signed the
consent in the agreement. Refer also to the section
“Seller of a matrimonial home,” above. If despite this
warranty, the seller has a spouse and the property is
their matrimonial home, the absence of the consent of
the untitled spouse in the agreement could provide a
basis for the untitled spouse to refuse consent to the
registration of the transfer at closing.
28. Urea Formaldehyde Foam Insulation
Warranty (“UFFI”) — para. 23
UFFI is a banned substance used many years ago as a
form of building insulation. This warranty is two-tiered.
The first level is a warranty by the seller that the seller
has not insulated the premises with UFFI during the
time that the seller was the owner of the property. The
second level is a warranty that to the best of the seller’s
knowledge there is no UFFI in the buildings. While it
may not be necessary to specify, the warranty does not
merge (come to an end) at the registration of the
Transfer/Deed but remains in effect after closing.
Note that the agreement does not contain similar clauses
dealing with toxic mould, asbestos, and other hazardous
substances. A lawyer drafting an agreement for a buyer
should consider adding such clauses in appropriate
situations. Note also that the UFFI clause and any other
toxic substance clauses will be exceptions to the “caveat
emptor” principle (see “Inspection clause — para. 13,”
above). (Ironically, UFFI is widely used in Europe to this
day.)
29. The broker’s disclaimer — para. 24
Real estate brokers have in the past been exposed to
liability arising from statements made by them to buyers
616
REAL ESTATE
or sellers. This paragraph attempts to relieve them of
such exposure.
30. Consumer reports — para. 25
Paragraph 25 is notice in accordance with the Consumer
Reporting Act that a consumer report may be obtained
or relied upon in the course of the transaction. This
would occur, for example, where there was a mortgage
taken back by the seller and the seller wanted to review
the creditworthiness of the buyer/mortgagor as a
condition of taking back the mortgage.
31. Agreement in writing — para. 26
If there has been any written addition to the agreement
that is in conflict with the preset portions, the addition
will supersede the preset provisions. The paragraph
further confirms that if in the course of discussions
involving the transaction there were any collateral
agreements, representations, warranties, or conditions
stated that are not in the agreement, they do not
constitute part of the agreement.
Throughout the agreement, the terms buyer and seller
are used to identify the parties to the contract. In order
to ensure that there is no confusion respecting the
Vendors and Purchasers Act or any court decisions, the
form provides that buyer means purchaser and seller
means vendor.
32. Electronic signatures — para. 27
The agreement includes an express provision allowing
both the agreement and closing documents to be signed
electronically. Before July 1, 2015, agreements for the
purchase and sale of real property required the original
hand-written signatures of all parties. This requirement
has now been eliminated by an amendment to s. 11(1) of
the Electronic Commerce Act, 2000.
33. Time and date — para. 28
Times and dates in the body of the agreement, being the
irrevocable date, closing date, and title search date and
time, but presumably not dates appearing in the
signature areas, refer in each case to the time and date
in effect where the property is situated.
34. Successors and assigns — para. 29
This paragraph states that there will be an enforceable
contract even if one or more of the parties should die or
become disabled or bankrupt before closing.
LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
AGREEMENT OF PURCHASE AND SALE
35. Signatures
35.1 General
The first part of this area of the form contains the buyers’
signatures. Signing the written agreement is the first
step in making the offer. In accordance with the Real
Estate and Business Brokers Act, 2002, the buyers must
also date their signatures. It is appropriate to identify the
seal to the parties at the time of signing (see “Irrevocable
date — para. 1,” above, regarding seals). The signatures
must be witnessed.
35.2 The seller’s acceptance
The second part of this area of the agreement is the
seller’s acceptance of the offer following delivery of the
offer by the buyers or their lawyer or agent.
Where the deposit is insufficient to pay the broker’s
commission, the seller irrevocably instructs the seller’s
lawyer to pay any unpaid commission balance from the
sale proceeds before releasing the sale proceeds to the
seller. The lawyer is not a party to the agreement and
therefore appears not to be obliged to honour this
direction if the seller directs otherwise before closing or
there are prior claims to the sale proceeds. The courts
have held, however, that where the seller has executed
under seal, the irrevocable instruction is binding upon
the lawyer, and non-compliance will result in liability. It
is also arguable that the seller’s lawyer holding the sale
proceeds is a trustee for the broker as well as for the
seller. The lawyer must therefore be careful about
refusing to pay the balance of commission simply
because the seller has “revoked” the seller’s irrevocable
direction. If a lawyer receives conflicting demands for
this money, payment into court of the disputed funds
pursuant to R. 43 of the Rules of Civil Procedure or,
perhaps in some cases, s. 36 of the Trustee Act, should
be considered.
36. Spousal consent
If consent by an untitled seller’s spouse is necessary, the
spouse would sign and date the agreement beside the
seal.
37. Confirmation of acceptance
There are instances where conditions to the agreement
are worded such that they expire a certain number of
days after acceptance. In the past, it has been difficult to
determine specifically when the transaction was finally
accepted. This provision is to be completed by the party
who last signs or indicates acknowledgement of the
agreement in its final form.
LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
CHAPTER 47
38. Confirmation of representation
The brokers involved in the transaction confirm their
representation status. It is possible to have the broker
acting for the seller and the co-operating broker acting
for the buyer. In the alternative, all the brokers may be
acting for the seller. Further, it is possible for one broker
to be representing both the seller and the buyer.
39. Acknowledgement
The purpose of this area of the form is to obtain
acknowledgement from the parties that they have
received an originally signed copy of the agreement, as
required under the Real Estate and Business Brokers
Act, 2002. In addition, this section provides the seller’s
and buyer’s address for service of notice as set out in the
notice paragraph. Finally, the lawyers for the parties are
identified with their addresses and telephone and fax
numbers.
40. Commission trust agreement
In this paragraph, the listing broker and the co­
operating broker confirm that all commission moneys
are to be held in trust by the listing broker and the co­
operating broker.
41. COVID-19 pandemic: the agreement
The standard form of agreement has seen little change
in the course of the COVID-19 pandemic, although many
real estate brokerages have adopted a series of
customized clauses that are added to the agreement in
schedules. These clauses typically deal with hypothetical
scenarios of the temporary closures of banks, land
registration services, and the purchaser’s mortgage
lender or the ordered closure of law offices. Other terms
provide contingencies if one or both parties contract
COVID-19 or are subject to a self-isolation requirement.
These terms often provide some formula for extending
the transaction if such a contingency arises. The terms
should be reviewed as to both their intended effect, but
many contain vague language that is of questionable
utility.
Of more direct impact on daily practice is the inclusion
of addition terms in a schedule allowing for the delivery
of keys to the buyer by way of a lockbox to be left on the
premises, rather than by an exchange between the
lawyers’ offices. In such circumstances, the lockbox
code, rather than the keys, are exchanged between the
lawyers.
617
CHAPTER 47 REAL ESTATE

Appendix A
Agreement of Purchase and Sale
OREA Standard Form 100 and the copyright therein are owned by the Ontario Real Estate Association (“OREA”). Except as
otherwise authorized by OREA, permission to use this Form is granted to members of OREA only and all unauthorized use and
reproduction of this Form is prohibited. OREA makes no representations or warranties regarding the Form, including the
completeness or accuracy thereof and/or its fitness for any particular transaction. OREA has no liability to any person under any
theory of liability (including in contract or tort or negligence) for use (or misuse) of the Form in any transaction.

618 LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION

 Agreement of Purchase and Sale
Form 100
for use in the Province of Ontario

This Agreement of Purchase and Sale dated this ....................... day of .................................................................................................... 20............

BUYER: ......................................................................................................................................................................., agrees to purchase from

(Full legal names of all Buyers)

SELLER: ......................................................................................................................................................................................, the following

(Full legal names of all Sellers)

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REAL PROPERTY:

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Address ...........................................................................................................................................................................................................

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fronting on the ................................................................................... side of ....................................................................................................

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in the ...............................................................................................................................................................................................................

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and having a frontage of ............................................................... more or less by a depth of ............................................................ more or less

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and legally described as ....................................................................................................................................................................................

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................................................................................................................................................................................................. (the “property”)
(Legal description of land including easements not described elsewhere)
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PURCHASE PRICE: Dollars (CDN$) ..........................................

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............................................................................................................................................................................................................. Dollars
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DEPOSIT: Buyer submits ...................................................................................................................................................................................

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(Herewith/Upon Acceptance/as otherwise described in this Agreement)

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..................................................................................................................................................... Dollars (CDN$) ..........................................

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by negotiable cheque payable to ............................................................................................................................ “Deposit Holder” to be held

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in trust pending completion or other termination of this Agreement and to be credited toward the Purchase Price on completion. For the purposes of this
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Agreement, “Upon Acceptance” shall mean that the Buyer is required to deliver the deposit to the Deposit Holder within 24 hours of the acceptance of
this Agreement. The parties to this Agreement hereby acknowledge that, unless otherwise provided for in this Agreement, the Deposit Holder shall place
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the deposit in trust in the Deposit Holder’s non-interest bearing Real Estate Trust Account and no interest shall be earned, received or paid on the deposit.
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Buyer agrees to pay the balance as more particularly set out in Schedule A attached.
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SCHEDULE(S) A..............................................................................................................attached hereto form(s) part of this Agreement.

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1. IRREVOCABILITY: This offer shall be irrevocable by ..................................................................... until ............................... on the ..............
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(Seller/Buyer) (a.m./p.m.)
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day of ................................................................... 20 ........., after which time, if not accepted, this offer shall be null and void and the deposit
shall be returned to the Buyer in full without interest.

2. COMPLETION DATE: This Agreement shall be completed by no later than 6:00 p.m. on the .............. day of ...................................................

20 ............... Upon completion, vacant possession of the property shall be given to the Buyer unless otherwise provided for in this Agreement.

INITIALS OF BUYER(S): INITIALS OF SELLER(S):

The trademarks REALTOR®, REALTORS®, MLS®, Multiple Listing Services® and associated logos are owned or controlled by
The Canadian Real Estate Association (CREA) and identify the real estate professionals who are members of CREA and the
quality of services they provide. Used under license.
© 2023, Ontario Real Estate Association (“OREA”). All rights reserved. This form was developed by OREA for the use and reproduction
by its members and licensees only. Any other use or reproduction is prohibited except with prior written consent of OREA. Do not alter
when printing or reproducing the standard pre-set portion. OREA bears no liability for your use of this form. Form 100 Revised 2023 Page 1 of 6
3. NOTICES: The Seller hereby appoints the Listing Brokerage as agent for the Seller for the purpose of giving and receiving notices pursuant to this
Agreement. Where a Brokerage (Buyer’s Brokerage) has entered into a representation agreement with the Buyer, the Buyer hereby appoints the
Buyer’s Brokerage as agent for the purpose of giving and receiving notices pursuant to this Agreement. Where a Brokerage represents both
the Seller and the Buyer (multiple representation), the Brokerage shall not be appointed or authorized to be agent for
either the Buyer or the Seller for the purpose of giving and receiving notices. Any notice relating hereto or provided for herein shall
be in writing. In addition to any provision contained herein and in any Schedule hereto, this offer, any counter-offer, notice of acceptance thereof
or any notice to be given or received pursuant to this Agreement or any Schedule hereto (any of them, “Document”) shall be deemed given and
received when delivered personally or hand delivered to the Address for Service provided in the Acknowledgement below, or where a facsimile
number or email address is provided herein, when transmitted electronically to that facsimile number or email address, respectively, in which case,
the signature(s) of the party (parties) shall be deemed to be original.

FAX No.: ...................................................................................... FAX No.: ..........................................................................................

(For delivery of Documents to Seller) (For delivery of Documents to Buyer)

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Email Address: .............................................................................. Email Address: ..................................................................................
(For delivery of Documents to Seller) (For delivery of Documents to Buyer)

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4. CHATTELS INCLUDED:.............................................................................................................................................................................

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Unless otherwise stated in this Agreement or any Schedule hereto, Seller agrees to convey all fixtures and chattels included in the Purchase Price free
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from all liens, encumbrances or claims affecting the said fixtures and chattels.
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5. FIXTURES EXCLUDED:.............................................................................................................................................................................
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6. RENTAL ITEMS (Including Lease, Lease to Own): The following equipment is rented and not included in the Purchase Price. The Buyer agrees
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to assume the rental contract(s), if assumable:

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The Buyer agrees to co-operate and execute such documentation as may be required to facilitate such assumption.

7. HST: If the sale of the property (Real Property as described above) is subject to Harmonized Sales Tax (HST), then such tax shall be

............................................................... the Purchase Price. If the sale of the property is not subject to HST, Seller agrees to certify on or before
(included in/in addition to)
closing, that the sale of the property is not subject to HST. Any HST on chattels, if applicable, is not included in the Purchase Price.

INITIALS OF BUYER(S): INITIALS OF SELLER(S):

The trademarks REALTOR®, REALTORS®, MLS®, Multiple Listing Services® and associated logos are owned or controlled by
The Canadian Real Estate Association (CREA) and identify the real estate professionals who are members of CREA and the
quality of services they provide. Used under license.
© 2023, Ontario Real Estate Association (“OREA”). All rights reserved. This form was developed by OREA for the use and reproduction
by its members and licensees only. Any other use or reproduction is prohibited except with prior written consent of OREA. Do not alter
when printing or reproducing the standard pre-set portion. OREA bears no liability for your use of this form. Form 100 Revised 2023 Page 2 of 6
8. TITLE SEARCH: Buyer shall be allowed until 6:00 p.m. on the .............. day of ......................................................., 20..........., (Requisition Date)
to examine the title to the property at Buyer’s own expense and until the earlier of: (i) thirty days from the later of the Requisition Date or the date on which
the conditions in this Agreement are fulfilled or otherwise waived or; (ii) five days prior to completion, to satisfy Buyer that there are no outstanding

work orders or deficiency notices affecting the property, and that its present use (....................................................................................) may
be lawfully continued and that the principal building may be insured against risk of fire. Seller hereby consents to the municipality or other governmental
agencies releasing to Buyer details of all outstanding work orders and deficiency notices affecting the property, and Seller agrees to execute and
deliver such further authorizations in this regard as Buyer may reasonably require.

9. FUTURE USE: Seller and Buyer agree that there is no representation or warranty of any kind that the future intended use of the property by Buyer is
or will be lawful except as may be specifically provided for in this Agreement.

10. TITLE: Provided that the 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 (a) any registered restrictions or covenants that run with the land providing that such

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are complied with; (b) any registered municipal agreements and registered agreements with publicly regulated utilities providing such have been

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complied with, or security has been posted to ensure compliance and completion, as evidenced by a letter from the relevant municipality or regulated

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utility; (c) any minor easements for the supply of domestic utility or telecommunication services to the property or adjacent properties; and (d) any
easements for drainage, storm or sanitary sewers, public utility lines, telecommunication lines, cable television lines or other services which do not

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materially affect the use of the property. If within the specified times referred to in paragraph 8 any valid objection to title or to any outstanding work

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order or deficiency notice, or to the fact the said present use may not lawfully be continued, or that the principal building may not be insured against
risk of fire is made in writing to Seller and which Seller is unable or unwilling to remove, remedy or satisfy or obtain insurance save and except against

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risk of fire (Title Insurance) in favour of the Buyer and any mortgagee, (with all related costs at the expense of the Seller), and which Buyer will not
waive, this Agreement notwithstanding any intermediate acts or negotiations in respect of such objections, shall be at an end and all monies paid

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shall be returned without interest or deduction and Seller, Listing Brokerage and Co-operating Brokerage shall not be liable for any costs or damages.

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Save as to any valid objection so made by such day and except for any objection going to the root of the title, Buyer shall be conclusively deemed to
have accepted Seller’s title to the property.

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11. CLOSING ARRANGEMENTS: Where each of the Seller and Buyer retain a lawyer to complete the Agreement of Purchase and Sale of the property,
and where the transaction will be completed by electronic registration pursuant to Part III of the Land Registration Reform Act, R.S.O. 1990, Chapter
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L4 and the Electronic Registration Act, S.O. 1991, Chapter 44, and any amendments thereto, the Seller and Buyer acknowledge and agree that
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the exchange of closing funds, non-registrable documents and other items (the “Requisite Deliveries”) and the release thereof to the Seller and Buyer
will (a) not occur at the same time as the registration of the transfer/deed (and any other documents intended to be registered in connection with the
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completion of this transaction) and (b) be subject to conditions whereby the lawyer(s) receiving any of the Requisite Deliveries will be required to hold
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same in trust and not release same except in accordance with the terms of a document registration agreement between the said lawyers. The Seller
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and Buyer irrevocably instruct the said lawyers to be bound by the document registration agreement which is recommended from time to time by the
Law Society of Ontario. Unless otherwise agreed to by the lawyers, such exchange of Requisite Deliveries shall occur by the delivery of the Requisite
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Deliveries of each party to the office of the lawyer for the other party or such other location agreeable to both lawyers.
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12. DOCUMENTS AND DISCHARGE: Buyer shall not call for the production of any title deed, abstract, survey or other evidence of title to the property
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except such as are in the possession or control of Seller. If requested by Buyer, Seller will deliver any sketch or survey of the property within Seller’s
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control to Buyer as soon as possible and prior to the Requisition Date. If a discharge of any Charge/Mortgage held by a corporation incorporated
pursuant to the Trust And Loan Companies Act (Canada), Chartered Bank, Trust Company, Credit Union, Caisse Populaire or Insurance Company
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and which is not to be assumed by Buyer on completion, is not available in registrable form on completion, Buyer agrees to accept Seller’s lawyer’s
personal undertaking to obtain, out of the closing funds, a discharge in registrable form and to register same, or cause same to be registered, on
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title within a reasonable period of time after completion, provided that on or before completion Seller shall provide to Buyer a mortgage statement
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prepared by the mortgagee setting out the balance required to obtain the discharge, and, where a real-time electronic cleared funds transfer system is
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not being used, a direction executed by Seller directing payment to the mortgagee of the amount required to obtain the discharge out of the balance
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due on completion.
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13. INSPECTION: Buyer acknowledges having had the opportunity to inspect the property and understands that upon acceptance of this offer there shall
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be a binding agreement of purchase and sale between Buyer and Seller. The Buyer acknowledges having the opportunity to include a
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requirement for a property inspection report in this Agreement and agrees that except as may be specifically provided for in
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this Agreement, the Buyer will not be obtaining a property inspection or property inspection report regarding the property.

14. INSURANCE: All buildings on the property and all other things being purchased shall be and remain until completion at the risk of Seller. Pending
completion, Seller shall hold all insurance policies, if any, and the proceeds thereof in trust for the parties as their interests may appear and in the
event of substantial damage, Buyer may either terminate this Agreement and have all monies paid returned without interest or deduction or else
take the proceeds of any insurance and complete the purchase. No insurance shall be transferred on completion. If Seller is taking back a Charge/
Mortgage, or Buyer is assuming a Charge/Mortgage, Buyer shall supply Seller with reasonable evidence of adequate insurance to protect Seller’s or
other mortgagee’s interest on completion.

INITIALS OF BUYER(S): INITIALS OF SELLER(S):

The trademarks REALTOR®, REALTORS®, MLS®, Multiple Listing Services® and associated logos are owned or controlled by
The Canadian Real Estate Association (CREA) and identify the real estate professionals who are members of CREA and the
quality of services they provide. Used under license.
© 2023, Ontario Real Estate Association (“OREA”). All rights reserved. This form was developed by OREA for the use and reproduction
by its members and licensees only. Any other use or reproduction is prohibited except with prior written consent of OREA. Do not alter
when printing or reproducing the standard pre-set portion. OREA bears no liability for your use of this form. Form 100 Revised 2023 Page 3 of 6
15. PLANNING ACT: This Agreement shall be effective to create an interest in the property only if Seller complies with the subdivision control
provisions of the Planning Act by completion and Seller covenants to proceed diligently at Seller’s expense to obtain any necessary consent by
completion.

16. DOCUMENT PREPARATION: The Transfer/Deed shall, save for the Land Transfer Tax Affidavit, be prepared in registrable form at the expense of
Seller, and any Charge/Mortgage to be given back by the Buyer to Seller at the expense of the Buyer. If requested by Buyer, Seller covenants that
the Transfer/Deed to be delivered on completion shall contain the statements contemplated by Section 50(22) of the Planning Act, R.S.O.1990.

17. RESIDENCY: (a) Subject to (b) below, the Seller represents and warrants that the Seller is not and on completion will not be a non-resident under
the non-residency provisions of the Income Tax Act which representation and warranty shall survive and not merge upon the completion of this
transaction and the Seller shall deliver to the Buyer a statutory declaration that Seller is not then a non-resident of Canada; (b) provided that if the
Seller is a non-resident under the non-residency provisions of the Income Tax Act, the Buyer shall be credited towards the Purchase Price with the
amount, if any, necessary for Buyer to pay to the Minister of National Revenue to satisfy Buyer’s liability in respect of tax payable by Seller under
the non-residency provisions of the Income Tax Act by reason of this sale. Buyer shall not claim such credit if Seller delivers on completion the

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prescribed certificate.

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18. ADJUSTMENTS: Any rents, mortgage interest, realty taxes including local improvement rates and unmetered public or private utility charges and

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unmetered cost of fuel, as applicable, shall be apportioned and allowed to the day of completion, the day of completion itself to be apportioned

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to Buyer.

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19. PROPERTY ASSESSMENT: The Buyer and Seller hereby acknowledge that the Province of Ontario has implemented current value assessment

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and properties may be re-assessed on an annual basis. The Buyer and Seller agree that no claim will be made against the Buyer or Seller, or any
Brokerage, Broker or Salesperson, for any changes in property tax as a result of a re-assessment of the property, save and except any property

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taxes that accrued prior to the completion of this transaction.

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20. TIME LIMITS: Time shall in all respects be of the essence hereof provided that the time for doing or completing of any matter provided for herein

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may be extended or abridged by an agreement in writing signed by Seller and Buyer or by their respective lawyers who may be specifically
authorized in that regard.

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21. TENDER: Any tender of documents or money hereunder may be made upon Seller or Buyer or their respective lawyers on the day set for
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completion. Money shall be tendered with funds drawn on a lawyer’s trust account in the form of a bank draft, certified cheque or wire transfer
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using the Lynx high value payment system as set out and prescribed by the Canadian Payments Act (R.S.C., 1985, c. C-21), as amended from
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time to time.
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22. FAMILY LAW ACT: Seller warrants that spousal consent is not necessary to this transaction under the provisions of the Family Law Act,
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R.S.O.1990 unless the spouse of the Seller has executed the consent hereinafter provided.
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23. UFFI: Seller represents and warrants to Buyer that during the time Seller has owned the property, Seller has not caused any building on the
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property to be insulated with insulation containing urea formaldehyde, and that to the best of Seller’s knowledge no building on the property
contains or has ever contained insulation that contains urea formaldehyde. This warranty shall survive and not merge on the completion of this
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transaction, and if the building is part of a multiple unit building, this warranty shall only apply to that part of the building which is the subject of
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this transaction.
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24. LEGAL, ACCOUNTING AND ENVIRONMENTAL ADVICE: The parties acknowledge that any information provided by the brokerage is not
legal, tax or environmental advice.
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25. CONSUMER REPORTS: The Buyer is hereby notified that a consumer report containing credit and/
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or personal information may be referred to in connection with this transaction.

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26. AGREEMENT IN WRITING: If there is conflict or discrepancy between any provision added to this Agreement (including any Schedule attached
hereto) and any provision in the standard pre-set portion hereof, the added provision shall supersede the standard pre-set provision to the extent
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of such conflict or discrepancy. This Agreement including any Schedule attached hereto, shall constitute the entire Agreement between Buyer and
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Seller. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein. For the
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purposes of this Agreement, Seller means vendor and Buyer means purchaser. This Agreement shall be read with all changes of gender or number
required by the context.

27. ELECTRONIC SIGNATURES: The parties hereto consent and agree to the use of electronic signatures pursuant to the Electronic Commerce Act,
2000, S.O. 2000, c17 as amended from time to time with respect to this Agreement and any other documents respecting this transaction.

28. TIME AND DATE: Any reference to a time and date in this Agreement shall mean the time and date where the property is located.

INITIALS OF BUYER(S): INITIALS OF SELLER(S):

The trademarks REALTOR®, REALTORS®, MLS®, Multiple Listing Services® and associated logos are owned or controlled by
The Canadian Real Estate Association (CREA) and identify the real estate professionals who are members of CREA and the
quality of services they provide. Used under license.
© 2023, Ontario Real Estate Association (“OREA”). All rights reserved. This form was developed by OREA for the use and reproduction
by its members and licensees only. Any other use or reproduction is prohibited except with prior written consent of OREA. Do not alter
when printing or reproducing the standard pre-set portion. OREA bears no liability for your use of this form. Form 100 Revised 2023 Page 4 of 6
29. SUCCESSORS AND ASSIGNS: The heirs, executors, administrators, successors and assigns of the undersigned are bound by the terms herein.

SIGNED, SEALED AND DELIVERED in the presence of: IN WITNESS whereof I have hereunto set my hand and seal:

............................................................................... ........................................................................ ........................................

(Witness) (Buyer) (Seal) (Date)

............................................................................... ........................................................................ ........................................

(Witness) (Buyer) (Seal) (Date)

I, the Undersigned Seller, agree to the above offer. I hereby irrevocably instruct my lawyer to pay directly to the brokerage(s) with whom I have agreed
to pay commission, the unpaid balance of the commission together with applicable Harmonized Sales Tax (and any other taxes as may hereafter be
applicable), from the proceeds of the sale prior to any payment to the undersigned on completion, as advised by the brokerage(s) to my lawyer.

SIGNED, SEALED AND DELIVERED in the presence of: IN WITNESS whereof I have hereunto set my hand and seal:

d.
............................................................................... ........................................................................ ........................................
(Witness) (Seller) (Seal) (Date)

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............................................................................... ........................................................................ ........................................

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(Witness) (Seller) (Seal) (Date)

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SPOUSAL CONSENT: The undersigned spouse of the Seller hereby consents to the disposition evidenced herein pursuant to the provisions of the Family

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Law Act, R.S.O.1990, and hereby agrees to execute all necessary or incidental documents to give full force and effect to the sale evidenced herein.

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............................................................................... ........................................................................ ........................................
(Witness) (Spouse) (Seal) (Date)

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CONFIRMATION OF ACCEPTANCE: Notwithstanding anything contained herein to the contrary, I confirm this Agreement with all changes both typed

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and written was finally accepted by all parties at .......................................... this ................. day of....................................................., 20...........

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(a.m./p.m.)

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..................................................................................................
(Signature of Seller or Buyer)
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INFORMATION ON BROKERAGE(S)
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Listing Brokerage ....................................................................................................................... ...........................................................
(Tel.No.)
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...............................................................................................................................................................................................................
(Salesperson/Broker/Broker of Record Name)
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Co-op/Buyer Brokerage ............................................................................................................. ...........................................................

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(Tel.No.)
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...............................................................................................................................................................................................................
(Salesperson/Broker/Broker of Record Name)
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ACKNOWLEDGEMENT
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I acknowledge receipt of my signed copy of this accepted Agreement of I acknowledge receipt of my signed copy of this accepted Agreement of
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Purchase and Sale and I authorize the Brokerage to forward a copy to my lawyer. Purchase and Sale and I authorize the Brokerage to forward a copy to my lawyer.
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.......................................................................... ............................ ........................................................................ ...............................

(Seller) (Date) (Buyer) (Date)
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.......................................................................... ............................ ........................................................................ ...............................

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(Seller) (Date) (Buyer) (Date)

Address for Service ............................................................................ Address for Service ............................................................................
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........................................................ ............................................. ........................................................ .............................................

(Tel. No.) (Tel. No.)
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Seller’s Lawyer ................................................................................... Buyer’s Lawyer ...................................................................................

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Address ............................................................................................ Address .............................................................................................

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Email ................................................................................................ Email ................................................................................................

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....................................................... .............................................. ....................................................... ........... ...................................

(Tel. No.) (Fax. No.) (Tel. No.) (Fax. No.)

FOR OFFICE USE ONLY COMMISSION TRUST AGREEMENT

To: Co-operating Brokerage shown on the foregoing Agreement of Purchase and Sale:
In consideration for the Co-operating Brokerage procuring the foregoing Agreement of Purchase and Sale, I hereby declare that all moneys received or receivable by me in
connection with the Transaction as contemplated in the MLS® Rules and Regulations of my Real Estate Board shall be receivable and held in trust. This agreement shall constitute
a Commission Trust Agreement as defined in the MLS® Rules and shall be subject to and governed by the MLS® Rules pertaining to Commission Trust.
DATED as of the date and time of the acceptance of the foregoing Agreement of Purchase and Sale. Acknowledged by:

....................................................................................................................... .............................................................................................
(Authorized to bind the Listing Brokerage) (Authorized to bind the Co-operating Brokerage)
The trademarks REALTOR®, REALTORS®, MLS®, Multiple Listing Services® and associated logos are owned or controlled by
The Canadian Real Estate Association (CREA) and identify the real estate professionals who are members of CREA and the
quality of services they provide. Used under license.
© 2023, Ontario Real Estate Association (“OREA”). All rights reserved. This form was developed by OREA for the use and reproduction
by its members and licensees only. Any other use or reproduction is prohibited except with prior written consent of OREA. Do not alter
when printing or reproducing the standard pre-set portion. OREA bears no liability for your use of this form. Form 100 Revised 2023 Page 5 of 6
 Schedule A
Agreement of Purchase and Sale
Form 100
for use in the Province of Ontario

This Schedule is attached to and forms part of the Agreement of Purchase and Sale between:

BUYER: ..................................................................................................................................................................................................., and

SELLER: ..........................................................................................................................................................................................................

for the purchase and sale of ...............................................................................................................................................................................

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........................................................................ dated the .............. day of ................................................................................., 20................

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Buyer agrees to pay the balance as follows:

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This form must be initialled by all parties to the Agreement of Purchase and Sale.

INITIALS OF BUYER(S): INITIALS OF SELLER(S):

The trademarks REALTOR®, REALTORS®, MLS®, Multiple Listing Services® and associated logos are owned or controlled by
The Canadian Real Estate Association (CREA) and identify the real estate professionals who are members of CREA and the
quality of services they provide. Used under license.
© 2023, Ontario Real Estate Association (“OREA”). All rights reserved. This form was developed by OREA for the use and reproduction
by its members and licensees only. Any other use or reproduction is prohibited except with prior written consent of OREA. Do not alter
when printing or reproducing the standard pre-set portion. OREA bears no liability for your use of this form. Form 100 Revised 2023 Page 6 of 6
AGREEMENT OF PURCHASE AND SALE CHAPTER 47

Appendix B
Agreement of Purchase and Sale
Sample Clauses for Residential Resale Transactions

Note: Clauses 1 to 8 are examples of conditions precedent that may be included in a schedule to an
agreement. Clauses 9 and 10 are not conditions precedent. Clauses must always be reviewed with the
client and edited to comply with the client’s requirements.
1. Conditional upon arranging a new Charge/Mortgage
This Offer is conditional upon the Buyer arranging, at the Buyer’s own expense, a new Charge/Mortgage for not less
thanA _________________________ ($___________), bearing interest at a rate of not more than ___ % per
annum, calculated semi-annually not in advance, repayable in blended monthly payments of about
________________ ($___________) including principal and interest, and to run for a term of not less than
_____ years from the date of completion of this transaction. Unless the Buyer gives notice in writing delivered to the
Seller not later than ____ p.m. on the ____ day of ____________, _____ , B that this condition has been fulfilled,
this Offer shall be null and void, and the deposit shall be returned to the Buyer in full without deduction. This condition
is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller
within the time period stated herein.
NOTE A: If a seller take-back charge/mortgage (VTB) is also being arranged, delete the phrase “not less than”
preceding the amount being financed and specify the amount (to prevent the property being over-financed to the seller’s
detriment.)
NOTE B: The time period needed for fulfilling this condition is typically about five business days.
2. Conditional upon assumption of existing Charge/Mortgage (chargee/mortgagee approval)
The Buyer agrees to assume the existing ________________ Charge/Mortgage held by
_______________________ for approximately _________________________ ($_________), bearing
interest at the rate of ____% per annum, calculated semi-annually not in advance, repayable in blended monthly
payments of ___________________ ($_______ ) including both principal and interest, and due on the ____ day
of ______________, _____. This Offer is conditional upon the Buyer obtaining approval of the Chargee/Mortgagee
to assume the existing Charge/Mortgage. Unless the Buyer gives notice in writing delivered to the Seller not later than
____ p.m. on the ______ day of _______________, _____, C that this condition has been fulfilled, this Offer shall
be null and void, and the deposit shall be returned to the Buyer in full without deduction. The Buyer hereby agrees to
proceed immediately to make application and provide such material as may be required by the Chargee/Mortgagee for
approval of the Buyer as the Chargor/Mortgagor.
NOTE C: The time period needed for fulfilling this condition is typically about five business days.
3. Conditional upon sale of the buyer’s property
This offer is conditional upon the sale of the Buyer’s property known as_________________________
____________________. Unless the Buyer gives notice in writing delivered to the Seller not later than ____ p.m.
on the _____day of ________________, _____, that this condition is fulfilled, this Offer shall be null and void, and
the deposit shall be returned to the Buyer in full without deduction. This condition is included for the benefit of the
Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller within the time period stated
herein.
4. Escape clause (removal of all conditions)
Provided further that the Seller may continue to offer the property for sale and, in the event the Seller receives another
Offer satisfactory to the Seller, the Seller may so notify the Buyer in writing by delivery to the Buyer or the Buyer’s
address hereinafter indicated. The Buyer shall have ______ hours from the giving of such notice to waive all conditions

LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION 625

CHAPTER 47 REAL ESTATE

by notice in writing delivered to the Seller, failing which this Offer shall be null and void, and the deposit shall be
returned to the Buyer in full without deduction.D
NOTE D: The escape clause will almost always be required by the seller when Condition 3 is included in an agreement.
5. Conditional upon inspection — seller allowed to remedy
This Offer is conditional upon the inspection of the subject property by a home inspector at the Buyer’s own expense
and the obtaining of a report satisfactory to the Buyer [in the Buyer’s sole discretion] E [or a report revealing deficiencies
in the property which the Seller is willing and able to remedy].F Unless the Buyer gives notice in writing delivered to the
Seller not later than _____ p.m. on the _____ day of _____________, ______, G that this condition has been
fulfilled, this Offer shall be null and void, and the deposit shall be returned to the Buyer in full without deduction. The
Seller agrees to co-operate in providing access to the property for the purposes of this inspection. This condition is
included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller
within the time period stated herein.
NOTE E: Most commonly, the words “in the Buyer’s sole discretion” appear here.
NOTE F: This wording may be used in place of “in the Buyer’s sole discretion.” However, this wording may create new
and difficult issues between buyer and seller: What constitutes a “deficiency”? What contractor must the seller use for the
repairs? What work must be done? What quality of materials must be used?
NOTE G: The time period needed for fulfilling this condition is typically about five business days. Condition 5 and
Condition 1 will usually run concurrently.
6. Conditional upon review of condominium documents
This Offer is conditional upon the Buyer and its solicitor reviewing the following Condominium Corporation
documentation: a Status Certificate, the last annual financial statements (audited if available), the current budget, the
Declaration, by-laws, rules, any management agreement, and all current insurance certificates; and upon their finding
all of the foregoing satisfactory in their sole and unfettered discretion.H Unless the Buyer gives notice in writing
delivered to the Seller not later than _____ p.m. on the _____ day of _____________, ______, I that this condition
has been fulfilled, this Offer shall be null and void, and the deposit shall be returned to the Buyer in full without
deduction. The Buyer or the Buyer’s solicitor agrees to request the foregoing documentation within _____ days after
acceptance of this Agreement. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s
sole option by notice in writing to the Seller within the time period stated herein.
NOTE H: Despite the words “in their sole and unfettered discretion,” the discretion cannot be exercised arbitrarily
without sufficient reason.
NOTE I: The time period needed for fulfilling this condition is typically about 12 business days. The Condominium Act,
1998 allows the condominium corporation up to 10 regular days (subject to s. 89(1) of the Legislation Act, 2006) to
provide the documents, and the buyer’s solicitor will need time after receipt to review it with the buyer.
7. Conditional upon obtaining insurance
This offer is conditional on the Buyer obtaining insurance for the property satisfactory to the Buyer in the Buyer’s sole
and absolute discretion. Unless the Buyer gives notice in writing delivered to the Seller not later than _____ p.m. on the
_____day of _____________, ______,J that this condition is fulfilled, this Offer shall be null and void, and the
deposit shall be returned to the Buyer in full without deduction. The Seller agrees to co-operate in providing access to
the property, if necessary, for any inspection of the property required for the fulfillment of this condition. This condition
is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller
within the time period stated herein.
NOTE J: Due to the nature of this clause, a short time frame should be chosen for this condition. In practice it is not
usual to include this condition unless the buyer has reason to believe that it will be difficult to obtain insurance for the
property.

626 LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION

AGREEMENT OF PURCHASE AND SALE CHAPTER 47

8. Condition: oil tank — aboveground or underground

This Agreement is conditional upon the Buyer obtaining a report from a fuel oil distributor registered under the
Technical Standards and Safety Act, 2000, S.O. 2000, c. 16, as amended, and any Regulations thereto as amended from
time to time stating the tank system in, on, or about the property is in a safe operating condition and complies with the
requirements of the Technical Standards and Safety Act, 2000, S.O. 2000, c. 16, as amended, and any Regulations
thereto as amended from time to time. The Seller agrees to allow access to the property by the fuel oil distributor for the
purpose of obtaining a report. Unless the Buyer gives notice in writing delivered to the Seller not later than ____ p.m.
on the ____ day of ________, 20___, that this condition has been fulfilled, this Offer shall be null and void, and the
deposit shall be returned to the buyer in full without deduction. This condition is included for the benefit of the Buyer
and may be waived at the Buyer’s sole option by notice in writing to the Seller within the time period stated herein.
9. Seller agrees to provide existing survey with declaration
The Seller agrees to provide, at the Seller’s own expense, not later than _____ p.m. on the _____day of
_____________, ______,K an existingL dated and signed survey of the said property showing the current location of
all the structures, buildings, fences, improvements, easements, rights-of-way, and encroachments affecting the said
property. The Seller will further deliver, on completion, a statutory declaration confirming that there have been no
additions to the structures, buildings, fences, and improvements on the property since the date of this survey.M
NOTE K: This is not a condition, but a term being added by the buyer to the agreement. The date specified should be well
before the requisition date.
NOTE L: The language of this buyer’s clause is mandatory, assumes there is an existing survey in the seller’s possession,
and describes what is in effect an up-to-date survey. Where boundary markers such as fences have changed, or changes
to the buildings have taken place, the survey will not show the “current location” of the fences or buildings and thus will
not comply with the requirement. For the seller, the best practice is to (a) delete this clause, (b) attach a copy of whatever
existing survey the seller may have as a schedule to the agreement, and (c) refer to the schedule in the description on page
1 of the agreement, so that there can be no dispute about what the buyer will receive.
NOTE M: The last sentence of the clause requires the seller to have the skills and knowledge of an Ontario land surveyor
and to have applied those skills. Most sellers are in no position to make such a statutory declaration and should always
remove sentences like this from agreements.
10. Seller to provide a vendor take back (“VTB”) mortgage loan
The Buyer agrees to give to the Seller at closing and the Seller agrees to take back in partial payment of the purchase price
a [first/second] mortgage in the amount of $____________, bearing interest at ________ percent (______%) per
annum calculated half yearly not in advance, repayable in blended monthly payments of $______ on account of principal
and interest, and having a term of _____ years from the closing date. Such mortgage shall be non-assumable if the buyer
re-sells the property and shall be open for prepayment of principal at any time or times without notice or bonus.
If the above VTB mortgage is to be subject to a first mortgage, then add:
The vendor take-back mortgage shall be subject to a first mortgage having a principal amount not exceeding
$_____________, bearing interest at a rate not exceeding ________ percent (_____%) per annum and maturing at
least _________ years after the closing date. The seller shall not be obliged to advance the vendor take-back loan if the
first mortgage does not comply with these requirements.

LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION 627

CHAPTER 47 REAL ESTATE

Appendix C
Considerations when drafting a schedule
for the purchase of a newly built freehold home

Many buyers of new freehold homes will seek legal advice about the Ontario Real Estate Association (OREA) form of
agreement of purchase and sale they are proposing to sign with a builder. Typically these are small builders who build or
extensively renovate one or two homes at a time for resale purposes. The OREA form is typically used for the purchase of
new freehold homes when such a seller/builder does not have its own lawyer-drafted form. Some of these homes will carry
TARION warranties under the Ontario New Home Warranties Plan Act (ONHWPA), while others will not. Meeting the
needs of clients buying or selling such homes generally requires that a lengthy schedule be added to the OREA agreement.
Many of the issues that a buyer or seller of such a home will want to address are in the non-exhaustive list below. This list
can also form part of a checklist of items for use when reviewing an OREA agreement with a client proposing to buy a new
freehold home. Some of these considerations, together with those that arise with new subdivisions, are discussed in
greater detail in Chapter 62 (Understanding a new home agreement of purchase and sale) of these Study Materials.
1. Providing for the statutory safeguards under the ONHWPA, with respect to the following:
(a) the registration of the seller/builder, as well as the enrolment of the dwelling unit itself, with the Ontario New
Home Warranties Plan (ONHWP);
(b) the status of the issuance of the building permit authorizing construction of the dwelling;
(c) protection of deposits up to $100,000 for a new freehold home (including procuring an ONHWP deposit
receipt);
(d) protection against incomplete work;
(e) protection against defects in workmanship and materials and breaches of the Ontario Building Code,
O. Reg. 332/12, made under the Building Code Act, 1992;
(f) warranty protection against basement, window, door, and other water leakage;
(g) warranty protection against major structural defects;
(h) minimum notice periods of extensions of closing and compensation for the failure to comply with same;
(i) a maximum period for the extension of closing without the buyer’s consent;
(j) the extension of closing for construction delays and other reasons beyond the seller’s control, including the
mandatory addendum to each offer, prescribed by the ONHWPA and its regulations;
(k) restrictions on major substitutions involving key elements of the house; and
(l) compensation to the buyer for minor substitutions to the house made without the buyer’s consent.
2. Paying of additional deposits required by the seller at various stages of construction.
3. Confirming that all deposits in excess of the maximum coverage provide under the ONHWP are paid to the builder’s
solicitor in trust.
4. Obliging the seller to construct the dwelling in accordance with certain plans and specifications.
5. Completing of the transaction when the interior of the dwelling has been substantially completed sufficient to
permit lawful occupancy thereof, notwithstanding that exterior work (e.g., landscaping and exterior painting) may
still be outstanding.
6. Requiring the buyer to abide by restrictive covenants that, among other things, would preclude any changes by the
buyer to the grading and drainage patterns of the property.
7. Reserving a right of re-entry in favour of the seller for the rectification of deficiencies and/or completion of grading.
8. Providing for additional adjustments such as
(a) TARION warranty enrolment fees;
(b) utility meter charges and connections;
(c) proportionate increases in various development and similar levies charged pursuant to provincial statues and
municipal by-laws; and
(d) the Harmonized Sales Tax (HST) new housing rebate including the buyer’s eligibility for it.

628 LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION


In order to appreciate the state of land registration in
Ontario, it is necessary to look at its history. At present,
the Ministry of Public and Business Service Delivery and
Teranet Land Information Inc. has a system of electronic
delivery of land registration. Prior to electronic
registration, lawyers or their staff would physically attend
at a registry office, search titles, and present paper
documents for registration.
This chapter looks first at the two systems of land
registration in Ontario.
1. The ownership of land
Land is a scarce resource. It provides income for farmers
and landlords and places to live for owners and tenants
alike. Because of its scarce nature and value, it is critical to
have a system of registration that provides for certainty of
ownership. Ontario has one of the most advanced systems
of land registration in the world.
2. Division of land — a historical overview
Historically, lands were divided into counties, which were
subdivided into townships. Townships were divided into
concessions, and concessions were further divided into
lots.
3. Land registration systems
The purpose of the land registration systems is to provide
notice to the public about the various interests that
individuals and corporations have in land. It also
establishes priorities of these interests and an orderly
method of recording them. Therefore, the systems will
show who the owner of a particular property is and what
mortgages or other encumbrances may be registered
against it; they also disclose various other documents that
may affect a property, such as easements or subdivision
agreements.
The two systems under which title is recorded in Ontario
are the “registry system,” which is governed by the
Registry Act, and the “land titles system,” which is
governed by the Land Titles Act. The registry system is an
older system where documents are registered without
review for legal sufficiency by the Government of Ontario.
It is, therefore, not conclusive evidence of the interest
described in the particular instrument. Each instrument
must be examined to determine its legal effect. The land
titles system, on the other hand, confirms title to the
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Land registration in Ontario
property and thus prohibits the registration of a transfer
from a person who is not a registered owner.
Each system is unique. As an example, title under the
registry system may be taken “in trust” for the benefit of
another party, while s. 62 of the Land Titles Act states, “A
notice of an express, implied or constructive trust shall not
be entered on the register or received for registration.”
Under the land titles system, a person can be named on
title in the capacity of trustee but this does not impose any
duty of inquiry on a purchaser (s. 62(2)).
The Land Registration Reform Act (LRRA), which has
introduced most changes to the land registration system,
including automation, applies to both systems.
4. The registry system
4.1 Registration of instruments
The Registry Act provides for the registration of
instruments relating to and affecting title to the land.
Instruments that may be registered under the Registry
Act are listed in s. 1 “instrument” of the Registry Act and
Part 1 of the LRRA.
Section 1 of the Registry Act defines “instrument” very
broadly. It includes every instrument whereby title to land
may be transferred, disposed of, charged, encumbered, or
affected in any other way. It also includes a Crown grant,
deed, conveyance, mortgage, assignment of mortgage,
assurance, lease, release, discharge, and agreement for
sale and purchase of land.
4.2 Effect of registration
Pursuant to s. 74 of the Registry Act, registration of an
instrument constitutes notice of the said instrument. The
lawyer must review the instrument to determine its legal
effect.
4.3 Priorities
Priority of registration is very important; for example, in
cases where the same interest is disposed of to different
individuals and the later instrument is registered first, one
needs to decide which of the two individuals has the
interest.
For example, assume Mr. Jones sold his property to A and
then sold the same property to B on the following day,
having B register the deed without B knowing about A. In
this case, the later instrument will have priority, since B
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did not have actual notice from A of the deed provided to
her by Mr. Jones. Sections 71 and 49 of the Registry Act
deal with priorities.
4.4 Registration: when instruments are
deemed to be registered
Section 77 of the Registry Act deems registration when the
registrar has accepted the documents for registration.
5. The land titles system
The land titles system provides a statement of title. It
therefore confirms who the owner is of the particular
property. The Land Titles Act applies to this system of
registration.
Each separately owned piece of land is called a “parcel.”
Each parcel has a number and is registered in a book or
electronically. The book is called the “register” or the
“parcel register” when referring to a particular parcel. The
parcel register is the title to the property, since it shows
the owner of the parcel and lists the encumbrances.
When a certain instrument disposing of an interest is
registered, the registrar “rules off” the previous
instrument that disposed of the same interest. A transfer
for Lot A that was registered April 4, 1999, will be ruled off
when the next transfer of the same Lot A is registered on
March 7, 2005. The parcel register will show the last
registered instruments for the property, and the lawyer
will not have to examine those that have been ruled off.
For lands designated under Part II of the LRRA, each
property has a property identification number, or “PIN”
for short. This is entered into the automated system to
make it easy to retrieve the parcel.
5.1 Instruments that may be registered
The Land Titles Act does not provide a definition of
“instrument” in contrast to the Registry Act. Different
sections of the Land Titles Act allow for registration of
various instruments. The forms of these instruments are
prescribed by the regulations.
As the parcel register is a statement of title, the
presentation of an instrument for registration is more
than just registration. Pursuant to s. 77(1) of the Land
Titles Act, every instrument presented for registration,
which upon registration creates, transfers, or terminates
an interest in land, is deemed to be an application to the
registrar to amend the registered title.
Section 81 of the Land Titles Act describes situations
where the land registrar may refuse registration of an
instrument.
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5.2 Registration: when instruments are
deemed to be registered
Pursuant to s. 78(3) of the Land Titles Act, an instrument
is complete when the instrument and its entry is certified
by the land registrar or deputy or assistant deputy land
registrar, and the time of receipt shall be deemed to be the
time of its registration. For example, if a mortgage was
received on July 7, 2011, and certified on August 6, 2011,
then the instrument is still deemed to be registered on
July 7, 2011.
5.3 Effect of registration
No instrument is registered unless certified (i.e., reviewed
and approved by the land registrar).
5.4 Priorities
Subsection 78(5) of the Land Titles Act provides that
priority of registration prevails, irrespective of notice.
6. Document names
There are various documents under the LRRA whose
names have changed over the years. “Transfer,” for
example, is now used to cover all conveyances of freehold
and leasehold lands. The term “deed” is no longer
applicable. “Mortgage” is no longer used, but has been
replaced with “charge.” The term “discharge” has been
adopted to describe both discharges of mortgages and
cessations of charges. Finally, “document” replaces
“instrument.”
There are only four basic types of documents allowed for
physical paper registration. Paper registration can occur
in both the land titles and the registry systems. These are
“Transfer/Deed of Land,” “Charge/Mortgage of Land,”
“Discharge of Charge/Mortgage,” and “Document
General.” There is also a form of acceptable schedule for
attachment to the other forms. It is permitted under
s. 3(1)(b) of the LRRA to register other forms as long as
they are attached to a prescribed form.
7. Automation
After exploring the land titles and registry systems, this
chapter now looks at automation: the process whereby
registry system records were administratively converted
to land titles. With automation also came the electronic
delivery of land registration services. This process was
completed in 2011. During the automation process, each
property was assigned a PIN. Title can now be searched
online through the Teraview website. Electronic
registration, or e-reg™, is done through Teraview. The
program has a detailed logic table that allows much of the
information contained in the document to be checked
electronically prior to electronic signature and
registration and will prompt the user to make corrections.
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LAND REGISTRATION IN ONTARIO
Once registered, each electronic document is checked by
registry office staff and certified by them. This certification
is noted on the parcel register by the letter “C”. Each user
has a username, password, and random number generator
via a “hard” token on a key chain or “soft” phone
application, which allow access to the system. These may
not be shared. Sharing is forbidden by the Rules of
Professional Conduct and by the lawyer’s agreement with
Teraview and can lead to problems, including fraud.
The law that enables electronic registration is Part III of
the LRRA. The key concepts of this part are the following:
ƒ The requirement that a document be in writing and
signed was removed. The LRRA provides that an
electronic document that creates, transfers, or
otherwise disposes of an estate or interest in land is
not required to be in writing or signed (LRRA,
s. 21).
ƒ The authority for direct electronic transmission to
the electronic land registration database was
created (s. 23).
ƒ A document registered in electronic format prevails
over any copy of the document that exists in written
form that is not a printed copy of the electronic
document (s. 22).
8. Types of land titles parcels
The following are the types of parcels available for search
in the land titles system. Since these parcels are governed
by the Land Titles Act, the documents presented for
registration must comply with the procedures for
registering in the land titles system.
8.1 Land Titles Absolute
This is the traditional Land Titles Absolute parcel issued
pursuant to a “first application” under s. 44 of the Land
Titles Act. Prior to automation, lands could be brought
from the registry system into the land titles system by way
of an application for first registration under the Land
Titles Act, commonly referred to as a “first application.”
Generally, a first application was done when an owner
wished to register a plan of subdivision or condominium.
In the first application process, a survey is undertaken on
the property in question. The owners of all adjoining
properties and certain other interest holders related to the
property, such as mortgagees, are required to be served
with the first application and plan of survey. These
interested parties are entitled to object to the first
application, in which case a hearing will be held to
determine their respective interests. At the end of the
process, a land titles parcel is granted that states the
interests to which the parcel is subject. Any issues of
adverse possession are dealt with, and from that time
forward, there is no ability to obtain title by adverse
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possession to the land once it is recorded in the land titles
system (see s. 51 of the Land Titles Act).
8.2 Land Titles Conversion Qualified (LTCQ)
This is the parcel created during automation, the
administrative conversion of the parcel from the registry
system to the land titles system. The qualifiers on the
guarantee of ownership differ from the Land Titles
Absolute (or traditional land titles) parcel. These parcels
are commonly referred to as “Qualified Land Titles.”
The qualifiers stated on these parcels are as follows:
Subject, on first registration under the Land Titles Act,
to:
Subsection 44(1) of the Land Titles Act, except
paragraph 11, paragraph 14, provincial succession
duties and escheats or forfeiture to the Crown.
The rights of any person who would, but for the Land
Titles Act, be entitled to the land or any part of it
through length of adverse possession, prescription,
misdescription or boundaries settled by convention.
Any lease to which s. 70(2) of the Registry Act applies.
As a result of the searching procedures employed during
the automation and conversion to the land titles system,
there are a number of items that the land registration
system guarantees in this parcel that it does not guarantee
in the traditional absolute parcel. These include a
guarantee against Planning Act contravention up to the
time the parcel is issued (para. 11); a guarantee against
dower (para. 14); and a guarantee against succession duty
and previous corporate escheats or forfeitures to the
Crown.
These guarantees apply as of the date of conversion, and
therefore one does not need to search behind the record to
ensure compliance with these items. From the date of
conversion forward, Planning Act and corporate escheats
can apply, and the appropriate searches should be
performed. Since there can be no new claims for dower or
succession duty, these items do not need to be searched.
Since the automation and conversion process does not
include notifying all interested parties, the system cannot
guarantee against mature claims for adverse possession
and other survey issues, misdescription, and unregistered
Registry Act leases.
It is important to note that the guarantee given by the
province in an LTCQ parcel is different from the Land
Titles Absolute mainly due to the guarantee up to the date
of conversion against Planning Act contravention or
corporate escheat. For the most part, this is superior to
Land Titles Absolute.
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8.3 Land Titles Absolute Plus (LT Plus)
This is the record created when an owner makes an
application to remove the additional qualifiers in the
LTCQ parcel. The upgraded title is required when the
owner wishes to develop the property by registering a plan
of subdivision or condominium on an LTCQ parcel,
consolidate an LTCQ parcel with an LT parcel, or deal with
issues such as mature claims for adverse possession. The
application is required to resolve adverse possession
issues, and parcels must have compatible qualifiers to be
consolidated. In these circumstances, a modified first
application to land titles called an “application for
absolute title” is made to deal with the LTCQ qualifiers
related to adverse possession, misdescription, and
Registry Act leases. Since the ownership has already been
established in the administrative conversion process, the
applicant must deal only with those issues enumerated
above. The applicant is required to obtain a survey of the
subject land and serve all interested parties.
The parcel continues as a land titles parcel, subject to the
qualifications listed in s. 44 of the LTA and to those
different qualifiers noted on the parcel. The qualifiers are
amended to reflect that the issues raised in the LTCQ
qualifier have been dealt with. The term “Plus” is used only
to distinguish it easily from other land titles parcels
issued.
In these parcels, the estate qualifier field is shown as “FEE
SIMPLE ABSOLUTE.” The parcel issued will have
different qualifiers than either the “LT Absolute Plus”
parcel or the LTCQ parcel. The qualifier states:
Subject to s. 44(1) of the Land Titles Act, except
paragraphs 3 and 14 thereof and provincial succession
duties and except paragraph 11 and escheats or
forfeitures to the Crown up to the date of registration
with an absolute title.
These qualifiers are excepted, since it is no longer
necessary to qualify the title to the possessory interests of
adjoining owners (para. 3) or for dower (para. 14),
because there can be no new claims for dower or for
succession duty. All these items have been dealt with
during the process for the application for the upgraded
title. In other words, these parcels are not subject to any
such interest.
Compliance with the Planning Act was guaranteed to the
time of conversion (i.e., when the LTCQ parcel was
created). In the application for absolute title since August
2001, the solicitor for the applicant has been required to
make a statement regarding the Planning Act for the
period between the conversion (i.e., LTCQ) and the
application. Therefore, in the parcels resulting from these
applications, the above exception relating to the Planning
Act will be in the qualifiers on the title.
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If the LT Plus PIN was issued prior to August 2001, no
Planning Act statement is made on the PIN, since no
statement related to Planning Act compliance would have
been made in the application. In these instances, a search
for Planning Act compliance is required back to the date
the LTCQ parcel was originally created by searching
abutting parcels.
ServiceOntario has developed a client guide for LTCQ to
LT Plus parcels, which can be found at
https://www.ontario.ca/land-registration/land-titles­
conversion-qualified-ltcq-land-titles-plus-ltplus­
client-guide.
9. Registry non-convert properties
There are approximately 30,000 properties that have not
been converted to land titles. These properties carry an
“R” designation after the PIN in the electronic system and
can be accessed through the Teraview system. The main
reasons for this are Planning Act issues, description
issues, easement and water issues (including, but not
limited to, water boundaries, bodies of water, lands
covered by water, watercourses, rights of water, and any
possibly navigable waters), conflicts of ownership and
inability to establish owners, and breaks in the chain of
title. There are also estate issues and family law issues
such as missing spousal statements that may have
prevented conversion. In order to convert these
properties, the lawyer must follow the process set out in
the Ministry of Consumer and Business Services
Registration Division, Title and Survey Services Office
Bulletin No. 2004-02, “Conversion of Registry Non-
converts to LTCQ.” Most of the properties can be
converted by following this process; some may require a
first application or a court order. The lawyer can submit a
request through OnLand, a web-based application that
acts as a virtual land registry office, to see if there is any
information about why the property has not been
converted. There is no cost for this inquiry, and it can be
of great assistance in assisting the lawyer in converting the
property, if necessary.
10. Law statements
Section 40 of Electronic Registration, O. Reg. 19/99,
made under the LRRA, introduced the key concept of “law
statements.” The electronic document registration system
allows for the use of law statements, which replace the
need for the registrant to provide evidence of the matter
dealt with by the statement. Land registrars may rely on
these statements and give effect to the registration if the
electronic document is otherwise capable of registration.
Section 40 prescribes those documents where a law
statement may be used. A law statement may only be made
by a person who is entitled to practise law in Ontario.
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LAND REGISTRATION IN ONTARIO
These statements apply to the following documents (all
sections below refer to O. Reg. 19/99):
ƒ a transfer (s. 5);
ƒ a transmission application by an estate trustee
(s. 14);
ƒ a transmission application by a devisee or heir-at­
law (s. 15);
ƒ an application to register a chargee as owner under
a foreclosure order (s. 19);
ƒ a transfer under power of sale (s. 20);
ƒ a notice of determination of lease (s. 25(2));
ƒ an application to register an order that requires a
statement that the order is still in full force and
effect (s. 28(d));
ƒ an application to amend the register based on a
court order (s. 30);
ƒ an application to delete a claim for a construction
lien, which requires a statement that there is no
sheltering under the certificate of action
(s. 33(1)(b)(ii)); and
ƒ an application to delete a writ of execution where
— a statement that the execution debtor has
obtained a complete, unconditional, and
unqualified release from the execution creditor
(s. 34(2)(b)); or
— a statement that the registered owner of the
land immediately before the land registrar
recorded the writ against the land is not the
execution debtor (s. 34(2)(c)).
The electronic registration system will only permit
registrants with the proper authority and an active Law
Society of Ontario member number to complete these law
statements. The list of active solicitors is regularly updated
by the Law Society database.
Documents are electronically signed in a two-step process.
First, the lawyer or person who has been given authority
by the lawyer signs for completeness. If law statements are
required, then only the lawyer can sign for completeness.
If no law statements are required, then the person who has
been given authority by the lawyer can sign for
completeness.
Second, the document must be signed for release. This can
be done by either the lawyer or the person who has been
given authority by the lawyer. Even a document where law
statements are required, provided the lawyer has signed
for completeness, can be signed for release by the
appropriate person authorized under the lawyer’s
Teraview account.
10.1 Effect of statements
Subsection 40(2) of O. Reg. 19/99 states that a person (the
lawyer) who makes a law statement that is also a
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CHAPTER 48
statement of fact must do so on the advice of the party to
the document who has knowledge of the fact.
Furthermore, the lawyer is not deemed to be the person
on whose application the registration of the document is
being made. For example, a lawyer making the Planning
Act statements in a Transfer is not deemed to be the
person applying to have it registered.
The lawyer ensures that the lawyer registers the document
electronically in accordance with an “acknowledgement
and direction,” which is produced by the Teraview
software and signed by the client. When acting for a
purchaser and institutional lender, only the purchaser
signs the acknowledgment and direction. Other situations
will vary upon the facts presented to the lawyer. Briefly,
the acknowledgment and direction document authorizes
and directs the lawyer on behalf of the client to register
electronically the documents described in the
acknowledgment and direction. It is imperative that the
lawyer has the client sign this document prior to signing
the document for completeness and release since it is
evidence of the client’s instructions directing the lawyer to
register.
11. Registering “paper documents”
There are a small number of documents that do not need
to be or cannot be registered electronically. A document
that exceeds the file size of 23.5 MB or plans, applications
for absolute title, applications for first registration,
condominium declarations and descriptions, as well as
related amendments and ancillary documents remain
excluded from electronic registration. Teraview now has
“paper document” functionality; with the exception of the
above documents, all Teraview licensees may submit
paper documents online from their own computers.
Reference should be made to “Paper Documents
Procedure” found on the Teraview website.
12. Deferred indefeasibility: fraudulent
transactions
What if, through identity theft or otherwise, a fraudster
stole the title of a property and conveyed it to a bona fide
purchaser for value without notice and/or mortgaged a
property and stole the proceeds of the mortgage?
The Court of Appeal for Ontario in Household Realty
Corporation Ltd. v. Liu held that a fraudulently signed
mortgage was valid and enforceable against the
homeowner husband where a wife had signed her
husband’s name using a fraudulent power of attorney. The
court considered s. 78(4) of the Land Titles Act in this
decision. The recourse of the defendants was to obtain
compensation through the Land Titles Assurance Fund.
The model of deferred indefeasibility (the registration of a
void instrument does not cure its defect and does not give
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good title, but a subsequent person dealing with the
property may rely on the otherwise defective document
and/or registration) had, in effect, been replaced by a
model of immediate indefeasibility (the registration of a
void instrument can give good title immediately). The
Court of Appeal for Ontario in Lawrence v. Wright did not
agree with the findings of Household Realty and reached
an opposite conclusion, effectively reinstating the doctrine
of deferred indefeasibility.
Based on, amongst other things, certain contradictory
decisions, the government moved to amend the Land
Titles Act. On or after October 19, 2006, a fraudulent
instrument is void (s. 78(4.1)), will not have any effect on
the title, and can be removed from the parcel register. The
Director of Titles may order a fraudulent instrument
deleted from the title register (s. 57(13)) and return title to
the rightful owner.
However, a transfer to an innocent purchaser or lender
registered subsequent to a fraudulent instrument and that
is not a fraudulent instrument will, however, be effective
(s. 78(4.2)).
The amendments also allowed compensation claims to the
Land Titles Assurance Fund to be processed much more
quickly.
The Rules of Professional Conduct require a lawyer acting
for a borrower and lender to make full disclosure of
material information to the lender and borrower and to
provide final reports to lenders within 60 days of the
registration of a mortgage (rr. 3.4-15 and 3.2-9.8,
respectively). Section 3.4 simplifies the manner in which a
lawyer acting jointly for a borrower and lender can obtain
consent from an institutional lender.
13. Client ID and verification requirements
— execution of the acknowledgement
and direction
In order to prevent, amongst other things, fraudulent
activity, the Law Society enacted amendments to By-
Law 7.1 (operational obligations and responsibilities),
made under the Law Society Act. Essentially, the lawyer
must identify the client by obtaining basic information,
such as the client’s home and business addresses, must
verify the client’s identity by using reliable source
documents (such as a driver’s licence, passport, or birth
certificate), and must retain the information and a
photocopy of the document used for verification (By-
Law 7.1, ss. 23(5) and (7)). Reference should be made to
the by-law to ensure compliance. These records must be
retained in the lawyer’s files.
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14. The two-lawyer rule for transfers —
Rules of Professional Conduct,
r. 3.4-16.7
In the preparation of a Transfer electronically, all lawyers
must complete a law statement with respect to whom the
lawyer acts for. An individual lawyer cannot act for or
otherwise represent both the transferor and the transferee
with respect to a transfer except in certain circumstances
and only if the lawyer is able to comply with r. 3.4-16.7 of
the Rules of Professional Conduct regarding conflicts of
interest. The exceptions are set out in the rules and will
assist the lawyer in choosing which box to electronically
choose in the “Statement” section of the Transfer.
15. Law Society’s Annual Report Filing
The Law Society requires lawyers who practice real estate
law to declare compliance with the Law Society rules and
by-laws relating to real estate. This requirement focuses
on mortgage fraud issues, amongst other things. It
reinforces the requirements outlined in the Rules of
Professional Conduct and by-laws. Lawyers declare they
have complied with their professional obligations to
ƒ not allow anyone to use their e-reg
diskette/key/RSA token/RSA token number and
personalized e-reg pass phrase;
ƒ directly supervise non-lawyers assigned permissible
tasks and functions, and not assign to nonlawyers
any tasks requiring a lawyer’s skill or judgment;
ƒ not act for both a transferor and transferee in the
transfer of title to real property, except in the
limited circumstances set out in r. 3.4-16.9;
ƒ when acting in permissible circumstances for both a
borrower and lender in a mortgage or loan
transaction, disclose in writing to the borrower and
lender, before the advance or release of mortgage or
loan funds, all material information that is relevant
to the transaction;
ƒ not act or do anything or omit to do anything to
assist a client or anyone else to facilitate dishonesty,
fraud, crime, or illegal conduct and acknowledge the
existence of various Law Society and LAWPRO
resources relating to real estate fraud; and
ƒ comply with their obligations under the Electronic
Land Registration Agreement (agreement that
lawyers must enter into with the Ontario
government to submit documents for registration in
the electronic land registration system) to obtain
evidence of proper authorization from the owner of
the land or holder of an interest in the land who has
directed the registration, prior to the submission of
the document for registration in the electronic land
registration system.
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While all land in Ontario is now automated, there are
properties that have not been converted to land titles for
various reasons. For this reason we must still know how to
search title under the Registry Act. This chapter examines
title searching for both land titles and registry systems.
Part I:
Legal descriptions
1. Ascertaining the legal description
A search of title should be conducted as soon as possible
once the agreement of purchase and sale is received. This
will give the lawyer enough time to conduct the
appropriate searches and submit and answer requisitions
on title within the time provided for in the agreement of
purchase and sale.
A legal description is usually found in the beginning
paragraph of the agreement of purchase and sale after the
words “and described as,” although it may or may not be
accurate. If the property is described by the municipal
address alone, the legal description may be obtained from
the following sources:
ƒ Teraview: The municipal address or owner’s name
can be used to search for the legal description. This
is the most common source as a starting point.
ƒ The vendor’s solicitor: This is available only if the
vendor has retained one.
ƒ A survey of the property: This is available only if the
client or the real estate agent has provided a copy.
ƒ Assessment department or realty tax office:
Sometimes, an assessment office will give the legal
description that corresponds to a municipal
address. Many departments refuse to give this
information over the phone.
1.1 Why correct legal description is
important
A correct legal description is crucial. A small mistake in
the legal description may result in the vendor or purchaser
being unable to deal with the property. For example, the
owner of the property may be identified as someone other
than the vendor, or there may be mortgages registered
that do not pertain to the property being bought or sold.
It is very important to check the legal description against
the agreement of purchase and sale. Any significant
differences should be discussed with the purchaser,
including the size of the lot the purchaser thinks the
purchaser is buying. If there are discrepancies that are
Chapter 49
Title searching
inadvertent errors, these may be corrected by simply
amending the agreement of purchase and sale or by
correspondence between solicitors. If the discrepancies
are significant, the purchaser will have to be advised of the
purchaser’s rights and remedies, which may include the
option of terminating the agreement of purchase and sale.
Part II:
Conducting the search
1.2 Steps in a search
The following is a brief summary of the essential steps
involved in searching title:
ƒ determining the commencement date for the search
of title (registry system only)
ƒ summarizing all of the documents in the chain to
determine their legal effect (registry system only)
and any other encumbrances or documents
affecting title (“abstracting”) (registry and land titles
systems)
ƒ conducting a Planning Act search (registry and land
titles systems)
ƒ conducting other miscellaneous searches, such as a
review of the Crown patent, corporate owners, and
executions (registry and land titles systems)
ƒ reviewing the search by the solicitor (unless the
solicitor conducted the search) (registry and land
titles systems)
ƒ preparing a solicitor’s abstract of title (registry and
land titles systems)
ƒ checking for fraud indicators (registry and land
titles systems)
1.3 Delegation to non-lawyers
As in any other area of law, the practice of real estate has
become more specialized. While some lawyers conduct
their own searches, many firms use conveyancers or
support staff to conduct searches. Conveyancers do not
work for the lawyer on a full-time basis, but only as
needed. Support staff often perform a number of functions
as well. Although some matters may properly be delegated
to non-lawyers, others must be performed by the solicitor.
For example, the lawyer must always review the search of
title and prepare a solicitor’s chain of title. Section 6.1 of
the Rules of Professional Conduct and commentaries,
particularly commentaries [5.3]–[5.4] of r. 6.1-1, should
be referred to regarding delegation.
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2. The 40-year search (registry)
Generally, the conveyancer
ƒ notes the names of the parties to the instrument;
ƒ ensures that the names of the parties are consistent
from one document to the next (particularly
relevant in the case of deed/transfers);
ƒ checks the contents of any recitals to ensure they
are accurate, in particular references to the dates
and numbers of other registered instruments;
ƒ always ensures that the legal description is accurate
and consistent; and
ƒ confirms that the documents are signed and sealed
by the appropriate parties.
2.1 The root of title
With a few exceptions, the conveyancer needs to search
title for the last 40 years. Subsection 112(1) of Part III of
the Registry Act provides:
112.—(1) A person dealing with land shall not be
required to show that the person is lawfully entitled
to the land as owner thereof through a good and
sufficient chain of title during a period greater than
the forty years immediately preceding the day of
such dealing, except in respect of a claim referred to
in s. 113(5).
Subsection 113(5) contains a number of exceptions, such
as claims of the Crown in some circumstances, claims
arising by possession, or statutory claims.
In other words, a person must show that the person has
good title for a period of 40 years (title search period). The
search will commence on the date that is 40 years prior to
the date of the agreement of purchase and sale
(commencement date). If the agreement is dated
December 31, 2005, the commencement date is
December 31, 1965.
The conveyancer looks for the first conveyance of the
freehold estate registered after the commencement date.
This deed becomes the “root of title” and will serve as the
starting point for preparing the chain of title. If there is no
conveyance of the freehold estate registered after the
commencement date, the conveyancer must go back
further in time to the first conveyance registered before
the commencement date, and that deed becomes the root
of title (s. 112(2)).
For example, if the first deed registered after the
commencement date was registered on January 1, 1972,
that deed is the root (Scenario A). If there was no deed
registered after December 31, 1965, but there is a deed
registered on March 3, 1913, the search will commence in
1913.
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In Scenario A, the chain of title commenced on January 1,
1972. Does this mean that the conveyancer can ignore
anything registered on title before that date? The answer
is NO. Every document registered within the title search
period still affects the lands. It is possible, for example,
that a predecessor in title granted an easement in 1966.
The document is not a root because it is not a conveyance
of the freehold estate. Even though this document was
registered before the root, it is still within the title search
period and still affects the lands.
2.2 Notice period — expiration of claims
Any rights arising from a registered instrument expire 40
years from the date of registration unless the claimant
registers a notice of claim in the prescribed form (ss. 111
and 113(1)). As an example, an easement right granted in
1963 will expire in 2003 unless a notice is registered. This
will rarely be an issue from a title searcher’s point of view
because a document that has expired will not usually show
up in the title search period. If the conveyancer searches
back 40 years, the conveyancer will not find a document
that was registered more than 40 years ago. However, the
document is relevant if the client has rights to lands by
virtue of a registered instrument. The client should be told
that an interest in lands will expire in 40 years’ time unless
a notice of claim is registered in the prescribed form.
2.3 Searching behind the root
Subsections 112(1)–(2) of the Registry Act make it quite
clear that a chain of title commences with the first
conveyance of the freehold estate within the title search
period. A conveyancer only has to search prior to the
commencement date if there is no conveyance of the
freehold estate registered after the commencement date.
This invites the possibility of fraud.
2.3.1 Specific registry search points
(a) Deed/transfers of land
Current transfers are registered on the document
prescribed by the Land Registration Reform Act and are
deemed to include certain covenants and a release. For
those deeds registered prior to April 1, 1985, the clauses
and covenants will usually be in the actual deed:
ƒ Granting clause: Typically, the grantor will grant the
lands to the grantee in fee simple as joint tenants,
tenants in common, partnership property, or
trustee.
ƒ Habendum clause: This clause usually follows the
granting clause and begins with the words “to have
and to hold.” If there are any restrictions to the
grant, they are usually contained in this clause and
must be carefully noted.
ƒ The four covenants: The following covenants should
be included:
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— The grantors have the right to convey the
lands.
— The grantee will enjoy quiet possession of the
lands.
— The grantors will execute further assurances of
the lands as may be required.
— The grantors have done no act to encumber the
lands.
ƒ Release: The grantor usually releases any claims
against the lands.
(b) Dealing with lands of a deceased
(executor’s deed, wills, letters probate)
A deed from an executor of a registered owner’s estate
must be checked to ensure that it has all of the appropriate
recitals.
The following should be noted:
ƒ Wills or letters probate will usually be registered in
the general register. The contents of these
documents must also be noted for the search.
ƒ If a person died while owning property between
January 1, 1970, and April 10, 1979, any deed,
mortgage, or other instrument must have a consent
of the Treasurer of Ontario attached (alternatively, a
certificate of consent may subsequently be
registered).
ƒ An estate tax release for federal taxes owing used to
be required for a person who died between
January 1, 1959, and December 31, 1971. As a result
of amendments to the Estate Administration Tax
Act, 1998, unpaid taxes no longer form a lien on the
property, and a release is not required.
(c) Deposits on title
Sometimes the notation “see deposit No. xxx” will appear
on the abstract pages. This means that a document (as
defined by s. 105) has been deposited in the deposit index
in accordance with s. 106 of the Registry Act. Its mere
deposit on title does not amount to notice under s. 70.
Nonetheless, a careful solicitor will read the deposit. Once
a deposit is read by a solicitor, the solicitor then has notice
of its contents.
This list is not exhaustive. For example, deeds granted
pursuant to power of sale proceedings by a mortgagee,
construction lien claims, and deeds from a municipality
after a tax sale should be checked to ensure compliance
with the applicable statutory regime.
(d) Adjoining owner’s search: Planning Act
and legal description
There are two reasons to search adjoining lands:
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ƒ to ensure that there is no encroachment (overlap);
and
ƒ to ensure there has been no violation of the
Planning Act.
(e) Encroachments
The legal description of all adjoining properties should be
checked. Ideally, there will be no overlap between the
lands being purchased and the neighbouring lands. Any
discrepancy could signify a cloud on title or a potential
boundary dispute.
(f) Spousal interests
Each transfer and charge in the 40-year period by an
individual must contain an affidavit of marital/spousal
status or statement confirming spousal status.
2.3.2 Automated registry titles
All registry properties have been parcelized, mapped, and
assigned PINs based on the description of the most recent
apparent change of ownership document. A thumbnail
description including an “as in number” is provided on
each PIN. The most recent apparent change of ownership
document will be loaded on the PIN allowing the use of a
PIN to assist in identifying the property in question when
performing a search. No registrations and deposits prior
to the activation date will be brought forward. All
documents registered or deposited after automation will
be abstracted on the automated parcel. As a result, for
these records, both the paper and automated systems
must be searched.
To make searching these records easier after automation,
discharges of mortgages are entered in full on the
automated system, and the affected mortgages will be
deleted from the paper record. Any required corrections to
pre-automation entries will also be made in the automated
system. The creation and maintenance of property
divisions and consolidations in the parcelized registry
system will be processed in a similar manner as automated
land titles.
Automated registry properties that have not been
converted are still administered under the registry system,
and the ownership is not guaranteed by the province.
Accordingly, you must still complete a full 40-year search.
3. Searches under the Land Titles Act
3.1 Guaranteed title
The land titles system is a register of titles. This means that
(subject to the exceptions identified below) the state of
title is guaranteed by the provincial government. A
searcher is entitled to rely on the fact that the party who
appears as owner in the register does in fact have good title
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to the property. There is no need to conduct a 40-year
search nor is there a need to produce a chain of title to the
property, except for use in off-title searches.
3.2 The mechanics of searching
3.2.1 Land titles
In the land titles system, the PIN for traditional land titles
parcels must be obtained. The POLARIS print out of the
parcel register is a complete copy of the paper parcel
register for that particular property and reflects all active
instruments, including the registered owner(s),
outstanding encumbrances, and other documents that
affect title to that property. Land titles system properties
have all relevant documents entered on the automated
system, completely eliminating the need to look at the
paper records. However, one must still examine those
documents entered on the automated system in order to
ascertain their contents.
PIN pages do not set out measurements for the parcel. The
underlying documents such as the plan of subdivision or
reference plan must also be reviewed with reference to the
measurements set out in the agreement of purchase and
sale.
3.3 Exceptions to guaranteed title and
searches required
Section 44 of the Land Titles Act sets out a number of
exceptions to the guaranteed title, the most significant of
which are the following:
ƒ Crown claims: The Crown could have a claim to the
lands if the lands escheated. Hence, the conveyancer
must conduct a search of the names of all corporate
owners throughout the chain of title so that a
corporate search can be performed.
ƒ Planning Act violations: A search of all adjoining
owners back until 1967 is still required (as with the
registry system, sometimes the search can end
sooner). Extra care is needed because it is more
difficult to identify the legal descriptions for all
adjoining owners in the land titles system.
Under s. 44(6) of the Land Titles Act, title is not affected
by a writ registered against a prior owner unless a notice
of the writ has been registered on the title register. Hence,
it is not necessary to search the names of the predecessors
in title. In addition, s. 136 provides that a writ does not
bind a current owner until the sheriff forwards a copy of
the writ to the Land Titles office.
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4. Other searches arising from the search
of title
4.1 Crown patent
The Crown patent is the initial grant from the Crown to a
private party. Most of the Crown patents are for huge
parcels of lands and were granted a long time ago.
The title searcher is concerned about the Crown patent for
two reasons. First, s. 22(3) of the Registry Act provides
that (except in certain unusual circumstances) any
instrument purporting to affect unpatented lands is of no
effect. It is essential that the conveyancer ensures that
there is a Crown patent covering the lands in question and
makes a notation to that effect.
Secondly, the 40-year limitation of claims does not apply
to restrictions contained in a Crown patent. Some lawyers
will obtain a copy of the patent to see if it contains any
restrictions regarding the use of the lands.
4.2 Corporate owners
If a corporation involuntarily dissolves (i.e., if its
corporate charter is revoked) while owning lands, the
lands “escheat” to (vest in) the Crown. Claims of the
Crown are an exception to the rule that a person need only
show entitlement to the lands for a 40-year period.
Accordingly, the prudent solicitor will instruct the
conveyancer to list all of the corporate owners in title from
the Crown patent onward and will then order a corporate
search to ensure that the corporation was in existence
during the period it owned the lands. The corporate
searches are not performed in the registry office; someone
must search the records of the provincial Ministry of
Public and Business Service Delivery or the federal
Innovation, Science and Economic Development Canada.
If a corporation dissolves voluntarily, its shareholders (or
in some instances, its creditors) are entitled to distribution
of its assets. In such cases, the shareholders or creditors
may have to be located to correct a gap or to feed the chain
of title.
Reference should be made to the Escheats Act, 2015 and
the Forfeited Corporate Property Act, 2015, which is
administered by the Ministry of Infrastructure.
4.3 Executions
A creditor with a judgment against a debtor that remains
unsatisfied may file its writ of execution with the local
sheriff. The execution binds the debtor’s interest in lands.
Accordingly, if the land is in the registry system, the
conveyancer should list the names of all persons who had
a beneficial interest in the lands throughout the 40-year
period. If the land is in the land titles system, only the
current owner’s name is searched.
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The execution search should be made in the jurisdiction
where the property is located. A search of executions
should be made and updated on the day of closing against
the current owner to ensure that nothing has been filed
between the time of the initial search and the date of
closing.
If the purchaser is planning to place a mortgage on title,
you will want to search the names of the purchaser exactly
as the name or names will be appearing on the deed. A
mortgagee will be reluctant to advance moneys in the face
of a writ against its borrower since its mortgage will be
subject to the writ. In other words, the writ will rank in
priority to the mortgage to the extent of the amount of the
writ plus interest and costs, if any.
4.4 Registered plans of subdivision
The plan should be checked to see if there is a notation for
a “one-foot-reserve” located on the streets. A one-foot­
reserve is a technique used by municipalities to ensure
that a developer complies with its obligations under
subdivision or development agreements. The city,
municipality, or region will be granted title to one or more
strips of the street by the developer; if the developer
defaults on any of its obligations, the relevant authority
can block access along the road by virtue of its ownership
of the reserves. Once the developer has complied with all
of its obligations, the city will pass a by-law dedicating the
reserves as public highways. An entry for this by-law will
be placed in the back of the plan book.
4.5 Charge/mortgages of land and
assignments and discharges
Details of any outstanding mortgages should be noted,
since the requisition letter will request that all
encumbrances be discharged or that the appropriate
undertakings be given (depending upon the wording of the
agreement of purchase and sale).
If the agreement provided that the purchaser is assuming
a mortgage, the lawyer should obtain a copy of the
mortgage so the lawyer may fully advise the client of its
terms. The mortgagee should also be contacted for a
statement to confirm the outstanding balance of the
mortgage being assumed and to ensure it is in good
standing.
If there are any assignments of outstanding mortgages,
that is, the original mortgagee has transferred its interest,
then the conveyancer should ensure that the proper party
provides a discharge.
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4.6 Subdivision agreement (homes in new
or fairly new developments)
This is an agreement between the municipality or region
and the developer that outlines the obligations of the
developer. The conveyancer should check to see if there
are any financial obligations that form a charge on the
property (if so, you may try to get a release, depending
upon the wording of the client’s agreement of purchase
and sale). Alternatively, the lawyer will have to ensure that
the agreement is in good standing by writing a letter to the
relevant authority.
4.7 Easements or rights of way
If the property is subject to a right of way or easement, you
will want to make careful note of its location and advise
your client accordingly. Depending upon the wording in
the agreement of purchase and sale, submit the
appropriate requisition. The conveyancer may also want
to search back to ensure that the right of way or easement
was validly conveyed by a predecessor in title.
4.8 Planning Act
The purpose of the Planning Act is to control the manner
in which land is divided. The consequence of non­
compliance is severe; a violation of the Planning Act
means that no interest in land is created or passes.
Consequently, a violation by a predecessor in title can
disrupt the entire chain of title.
Section 50 of the Planning Act (which contains the basic
prohibition) provides that a person cannot enter into
certain transactions (including a sale, transfer, or
mortgage) unless the person does not retain an interest in
the abutting lands.
This prohibition is illustrated in the following example:
assume Jane owns an acre of land. Any dealings in
connection with this land (for example, a sale, mortgage,
or other interest (such as a lease) that exceeds 21 years)
must encompass the entire acre. Jane cannot transfer one-
half of the acre because she would retain the ownership
interest in the other half and thereby violate the basic
prohibition. By conveying half of the land, she would
retain the fee simple in abutting land, therefore
subdividing land without the proper legal authority to do
so. One of the basic premises that underlies the Planning
Act is that to subdivide land without authority will result
in a lack of infrastructure such as schools, parks, roads,
and other basic services.
Therefore, a purchaser must search title to make sure that
there was never any common ownership between the
subject lands and the adjoining lands. Hence, the
conveyancer must look only at the names of the owners,
lessees, and mortgagees on title and compare them with
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the names and dates in the chain of title for the subject
lands.
Note the following additional points:
ƒ There are a number of important exceptions to the
basic prohibition. The main one is that no Planning
Act search is required if the lands in question
constitute the whole of a lot on a registered plan of
subdivision.
ƒ In addition, all violations prior to June 15, 1967,
were forgiven. Accordingly, it is not necessary to
search prior to this date.
ƒ On the other hand, in addition to the basic
prohibition, the legislation prohibits a number of
other transactions.
5. Solicitor review and abstract
The conveyancer’s search of title will include the
following:
ƒ a list of the instrument numbers that affect title
(registry only);
ƒ a copy of any plan of subdivision or reference plan
survey or sketch referred to in the legal description
of any documents on title that can assist in
reviewing a legal description;
ƒ copies or abstracts of each instrument affecting title;
ƒ a chain of title (registry);
ƒ a sketch of the property, which will identify the
adjoining lands and their legal descriptions;
ƒ a search of the adjoining lands;
ƒ a list of all corporate owners from the Crown patent
(except for LTCQ titles);
ƒ details of the Crown patent;
ƒ the names of all owners on title for the lands over
the last 40 years for an execution search or an actual
sheriff’s certificate for these names (registry); and
ƒ notation of the last instrument number registered
on title.
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In land titles, the conveyancer will provide a copy of the
parcel register. If the lands have not been converted,
copies of the POLARIS printout will be included.
The solicitor must review each document with great care.
This task cannot be delegated to a non-lawyer. A solicitor
should take careful notes during the course of reviewing
the search. Custom dictates that the solicitor prepare a
“solicitor’s abstract” or a “solicitor’s chain of title.” This is
done to ensure that the conveyancer has not made any
errors and to be fully familiar with the search. The search
and the solicitor’s search notes can become relevant years
down the road if a problem is discovered when the client
or another successor in title sells the property. It is
essential that the search file is complete, accurate, and
stored in a safe location.
6. Subsearches
Immediately prior to the registration of the deed or
mortgage, a subsearch must be conducted to ensure that
there have been no intervening registrations from the date
of the original search. The search of adjoining lands must
be updated.
7. Search of title: fraud indicators
When conducting a title search of a property, a lawyer
should carefully review all documents on title affecting the
client’s interest in the property, including the registration
shortly before closing of recent discharges or transfers
that may indicate suspicious activity and transactions
where the purchase price has increased substantially over
a short period of time. Also, lawyers should be sure to
include deleted instruments when obtaining parcel pages
for all land titles searches so as to give a complete picture
of all outstanding documents registered on title and to
reveal any suspicious activity.
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Letter and online enquiry searches
In addition to a title search, there are other searches that
are necessary to assure title and marketability of a
property. These searches are made to determine whether
there are any statutory liens or orders that may affect a
property and whether a property complies with municipal
by-laws or other statutory requirements.
The searches will vary depending on the type of property
that is being purchased. This chapter will provide an
outline of standard searches for the purchase of urban
properties, farm properties, cottage properties, vacant
land, and properties located in an unorganized territory.
These standard searches are referred to as letter searches,
on the basis that they are done by way of a letter. Some of
these searches may be conducted online. A growing
number of jurisdictions and organizations such as the
Electrical Safety Authority are delivering results online
and via email.
After reading the agreement of purchase and sale and
determining the relevant searches to make, it is advisable
to speak to the client about the searches that are relevant
to the property being purchased and obtain the client’s
instructions as to whether to institute some of the
searches. For example, there are searches, such as the fire
marshal’s search or a municipal work order search, that
may trigger an on-site inspection that can reveal violations
for which the client may be responsible under the
agreement of purchase and sale.
Also, some of the searches may be costly, and the client
may be limited in funds. If the client instructs the lawyer
not to complete a search, the lawyer should fully explain
the risk of not having such a search completed, confirm
the consequences in writing, and have an
acknowledgement signed by the client that the particular
search will not be conducted and also a direction to
complete the transaction in any event.
Lastly, keep in mind that some of these searches may not
be required if the client is purchasing title insurance.
Before conducting a letter search, check the requirements
of the title insurer against the checklist of searches. Also,
keep in mind that if the lawyer also acts for the lender, its
instructions must also be obtained.
It is important to note that even if title insurance may not
require certain searches, some lawyers still proceed to
order them to facilitate the preparation of certain
documents for closing. For example, a tax certificate may
not be required to be ordered if obtaining title insurance.
Chapter 50
However, in order to ascertain if the statement of
adjustments is properly prepared and that the vendor
actually paid the taxes as stated on the statement of
adjustments, one needs to confirm this with the tax
department. The best way to confirm this is to obtain a tax
certificate. Otherwise, the client may call the lawyer after
closing, complaining about arrears that were the vendor’s
responsibility, a situation that will then result in extra
letters to the seller’s lawyer and eventually a title
insurance claim if the seller refuses to comply. Again, each
case is different, and one must make the decision based on
the circumstances. The critical point is to ask the client
and obtain instructions in writing.
1. Searches for urban properties
1.1 Realty taxes
Under s. 349(3) of the Municipal Act, 2001, taxes due on
land are a special lien on the property in priority to every
claim, privilege, lien, or encumbrance of every person
except the Crown, and its priority is not lost or impaired
by any neglect, omission, or error of the municipality or its
agents or through taking no action to register a tax arrears
certificate. As a result, arrears of realty taxes take priority
over any instrument registered on title. To determine
whether there are any arrears of realty taxes, send a
request for a tax certificate to the municipality in which
the property is located together with the requisite fee.
Information on the tax certificate varies from municipality
to municipality.
A tax certificate indicates any arrears of taxes, any
penalties chargeable on the arrears, the total taxes for the
preceding year, any local improvement charges, the total
taxes for the present year, and the instalments due for the
current taxes.
If there are taxes owing, there are several options available
to the lawyer:
ƒ Obtain the undertaking of the vendor’s lawyer to
pay the arrears and penalties to the date of closing
as well as a redirection with respect to the said
amount.
ƒ Deduct the amount of the arrears and penalties
from the balance due on closing so that the lawyer
can ensure that payment is made.
ƒ Credit the purchaser with the arrears and penalties
on the statement of adjustments.
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The lawyer will requisition that taxes be paid on closing
and then provide the options listed above so that the taxes
get paid.
In addition to helping determine whether there are arrears
of taxes, the information that the lawyer obtains from a tax
certificate enables the lawyer to check the adjustment for
taxes shown on the statement of adjustments. Specifically,
the lawyer can check the amount of the total current year’s
taxes and the amounts paid by the vendor. If the amounts
shown on the tax certificate are not the same as the figures
on the statement of adjustments, draw this discrepancy to
the attention of the vendor’s lawyer and obtain the
necessary undertaking, adjustment, or credit as described
above.
1.2 Water account
The collection of water/sewer charges is based upon
s. 398(2) of the Municipal Act, 2001, which states that a
municipality or a local board may add to the tax roll any
fees and charges imposed by a municipality or a local
board on a person for the supply of a public utility. Such
fees and charges may be collected in the same manner as
taxes on the property and may be recovered with interest
and costs.
To determine whether there are any outstanding
water/sewer charges, send a letter enquiry either to the tax
department or to the clerk of a local municipality. In some
municipalities there is a separate department that handles
the collection of water/sewer charges, and in that
instance, the letter enquiry is directed to that separate
department.
If there are outstanding water arrears, the lawyer would
deal with them in the same manner as tax arrears
described above.
Generally, a vendor will give an undertaking to pay all
utility accounts to the date of closing. Since the final bill is
rendered after closing, it is impossible to require the
payment. So unless there are actual arrears of the water
account, the lawyer requests payment from the closing
funds, since this is covered by the vendor’s undertaking.
However, if there are arrears of water charges, then the
same procedure used for tax arrears described above
should be used.
1.3 Local improvements
If a person wishes to have certain services undertaken by
a municipality or a local board on their property, such as
the installation of municipal services or sidewalks, a
municipality or a local board pursuant to s. 326(1) of the
Municipal Act, 2001 may enact a by-law for the
installation of such services.
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A special levy for such services is then imposed by a
municipality or local board, and pursuant to s. 398(1) of
the Municipal Act, 2001, the fees and costs of a
municipality or local board for such services constitute a
debt of such person to a municipality or local board.
Pursuant to s. 398(2), such fees and costs may be added to
the tax roll and be collectible in the same manner as taxes.
When requesting a tax arrears certificate, the letter
enquiry should contain an enquiry as to whether there are
any other outstanding charges for special services that
have been added to the tax roll.
If there are such outstanding charges, a purchaser’s lawyer
should requisition the vendor’s lawyer for either an
adjustment of such charges on the statement of
adjustments or payment in full of such charges if they were
not dealt with in the agreement of purchase and sale as an
item to be adjusted on closing.
The local improvement charges may be spread out over
several years, and it is important to ascertain for what
period the charges are being levied. If the charges apply to
the period of time that the vendor has lived in the
property, then the full amount should be paid on closing
or a credit given to the purchaser on the statement of
adjustments.
If the amount applies to a time that encompasses the
separate ownership of both parties, then an adjustment
has to be made on a per diem basis as to how much each
should pay, and this should be reflected in the statement
of adjustments.
1.4 Hydro arrears
Unpaid hydro arrears do not form a lien on land.
Consequently, a letter search for hydro arrears is no longer
necessary.
However, utility companies continue to request change of
ownership letters on the sale and purchase of residential
homes or whenever there is a change of tenants. It is
recommended that both the purchaser’s lawyer and
vendor’s lawyer send a change of ownership letter.
In addition, if the lawyer is acting for a vendor, the vendor
should be reminded to read the meters the day before
closing and to close the account or transfer it to the
vendor’s new residence.
1.5 Gas arrears
Arrears of gas do not constitute a lien on the land unless
the gas company is owned or operated by a municipal
corporation. Since the lawyer would wish to ensure that
the client will not have to deal with the vendor’s gas
arrears after closing, the comments made with respect to
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payment of hydro, water, and tax arrears also apply in this
instance.
1.6 Zoning compliance
Most municipalities have a zoning by-law, which deals
with such matters as the uses permitted for a property,
requirements for lot size and frontages, location of
buildings on the lot (setback requirements), and size and
height of the dwelling. If a municipality has a zoning by­
law, obtain information as to whether the property that
the lawyer is dealing with conforms with its zoning by-law.
Some municipalities will not give such an opinion, while
others will for a fee.
If a municipality will not give a zoning opinion, the lawyer
will have to obtain a copy of the zoning by-law, locate the
zone in which the property is situated, refer to the zoning
requirements, and determine whether the property
complies.
The lawyer will be unable to confirm conformity of the
property with all of the provisions of the zoning by-law
since some information will not be available. At the very
least, the lawyer should determine the use of the property,
the lot size, and the setback requirements. When the
lawyer reports to the client or to the mortgagee as to
zoning, the lawyer should qualify any opinion as to zoning
requirements for which the lawyer was unable to satisfy
himself or herself.
1.7 Legal non-conforming use
If the property does not comply with a zoning by-law,
determine when the original building and any addition to
it were built and the date of the enactment of the current
zoning by-law. The property may have the designation of
legal non-conforming use as to the location of the existing
improvements if they were constructed before the
enactment of the subject zoning by-law or if the original
building and any addition to it conformed with the zoning
by-law then in effect at the time of construction. The
current by-law would indicate what rights a building
would acquire if its construction predated the by-law’s
enactment.
Additions to an original building must conform to the
zoning by-law then in effect at the time of its construction.
This means that, although the original building might
have enjoyed a legal non-conforming use as to its location
because it pre-dated the enactment of a zoning by-law, an
addition to the original building might not have the same
status if the addition was not in compliance with the
zoning by-law then in effect when it was constructed.
Whenever possible, obtain a letter from the municipality
confirming that the building on the property and any
addition to it have acquired a legal non-conforming use
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designation as to their present location. There are
municipalities, such as the City of Toronto, that will not
give this type of letter of compliance. In that instance, rely
upon the research and findings. The area of legal non­
conforming use(s) has been dealt with extensively by the
courts, and great care should be exercised before assuring
a client that a property to be purchased is legally non­
conforming.
If the property does not enjoy a legal non-conforming use
designation, look at the agreement of purchase and sale to
determine what remedies are available, discuss the
problem with the client, confirm the client’s instructions
in writing, and protect the client’s rights under the
agreement of purchase and sale or at law by way of
requisition.
1.8 Work orders
1.8.1 Property standards by-law, building
by-law, and the Ontario Building
Code
Municipalities enforce the requirements of the Building
Code Act, 1992 and the Building Code, O. Reg. 332/12,
made under the Building Code Act, 1992.
If a property does not comply with the Building Code,
s. 15.2(2) of the Building Code Act, 1992 provides that a
violation order may be issued specifying the violation and
requiring the property owner to rectify the deficiency
within a certain period. This violation notice becomes an
outstanding work order until it is completed. If the
property owner fails to satisfy the work order, the
municipality may complete the work to put the property
into compliance and charge the cost of the work to the
property owner, which is then collected in the same
manner as municipal taxes.
Also note that s. 15.2(4) of the Building Code Act, 1992
states that an order may be registered in the proper land
registry office, and upon such registration, any person
acquiring an interest in the land subsequent to such
registration shall be deemed to be served with such order
on the day the order was initially served.
The lawyer will want to order a building compliance report
from the building department or property standards
department or the clerk of a municipality to determine
whether there are any outstanding work orders on file for
the subject property and any violations of the by-laws.
Unless instructed by a client, do not authorize the
municipality to do an inspection, since this may uncover
possible violations for which the purchaser may be
responsible. For example, some standard forms of
agreement of purchase and sale provide that the vendor is
responsible for any outstanding work orders up to the date
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of acceptance of the agreement of purchase and sale and
the purchaser is responsible for any work orders after that
date.
If the vendor is responsible for rectifying the work order,
write a letter to the vendor’s lawyer advising of the
outstanding work order and requiring the vendor to
comply with the work order prior to closing.
If the purchaser is responsible for rectifying the work
order, speak with the client about the work order and the
requirement of having the work completed and confirm
the discussion with the client by letter.
1.8.2 Electrical Safety Authority orders
Under Part VIII of the Electricity Act, 1998, the Electrical
Safety Authority is empowered under s. 113(1) to regulate
the design, construction, installation, protection, use,
maintenance, repair, extension, alteration, and
connection used or to be used in the generation,
transmission, distribution, retail, or use of electricity in
Ontario.
All major electrical work to premises requires a permit
from the Electrical Safety Authority. If a permit is taken
out for such electrical work, an inspection follows to
ensure that the work is done properly. If the work is
deficient or improperly done, the Electrical Safety
Authority is empowered under s. 113(11) of the Electricity
Act, 1998 to issue orders relating to such work.
To ensure that there are no such work orders, write a letter
or go online to the Electrical Safety Authority at
https://www.esasafe.com to request a record search
and pay the requisite fee. If there are outstanding work
orders, the comments pertaining to work orders under a
property standards by-law or the Ontario Building Code
would similarly apply.
1.8.3 Fire Protection and Prevention Act,
1997
Section 19 of the Fire Protection and Prevention Act, 1997
states that a Fire Marshal, an assistant to a Fire Marshal,
or a fire chief (collectively referred to in the Act as an
“inspector”) may, with or without a warrant, enter and
inspect lands and premises for assessing fire safety at all
reasonable times. Under s. 21 of this Act, an inspector who
carries out such inspection may order an owner or an
occupant to take any necessary measure to ensure fire
safety on the property.
Consequently, before writing to the Fire Marshal’s Office
to enquire about any work order that may be issued with
respect to a property, first speak to the client about the
consequences of such a search and obtain the client’s
written instruction.
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The lawyer can enquire about a work order search only on
record, which does not necessitate an inspection.
However, the Fire Marshal does have discretionary power
to inspect any premises, notwithstanding that the enquiry
may request only an “on record” search.
1.9 Occupancy permits
If a dwelling is newly built or renovated or if an extension
or addition has been added to the dwelling, find out
whether the local municipality has issued an occupancy
permit under its building by-law or property standards by­
law or under the Ontario Building Code.
There may be several reasons why an occupancy permit
has not been issued. For example, there are some
municipalities that do not issue these permits after a final
inspection. The lawyer can, however, call the inspector
and get a verbal response with respect to the premises. The
lawyer will usually have to pay the prescribed fee for a
building/zoning compliance letter, which requests
information on whether occupancy has been granted, in
order for the inspector to provide such information. Some
other reasons for the absence of an occupancy permit are
perhaps an inspection has not yet been made, the
paperwork is not completed, or the permit is not required
for the extension, renovation, or addition.
In most agreements of purchase and sale for newly
constructed dwellings, it is stated that the vendor will not
be obligated to provide an occupancy certificate or permit
to the purchaser. Unless a lawyer has reviewed the
agreement of purchase and sale prior to signing and
deleted this clause, the purchaser may not be entitled to
require the vendor to provide the occupancy certificate or
permit. In this case, the lawyer should explain the
situation to the client that the remedies in this case are
virtually non-existent. Title insurance may help, so the
lawyer may want to review its policies.
If the agreement of purchase and sale contains a provision
that an occupancy permit must be delivered prior to
closing but one is not available and the vendor is unwilling
to give the undertaking requested, then discuss the risk of
closing with the client.
Essentially, it is contrary to a building by-law and the
Ontario Building Code to occupy newly built or renovated
premises without an occupancy permit or a final
inspection having been made by a municipality’s building
inspector. If there are deficiencies, the client may be
ordered to rectify them. If the client instructs the lawyer
to close without an occupancy permit or a final inspection,
confirm this instruction in writing. Optimally, the vendor
should rectify all deficiencies prior to closing.
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1.10 TARION and the Home Construction
Regulatory Authority
TARION is responsible for the administration of the
Ontario New Home Warranties Plan Act. TARION
provides, amongst other things, a warranty of the builder’s
workmanship and certain deposit guarantees.
As of February 2021, the Home Construction Regulatory
Authority (HCRA) was created to be responsible for new-
home builder and vendor licensing in Ontario. The New
Home Construction Licensing Act, 2017 created the
HCRA, which takes over the builder and vendor licensing
from TARION. The HCRA provides the Ontario Builder
Directory, which is the official source of information about
builders and vendors.
1.11 Unregistered hydro (electricity)
easement
Generally, easements relating to the transmission,
distribution, or use of electricity in Ontario are registered
on title. However, there are instances where an easement
document has not been registered and a right to such
easement is claimed pursuant to s. 46(1) of the Electricity
Act, 1998 or pursuant to the predecessor legislation,
s. 48(2) or (3) of the repealed Power Corporation Act.
It is uncommon to find unregistered hydro easements in
urban areas that have been subdivided, since such
easements are more commonly found in rural or cottage
areas. Nonetheless, there are properties in urban areas
that have not been subdivided. The lawyer should make a
determination whether such a search should be made
depending on the type of property the client is purchasing
and send a letter search to the local electric company.
Subsection 46(3) of the Electricity Act, 1998 specifically
provides that on the request of an owner of land or a
person intending to acquire an interest in such land, the
holder of such a right shall make a search of its records
and, within 21 days after receiving a request, inform such
person whether such an unregistered right affects such
land and the term and extent of such right.
For online searches for Hydro One Networks Inc., see
https://www.services.hydroone.com/lvr/welcome.ht
ml.
1.12 Bankruptcy
Although many solicitors search the records of the
Registrar in Bankruptcy and the official receiver to
ascertain any bankruptcies of a vendor, these searches are
not necessary until the trustee-in-bankruptcy registers an
appropriate notice on title.
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1.13 Waste disposal search
This search is relevant where large tracts of land are
purchased and then developed for commercial or
residential purposes. However, this is a rarely conducted
search in a residential transaction, since the underlying
assumption is that all required searches were conducted
before the creation of a subdivision or condominium.
Section 46 of the Environmental Protection Act provides
that no use shall be made of land or land covered by water
that has been used for the disposal of waste within a period
of 25 years from the year in which the land ceased to be so
used unless approval of the Minister of the Environment,
Conservation and Parks for the proposed use has been
given.
To enquire whether a parcel of land has been used as a
waste disposal site, write to the Ministry of the
Environment, Conservation and Parks. Unfortunately, its
records start only from 1971. For any information before
1971, the lawyer must write to the planning department of
the relevant local municipality. When sending the enquiry,
include a copy of a plan of the land to assist in locating the
area in which the land is situated and indicate the lot and
plan numbers and the underlying lots and concession
numbers.
1.14 Heritage designation
If a property is designated under the Ontario Heritage Act
to be of historic or architectural value or interest, a by-law
is enacted by the municipality in which the property is
located and registered on title, designating the property as
a “designated property.” If a property becomes a
“designated property,” any alteration or improvement to
the property is subject to the provisions of the Act.
Further, if a property owner applies to a municipality for
a loan to alter or improve a “designated property,” s. 39
provides that the loans shall be a lien on the property until
paid.
Under s. 27 of the Ontario Heritage Act, the clerk of a
municipality must keep a register containing
ƒ a legal description of the “designated property”;
ƒ the name and address of the owner; and
ƒ a short statement of the reason for the designation.
Extracts from the register can be issued to any person on
payment of the fee prescribed by the regulations.
Another way to search whether the property being
purchased is a “designated property,” send a letter of
enquiry to the clerk of the municipality enquiring whether
the property is a “designated property,” whether any by­
law designating the property has been proposed or
pending under s. 29 of the Act, and whether there is a lien
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claimed against the property by virtue of a loan under
s. 39.
1.15 Corporate status
When the lawyer receives the search of title and there are
corporations that held the property in the chain of title,
the lawyer should check whether these corporations were
in existence during the period of ownership of the
property. Both the federal and provincial corporate
statutes provide that, upon dissolution of a corporation,
its property is escheated, or forfeited, to the Crown.
This constitutes a break in the chain of title and
subsequent grants would be void. For a fee, the Ministry
of Government and Consumer Services or other service
providers will provide the lawyer with information stating
the name of the corporation, its corporate number, its
jurisdiction of incorporation, the date it was incorporated,
and if applicable, the date it was dissolved.
If any corporation in the title search period is not an
Ontario company, a similar letter must be obtained from
the jurisdiction in which that corporation is incorporated.
This search is not necessary if the title to the property has
undergone a land titles conversion to Land Titles
Conversion Qualified. However, subsequent to the time of
conversion, this search is again required for any corporate
registered owner.
Reference should be made to the Escheats Act, 2015 and
the Forfeited Corporate Property Act, 2015, which is
administered by the Ministry of Infrastructure.
1.16 Compliance with registered agreements
Subsection 51(25) of the Planning Act allows for the
municipal or other approval authority to impose certain
conditions on the developer and/or builder necessary for
the approval of a plan of subdivision. For example, they
may want the owner of the land to enter into one or more
agreements with the municipality, referring to matters
such as provision of municipal services; letters of credit;
installation of sidewalks, street lighting, and drainage; and
other conditions that the authority may consider
necessary. The municipality may have the right to correct
the default and then create a lien on the land for the
amount.
This agreement may be registered against the land to
which it applies, and the municipality or approval
authority shall be entitled to enforce its provisions against
the owner and subsequent owners of the land, subject to
the Land Titles Act and Registry Act.
If the title search reveals an agreement, which may be
called a subdivision, development, or site-plan agreement,
check for compliance with the terms of the agreement by
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sending a letter to the legal department or the clerk’s office
of the relevant municipality inquiring whether the
agreement has been complied with or, in the alternative,
whether the municipality holds sufficient security to
ensure compliance with the agreement.
If the search reveals that there is non-compliance, find out
what work is outstanding, what steps the municipality will
take to correct this outstanding work, and what remedies
are available to the client under the agreement of purchase
and sale. Discuss these matters with the client and
document the client’s instruction in writing.
1.17 Airport zoning regulations
If the property is located in the vicinity of an airport, the
title search may reveal airport zoning regulations that
impose height restrictions for structures and grade
elevations of properties, expressed in units above sea level.
Airport zoning regulations are made pursuant to Part I of
the Aeronautics Act, which permits the Governor in
Council to make such regulations to prevent the
incompatibility of the use of adjacent lands with the safe
operation of an airport or prevent uses that would cause
interference with signals or communications to and from
an aircraft.
It is difficult to check compliance of airport zoning
regulations registered on title. Consequently, the lawyer
cannot give any opinion regarding the compliance of such
regulations, and the title opinion should be qualified
accordingly. The lawyer should advise the client of the
existence and particulars of the regulations.
The lawyer should also advise the clients to check with the
local municipality’s planning department for further
details regarding such regulations.
1.18 Development charges
The Development Charges Act, 1997 allows municipalities
to levy a development charge upon the development of
property. Section 26 of this Act provides that a
development charge is payable immediately upon the
parties entering into an agreement unless a development
charge by-law provides otherwise.
Alternatively, s. 27(1) states that a municipality may enter
into an agreement with a person who is required to pay a
development charge before or after it would otherwise be
payable. Such an agreement is generally registered on
title. If a development charge remains unpaid after it is
payable, s. 32(1) provides that the amount unpaid is added
to the tax roll and is collected in the same manner as taxes.
If the lawyer is dealing with a new home or a renovated
home, the lawyer should review the title to see if an
agreement or a by-law in respect of development charges
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is registered on title. If there is no such agreement or by­
law, the lawyer should write to the building department of
the local municipality to enquire if a development charge
is payable with respect to such development, how much is
payable, and when it is payable.
If the charges are payable on closing, requisition the
vendor’s lawyer for the payment of such charges on
closing. As part of the closing arrangements, a portion of
the balance should be due on closing, directly payable to
the municipality for the required amount, and the
vendor’s lawyer’s personal undertaking to remit such
payment to the municipality and to provide the lawyer
with evidence of such payment within a reasonable time
after closing should be obtained.
1.19 Environmental searches
It is not typical to send out environmental enquiries in a
residential real estate transaction. It is unlikely that the
normal activities of a homeowner would lead to
Environmental Protection Act orders. In addition, plans
of subdivision are generally circulated to the Ministry of
the Environment, Conservation and Parks for comment
prior to final approval, and the probability of significant
environmental problems is remote.
Environmental searches are more routinely conducted in
instances where commercial or industrial properties are
being purchased or financed or where vacant land is being
acquired.
1.20 Underground fuel oil storage tanks
There are properties that contain underground fuel oil
tanks that may be in use. These tanks may be wholly or
partially buried somewhere outside of the main dwelling
or wholly or partially buried in the basement.
If the client is purchasing a property with an underground
fuel oil tank, Fuel Oil, O. Reg. 213/01, made under the
Technical Standards and Safety Act, 2000, sets out rules
for these underground fuel oil tanks.
As of May 1, 2002, all underground fuel oil tanks must be
registered with the Technical Standards and Safety
Authority (TSSA). The TSSA maintains a registry of
underground fuel oil tanks.
To determine whether an underground fuel oil tank is
registered, contact the TSSA, and give the TSSA the
address of the property. The TSSA will advise the lawyer
verbally without charge if its records reveal the
registration of an underground fuel oil tank on a specific
property. For a fee, the TSSA will provide a written
response.
If the underground fuel oil tank is not registered, then
requisition the vendor’s lawyer about its registration,
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since no fuel oil for a heating system can be delivered until
the tank is registered. To register the tank, work may have
to be done to the tank and/or soil. Therefore, the
requisition should include not only completion of the
registration but also any remedial work to the soil, which
may have been contaminated by the existence of the
underground tank.
If the underground tank is not in use, the lawyer would
requisition the vendor’s lawyer for the removal of the tank
and any remedial work to be done to the soil. In addition,
advise the client’s lender and title insurer of this matter to
determine their respective requirements.
It is prudent to recommend to the purchaser that, if there
used to be an oil tank on the property being purchased,
then the purchaser should conduct an environmental
audit, which may include the testing of soil samples to
determine if any environmental remediation is necessary.
1.21 Underground utility facilities
The lawyer may come across a situation where the client
needs to know if there is an underground utility cable
buried somewhere in a parcel of land. There is a 24­
hour/7-days-a-week service that will locate underground
utility services throughout Ontario. Ontario One Call will
assist in locating these buried utility wires and cables. The
service is free of charge.
2. Farm properties
2.1 Realty taxes
As in urban properties, check for outstanding realty taxes
by writing to the clerk of the municipality and requesting
a tax arrears certificate for a fee.
2.2 Water
2.2.1 Serviced by a water main system
Some rural properties are connected to the water main
system of the local municipality. If so, enquire of the local
municipality as to whether there are any arrears for
outstanding water accounts and whether there are
outstanding deferred frontage charges. The latter pertains
to the cost of connecting the property to the water main
system and is generally done through an agreement, which
may or may not be registered on title.
The agreement provides that the municipality will supply
materials and labour in connecting the subject property to
the water main system. Payment for the labour and
materials is spread over a number of years. Upon the sale
of the property, the entire amount becomes due and
owing. Some municipalities register this agreement on
title.
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If the agreement is not registered, the lawyer must enquire
directly of the municipality whether any such agreement
has been entered into and, if so, the amount outstanding.
The lawyer would then requisition the vendor’s lawyer to
pay out of the balance due on closing the amount owing
under the agreement for deferred frontage charges and, if
the agreement is registered on title, obtain and register a
release from the municipality with respect to this
agreement.
2.2.2 Serviced by a privately owned well
If the subject property is not connected to a municipal
water system and obtains its water from a well, there are
several concerns:
ƒ the quality of the water or its potability;
ƒ the quantity of the flow of the water;
ƒ the capacity of the well; and
ƒ the operational efficiency of the well.
A water sample should be delivered to the local health unit
for testing.
Well drillers’ certificates are usually available and should
be requested from the vendor or by conducting a search of
Ministry of the Environment, Conservation and Parks
records.
2.2.3 Private water system
There are properties that are not connected to a municipal
water main system or are not serviced singularly by a well.
Instead, these properties are connected to a private water
system that services more than one residence.
The Safe Drinking Water Act, 2002 provides for
regulation of drinking water systems and drinking water
testing. The Director can respond to drinking water health
hazards on an emergency basis and issue an order for costs
against an owner of a drinking water system, and these
costs can be added to taxes (s. 124(1)).
2.3 Septic tank or sewage systems
Effective April 1998, the Ontario Building Code was
amended to incorporate a new Part 8, which applies to the
construction, operation, and maintenance of all sewage
systems and to the construction of buildings in the vicinity
of sewage systems. The Ministry of Municipal Affairs and
Housing, through a municipality, county, board of health,
or conservation authority, as the case may be, became
responsible for the enforcement of the provisions of Part 8
that related to sewage systems.
The requirement, pursuant to the legislation, is that every
homeowner must have a sewage system for both toilet
waste and “grey water,” that is, water from sinks,
bathtubs, laundry, etc.
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REAL ESTATE
The installation of such a sewage system must be by an
installer licensed under the Ontario Building Code Act,
1992. A permit is required from the chief building official
for such installation, and inspections are required during
the course of construction. A final inspection must be
made before the sewage system is used.
To obtain information regarding an existing sewage
system installed after April 6, 1998, direct the enquiries
either to the local public health unit or to the chief building
official or building department of a municipality.
If the system was installed before April 6, 1998, enquiries
may be made to the local public health unit, the local office
of the Ministry of the Environment, Conservation and
Parks, or other local authority holding the records for
systems installed before April 6, 1998. The information
that the lawyer may obtain will be for systems installed
after 1972.
2.4 Hydro arrears and work orders
The above comments regarding the change in practice of
hydro arrears searches similarly apply to farm properties.
This change in practice does not affect the search for any
outstanding hydro work orders for which the lawyer will
write to the local Electrical Safety Authority.
2.5 Unregistered hydro easements
The above comments regarding a letter search for
unregistered hydro easements apply to farm properties.
2.6 Tile Drainage Act
Section 8 of the Tile Drainage Act imposes a lien on a
property where tiles have to be installed to permit run-off
water. If the property is located within a municipality, the
charges are added to the municipal tax bill. Accordingly,
when writing for a tax certificate, also include a specific
enquiry about any outstanding charges or levies under the
Tile Drainage Act.
2.7 Bank Act
Section 427 of the Bank Act provides that a bank may
advance moneys
(1) to wholesale or retail purchasers of, shippers of, and
dealers in
ƒ products of agriculture, aquaculture, the forest, the
quarry and mine, or the sea, lakes, and rivers; or
ƒ goods, wares, and merchandise, manufactured or
otherwise
on the security of such products or goods, wares, and
merchandise used in or procured for the packing of such
products or goods, wares, and merchandise; and
(2) to
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ƒ any person engaged in
— business as a manufacturer; or
— forestry, mines, sea, and industry; and
ƒ farmers and fishermen
on the security of their manufactured goods, wares, or
merchandise, aquacultural stock, crops, livestock, and
agricultural equipment or implements.
Under this statute, delivery of a document giving security
on property to a bank under the authority of s. 427(1) vests
in such bank in respect of the property described in such
document as a first and preferential lien and claim for the
sum secured and interest thereon. This preferential lien
and claim covers crops before and after their severance
from the soil, harvesting, or threshing. In addition, the
bank has the same rights and powers as if it had a
warehouse receipt or bill of lading with respect to
encumbered property.
The rights and powers of the bank apply to real property,
even though the property is affixed to real property and
even though the person giving the security is not the
owner of that real property.
Bank searches may be conducted personally at the Bank of
Canada in Toronto or in writing by requesting a certificate
upon payment of the prescribed fee. If there is a loan
under the Bank Act, requisition for its discharge and
payment.
2.8 Farm property tax program
Farms that are eligible to be assessed in the Farm Property
Class will be eligible for a property tax rate of 25% of the
municipal residential tax rate for the applicable taxation
year.
To be eligible for the 25% property tax rate, the property
must be assessed as farmland, a farm business generating
over $7,000 of gross farm income must be carried out on
the farmland, a valid Farm Business Registration number
must be existing, and the property must be owned by a
Canadian citizen or a permanent resident of Canada.
If the gross farm income is less than $7,000, eligibility
may still be available if one of the exceptions are met and
applied for:
ƒ In the opinion of the Minister of Agriculture, Food
and Rural Affairs, the farmer was not required to
register because the applicable year was not a
normal production year but, if it had been, the gross
farm income would have been over $7,000.
ƒ As a result of the age or illness of the owner or the
age, illness, or death of the owner’s spouse, gross
farm income fell below $7,000 in the applicable
year, provided that the person carrying on the farm
business is the property owner, the farm business
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generates gross farm income greater than zero, the
farm business has been operated by the owner or
spouse of the owner for at least 10 years, and the
owner qualified for the farm tax rebate during this
period.
Lawyers who are acting for purchasers of farmland should
obtain a representation from the vendor that the farmland
is assessed as Farm Property Class and evidence of such
assessment.
In addition, purchasers’ lawyers should advise purchasers
who will operate a farm business for the first time of the
requirement to contact the Municipal Property
Assessment Corporation and the Ontario Ministry of
Agriculture, Food and Rural Affairs. This Ministry can also
provide further information regarding the tax programs
administered by the Ministry.
2.9 Highway entrance
If the farm property fronts onto a provincial highway,
write to the Ministry of Transportation and
Communications to enquire if the entrance to the highway
is a legal entrance and if a permit has been issued under
s. 34 of the Public Transportation and Highway
Improvement Act.
Under s. 34(2), there are certain listed situations for which
a permit is required, such as
ƒ the placing, erecting, or altering of any building,
fence, gasoline pump, other structure, or road or the
placing of any tree, shrub, or hedge within 45
metres of any limit of the Queen’s Highway or
within 180 metres of the centre-point of an
intersection;
ƒ displaying any sign, notice, or advertising device
within 400 metres of any limit of the Queen’s
Highway; or
ƒ using any land that lies within 800 metres of any
limit of the Queen’s Highway for a shopping centre,
stadium, fair ground, race track, drive-in theatre, or
any other purpose that would cause people to
congregate in large numbers.
If no such permit is issued, requisition the vendor’s lawyer
to obtain such a permit.
If the farm property fronts onto a regional highway, write
to the regional or local municipality dealing with private
approaches for the same type of enquiry.
2.10 Controlled-access highway
If the property being purchased is located within certain
distances of a controlled-access highway, write to the
Ministry of Transportation and Communications to
enquire if a permit has been issued for the purposes set
out in s. 38 of the Public Transportation and Highway
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Improvement Act, which is similar to s. 34 of that Act
discussed above.
2.11 Ontario Heritage Act enquiry
As in urban properties, the lawyer should enquire whether
the subject property is a designated property within the
meaning of the Ontario Heritage Act.
2.12 Funeral, Burial and Cremation Services
Act, 2002
If the lawyer is dealing with farm property that the client
wishes to subdivide or merely acquire, the lawyer may
consider writing to the clerk of the local municipality or
the Cemeteries Branch of the Ministry of Government and
Consumer Services to determine whether its records
indicate that the subject property has been used as a
“cemetery.”
The letter of enquiry should be accompanied by a plan of
survey and a legal description of the property.
Unfortunately, the records of the Ministry are not precise.
They provide only information as to whether a cemetery
has ever been located in a particular lot in a concession in
a particular municipality. The letter will then refer the
lawyer to the local municipality. Unless the lawyer has
reason to believe that the subject farm property may
contain a burial site or unless the client is acquiring
church lands, this is not a standard search that needs to be
done.
Under the Funeral, Burial and Cremation Services Act,
2002, a “cemetery” means land set aside to be used for the
interment of human remains, and a “burial site” is defined
as land containing human remains that is not a
“cemetery.” If the client has the misfortune of finding
human remains or has reason to believe that an area of
land may have been used for a burial site, s. 94 of the Act
states that no person shall disturb or order the disturbance
of a burial site or artifacts associated with the human
remains except on the instruction of a coroner or pursuant
to a site disposition agreement or if the disturbance is
carried out in accordance with the regulations made
pursuant to the Act. Section 95 of the Act provides for a
positive obligation to notify the police or coroner.
2.13 Airport zoning regulations
As earlier noted, the regulations should be drawn to the
attention of the client. In particular, the height restrictions
imposed by airport zoning regulations would apply to
farm structures, such as silos or other storage areas, on
farm properties located near an airport.
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2.14 Development charges
The previous comments regarding development charges
similarly apply to farm properties.
2.15 Conservation Authorities Act
If the property includes any water courses or if there are
substantial variations in grade in or about the area where
the property is located, consider the provisions of the
Conservation Authorities Act. Conservation authorities
under this Act are empowered to make regulations under
s. 28(1) to, among other things, prohibit, regulate, or
require the permission of the authority for any
development, if such development may affect the control
of flooding, erosion, pollution, or conservation of land.
There are two types of enquiries that can be made to a
conservation authority. One is an on-site inspection
whereby an official will visit the site and identify what
regulations or restrictions may affect the site. The second
is a letter enquiry, which confirms whether the subject
property is within the jurisdiction of the conservation
authority and, if so, the general restrictions that would
apply.
Conservation authorities should also be contacted if the
client is considering installing a septic system, since it will
identify the area in which a septic system cannot be
installed.
2.16 Weed control
Under s. 13 of the Weed Control Act, an inspector finding
noxious weeds or weed seeds on land may order the
person in possession of the land to destroy the noxious
weeds or weed seeds.
Under s. 15, if the person does not comply with the order,
the inspector can have the noxious weeds or weed seeds
destroyed in the manner prescribed by the regulations and
shall render a statement to the person in possession of the
lands and the owner for the expenses incurred.
If the person for whom the statement was given fails to pay
the amount, the inspector can give the statement to the
council of the municipality in which the land is located,
and the council shall order it to be paid out of the general
funds of the municipality. The council can then collect this
amount in the same manner as taxes under the Municipal
Act, 2001 or the City of Toronto Act, 2006 (Weed Control
Act, s. 15(6)).
Accordingly, consider including this enquiry in the
request for a tax certificate.
2.17 Beds of Navigable Waters Act
If the subject property borders on a body of water or
stream or is one on which the whole or part of a body of
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water or stream is situated or is one through which a body
of water or stream flows, the lawyer may consider
inquiring whether that body of water is “navigable” under
the Beds of Navigable Waters Act.
If the body of water or stream is “navigable,” then in the
absence of an express grant of the beds in the Crown
patent, it is deemed that the bed of such body of water was
not intended to pass and did not pass to the grantee of
such Crown patent.
To enquire whether a body of water is “navigable,” write
to the local office of the Ministry of Natural Resources and
Forestry.
2.18 Local improvements
The prior comments regarding local improvements apply
to farm properties as well.
2.19 Drainage Act
“Drainage works” under s. 1 of the Drainage Act includes
a drain constructed by any means, including the
improving of a natural water course, and includes works
necessary to regulate the water table or water level within
or on any lands or to regulate the level of the waters of a
drain, reservoir, lake, or pond, and includes a dam,
embankment, wall, protective works, or any combination
thereof.
Improvements under this Act work in the same way as
local improvements. Special assessments are passed onto
property owners much like local improvement
assessments. Any enquiry under this Act should be made
to the clerk of the municipality.
2.20 Corporate status
The prior comments on corporate status similarly apply to
farm properties.
2.21 Underground fuel oil tanks
The prior comments regarding the search for
underground fuel oil tanks with the TSSA are applicable to
farm properties.
3. Cottage properties
The following searches would similarly apply to cottage
properties:
ƒ realty taxes;
ƒ hydro arrears and work orders;
ƒ wells as to potability and quantity of flow of water;
ƒ sewage systems, permits, and outstanding work
orders;
ƒ unregistered hydro easements;
ƒ highway entrances;
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ƒ controlled access to highways;
ƒ Conservation Authorities Act;
ƒ Drainage Act;
ƒ Beds of Navigable Waters Act; and
ƒ corporate status.
In addition to the aforementioned searches, the following
searches for cottage properties are suggested.
3.1 Zoning
Check zoning to find out whether there are any land-use
restrictions affecting the subject property. For example,
there may be a zoning by-law restricting the seasonal use
of the cottage.
Many clients may want to add to the cottage structure or
add accessory structures such as boathouses or docks. The
client should be advised to obtain a copy of the by-law as
soon as possible. In addition, if the client wants to build
on or develop the property, the lawyer or the client should
check the zoning by-law. The restrictions or limitations to
any improvement or development of a property will be
identified, such as, whether the property is in a flood plain
or environmental or hazard zone.
3.2 66-foot reservation
For cottage owners whose properties are waterfront
properties, ownership of the 66 feet (equal to one chain)
running back from the water’s edge may or may not be
referred to in the Crown grant. The two most frequent
types of the 66-foot strip are the following:
ƒ a reservation by the Crown for a grant to the
original patentee of the land of 66 feet running
along the shoreline back from the water’s edge for
the purpose of access. Title to this 66 feet remains in
the Crown.
ƒ a Crown grant that grants the whole of the land
described in the patent that does not extend to the
water’s edge. The 66 feet between the lot line
described in the grant and the water’s edge was laid
out in the original survey as the road allowance. In
1913, title to all such road allowances was by statute
vested in the local municipalities.
If the water line has changed, it is now necessary to
ascertain where the current water line is, in order to
determine the location of the 66-foot strip.
To determine the ownership or the existence of this 66­
foot reservation from the water’s edge, contact the
Ministry of Natural Resources and Forestry or its local
branch.
3.3 Other reservations in Crown patent
In addition to the 66-foot reservation from the water’s
edge, there may be other reservations in the Crown patent,
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such as for mines and minerals, the obligation to build,
etc.
Check the Public Lands Act to determine whether the
reservations are still in effect. If they are, check the
agreement of purchase and sale to see if the parties have
agreed that the land being sold is subject to these
reservations. If not, requisition the release of the
reservations at the expense of the vendor. If this cannot be
negotiated, discuss options with the client, which must
include an abatement of the purchase price.
For copies of Crown patents, write to the Ministry of
Government and Consumer Services, Official Documents
Office, Toronto, Ontario, and send the requisite fee with
your letter.
3.4 Installation of boathouses, docks, etc.,
in water
Where there are structures located in water, such as a
boathouse, docks, or piers, check whether the necessary
approvals have been obtained for such structures.
Also, check if the bed of the water upon which the
structure is located belongs to the riparian owner, and if it
does not, obtain permission from the owner of the bed.
In the case of navigable waters in Ontario, the owner of the
bed would be the Province of Ontario. Under s. 24 of the
Public Lands Act, the Crown is automatically the owner of
any structure placed or left without authority on public
lands. The Ministry of Natural Resources and Forestry
may remove or destroy the offending structure and charge
the cost of removal to the persons who installed or left it.
Further, there is a penalty for unlawful occupation of
public land equal to twice its value (see s. 26).
If the owner of the bed is the Crown, a lease or a licence of
occupation must be obtained under the Public Lands Act.
If there is anything constructed in navigable water, check
that a permit was issued for such a structure by writing to
the Ministry.
In addition, if the water is navigable water and the body of
water is listed on the schedule to the federal Canadian
Navigable Waters Act, then reference must be made to
ss. 4.1 and 5(1) of this Act, which require a notice or an
application to construct, place, alter, repair, rebuild,
remove, or decommission a “work.” Without the
approval, the Ministry is empowered to remove the work
and seek fines. The purpose of giving the notice is to allow
the Minister to determine if the “work” is likely to
substantially interfere with navigation. If the Minister so
determines, then the owner must apply for such approval.
If the cottager owns the bed, consideration should be
given to s. 29(3) of the Ontario Water Resources Act that
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prohibits the placing in water of material or anything that
may impair the quality of water in certain defined areas.
In addition, for properties within a conservation area
designated under s. 28 of the Conservation Authorities
Act, permission is required from the local conservation
authority for the construction of any building or structure
and the placing of any fill in certain areas.
Lastly, any person undertaking construction of a structure
on water will have to comply with the local applicable
zoning and building by-laws and obtain a building permit,
if required.
3.5 Shoreline Property Assistance Act
An owner can apply to the council of a municipality for a
loan pursuant to s. 4 of the Shoreline Property Assistance
Act if the owner wishes to construct retaining walls, dykes,
breakwaters, groynes, cribs, or other structures designed
for the rehabilitation or protection or both of properties
located on the shores of lakes, rivers, or other bodies of
water that have been damaged or eroded by the elements.
If approved, a loan for the construction of the works or the
repair of the works shall not exceed the amount
prescribed, pursuant to s. 4(7). The council then issues a
debenture payable to the Treasurer of Ontario with
respect to the moneys loaned by the municipality, and a
by-law authorizing the debenture would then be
registered on title.
Under s. 11, where part of the land in respect of which
money has been lent under the Act is sold, the council of
the municipality apportions the special annual rate
between the part sold and the part remaining.
Under s. 12, a discharge of the indebtedness can then be
made by paying to the treasurer of the municipality the
amount owing together with accrued interest.
If a by-law is registered on title with respect to this Act,
write to the clerk of the municipality to find out what is the
amount outstanding and then requisition the vendor’s
lawyer for the payment and discharge of the indebtedness.
3.6 Local improvements
Retaining walls, dykes, breakwaters, groynes, cribs, and
other shore protection are also local improvements, and
the earlier comments regarding local improvements apply
to cottage properties as well as urban and farmland
properties.
3.7 Underground fuel oil tanks
The prior comments regarding the search for
underground fuel oil tanks with the TSSA is applicable to
cottage properties.
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4. Vacant land
Depending on the area where the vacant land is situated,
earlier comments about the following searches apply:
ƒ Crown reservations;
ƒ corporate status;
ƒ taxes;
ƒ local improvements;
ƒ unregistered hydro easements;
ƒ Cemeteries Act (Revised);
ƒ Conservation Authorities Act;
ƒ Beds of Navigable Waters Act;
ƒ Weed Control Act; and
ƒ Drainage Act.
In addition, consider conducting the following
environmental searches:
ƒ Section 18 searches: Under the Environmental
Protection Act, the Director is given the power to
make clean up orders and issue certain certificates
of approval. A list of these approvals and orders is
kept on file at the Ministry of the Environment,
Conservation and Parks in an alphabetical index of
names. The list of names is compiled from 1970. A
letter can be sent to the regional office of the
Ministry requesting information on whether the
names submitted appear on the index record
maintained under s. 18. The orders are not filed by
property address or lot and plan description; and
therefore, a review of the chain of title on both the
property being purchased and the adjoining
properties should be made to compile a list of
names of title holders. Corporate searches should
also be done for corporations appearing on title to
determine whether they have changed their names
or amalgamated. It is also recommended that the
names of current and prior tenants/users of the
property be acquired from the client, if available.
ƒ Waste disposal sites: The Ministry of the
Environment, Conservation and Parks has compiled
a list of waste disposal sites and, upon request, will
provide advice as to whether a certain property
appears on its list. The lists are organized by lot and
concession number. It is also helpful to provide a
sketch locating the property in relation to
concession roads and other main roads.
ƒ Municipal inquiries: The Ministry of the
Environment, Conservation and Parks suggests that
municipal records be consulted for the period prior
to 1971. Generally, municipalities are not prepared
to entertain this type of letter enquiry, and it is
more useful to speak with a planner to determine
the previous land uses for the property or the
adjacent property.
The above enquiries will only provide information
contained in government records and responses and will
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not provide the client with assurance about the state of the
property or any potential environmental liability.
Speak to the client about conducting an environmental
inspection and audit, as well as including environmental
representations and warranties in the agreement of
purchase and sale. Representations and warranties are
only as good as the party that gives them, and the ability
to obtain appropriate compensation in the event of a
breach of the representation or warranty may be difficult.
Advise the client that responses from the Ministry of the
Environment, Conservation and Parks or other municipal
departments may not be received in time for closing.
There does not seem to be a standard practice among
practitioners as to what environmental inquiries should be
made. At a minimum, advise the client about the types of
due diligence enquiries that can be made, the cost of each
type of enquiry, and the risk inherent in the transaction.
The client’s instructions should be documented in writing.
The Brownfields Statute Law Amendment Act, 2001 is
intended to encourage the revitalization, development,
and clean up of abandoned and contaminated lands
known as “Brownfields.”
When searching the title to these types of properties, the
lawyer may find a certificate of property use registered by
the Ministry. This certificate may require an owner to take
action to prevent, eliminate, or ameliorate adverse
conditions on the subject property, or may require an
owner to refrain from certain uses of the property and/or
construction on the property.
If the lawyer finds a certificate of property use or a
Ministry of the Environment, Conservation and Parks
order registered on title, enquire with the Ministry to
determine if the property is in compliance. If the property
is not in compliance, requisition compliance by the vendor
and review the agreement of purchase and sale to
determine what course of action the client should take in
the event that the vendor is unwilling or unable to comply.
In addition to discussing this matter with the client, the
lawyer should also notify the mortgage company and/or
the title insurer of this non-compliance to determine their
respective requirements.
5. Unorganized territories
Territories that have not yet been organized as a
municipality are “unorganized territories.” Properties
located in these territories are subject to specific
legislation, some of which are set out below.
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5.1 Zoning
Under s. 13 of the Public Lands Act, the Minister of
Natural Resources and Forestry has authority to designate
any area and territory without municipal organization as
a restricted area and, subsequently, can issue building
permits on such terms and conditions as the Minister
considers proper.
Accordingly, when an area has been designated by the
Minister, a permit is required for the construction of any
building or the making of any improvement on lands in
that area. If the lawyer wants to find out what restrictions
are applicable to a property located in such an area,
enquire at the local office of the Ministry of Natural
Resources and Forestry. See s. 14 of the Public Lands Act,
which contains further restrictions.
5.2 Taxes
Under s. 2(1) of the Provincial Land Tax Act, 2006, all
land situated in unorganized territories subject to
exemptions are liable to assessment and taxation.
The Minister prepares a tax roll for non-municipal
territory.
5.3 Tile Drainage Act
Subsection 11(2) of the Tile Drainage Act governs loans
and liens given in territory without municipal
organization.
5.4 Local Roads Boards Act
Under the Local Roads Boards Act, a majority of the
owners at a special meeting can petition the Minister of
Transportation to establish a “local roads area.” Once such
an area has been defined, a local roads board will be
established to determine what roads to create or to repair.
The local roads board also establishes an annual levy
against all of the taxable land lying within the local roads
area. The levy is a land tax against all property owners and
is collectible in the same manner as taxes under the
Provincial Land Tax Act, 2006 if delegation occurs by way
of agreement with the Minister of Finance. If the tax
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remains unpaid for two years or more and remains so
unpaid for 12 months after the mailing of a notice and the
secretary treasurer of the board so certifies, the Minister
of Natural Resources and Forestry can declare the land
forfeited.
The Act makes specific reference to the return of lands that
have been forfeited in error but does not provide a
mechanism whereby a delinquent taxpayer can pay up and
get the property back.
5.5 Northern Services Boards Act
A local services board created under the Northern
Services Boards Act deals with matters such as water
supply, fire protection, garbage collection, sewage, street
or area lighting, and recreation. If such services are
supplied, then the costs are passed onto the property
owners within the local services area in the same manner
as taxes under the Provincial Land Tax Act, 2006.
5.6 Shoreline Property Assistance Act
For enquiries under the Shoreline Property Assistance
Act, write to the relevant municipality.
6. Conclusion
The aforementioned searches are by no means exhaustive
of the searches that can apply to the purchase of a
property, but they are the most frequently applicable.
Know as much about the property from the client, the
vendor, or the real estate agent as possible, particularly in
areas not located within a registered plan of subdivision.
Only in this manner can the lawyer become aware of what
searches to conduct.
Finally, in the case of a client who is applying for title
insurance, if the lawyer performs any enquiries on behalf
of the title insurer and the title insurer will accept verbal
responses to an enquiry, ensure that the verbal response
that is obtained is documented in writing, as well as the
name of the person who provided the response and the
date and time that the conversation took place.
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Subdivision control: Section 50 of the Planning Act
1. Purpose of s. 50 of the Planning Act
The purpose of the Planning Act (Act) is to control the
manner in which land can be developed and used. Land
development often requires “subdivision”: the division of
one large parcel of land into two or more smaller parcels.
Such subdivision of land is the subject of s. 50 of the Act.
Non-compliance with s. 50 is fatal to any intended
transaction. The legislation is necessary because at
common law, the owner was not restricted as to the use of
the land, subject to possible nuisance actions, and such
absolute control by the owner is considered inconsistent
with good municipal planning.
The provincial government does not, in most cases,
exercise direct control over development; rather, the
legislation is designed to allow development decisions to
be made by municipalities and be overseen by the Local
Planning Appeal Tribunal (LPAT). As of late, the focus has
been on restoring local accountability and transparency to
land-use planning. The Strong Communities (Planning
Amendment) Act, 2004 strengthens planning at the
municipal level, and the Planning and Conservation Land
Statute Law Amendment Act, 2006 limits the LPAT to
acting as a true appeal body.
There is a substantial body of case law regarding s. 50 of
the Act. Many of the reported decisions have arisen in the
context of vendor and purchaser applications where the
two sides of an issue are often not strenuously argued
since the parties may be intent only on solving a mutual
problem as quickly and cheaply as possible. Thus,
inconsistent judicial decisions are common. As a result, it
is important to understand the plain wording of the
subsections and to appreciate the case law in the context
in which the decisions have been rendered.
2. Effect of contraventions: s. 50(21)
Subsection 50(21) provides that any transaction
prohibited under s. 50 (or the equivalent section in an
earlier statute) “does not create or convey any interest in
land.” If a conveyance of land contravenes s. 50, it will not
convey any interest in land; as a result, any transfer,
charge, lease, agreement, or other conveyancing
document registered in contravention of s. 50 of the
Planning Act will not have its intended effect. It is
therefore an essential responsibility of the lawyer to
ensure compliance with s. 50.
Subsection 50(21) does, however, contain a “subject to
compliance” provision that is available to protect the
interest in land created by an agreement of purchase and
sale, even if on its face the agreement contravenes s. 50. In
the case of an agreement of purchase and sale that
ƒ breaches s. 50 of the Act;
ƒ breaches s. 50 in a way that can be cured before
closing; and
ƒ contains a clause in the form of a true condition
precedent making it “subject to the express
condition contained therein that such agreement is
to be effective only if the provisions of this section
are complied with,”
the agreement will be valid and fully enforceable, pending
the resolution of the breach of the Act before completion.
If the express condition is included, neither party can
immediately declare the agreement ineffective on the
ground that the agreement creates no interest in the land
due to the contravention of the Act. If the problem is fixed,
then the transaction proceeds; if not, the transaction fails.
The OREA agreement of purchase and sale contains this
clause in para. 15.
Such an explicit condition must be included in every
agreement of purchase and sale, option to purchase
agreement, lease for more than 21 years, or other
document involving the conveyance of an interest in land.
Doing this guarantees protection for the agreement from
the effect of s. 50(21) should an unexpected problem
under the Act arise.
3. The legal framework of land division:
ss. 50(3) and 50(5) and the registered
plan of subdivision
3.1 Terminology
This chapter frequently refers to a “parcel” of land. A
parcel is simply (1) a piece or section or tract of contiguous
land (2) owned by one or more co-owners.
A “lot” of land is a parcel of land identified by a number. A
lot can be a lot on a concession or a lot on a plan of
subdivision. “Part of a lot” means a fractional physical
section of one lot.
The word “convey” is used in a general sense to cover any
of the conveyances referred to in the opening words of
ss. 50(3) and (5).
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A “registered plan of subdivision,” (RPS) is a plan that has
been approved and registered under s. 51 of the Act. The
RPS, along with the official plan made under Part III of the
Act, are the basic planning tools for land development in
Ontario. The owner of any suitably sized parcel of land can
apply to the municipality for an RPS that divides the
owner’s land into multiple “lots,” “blocks,” roads, and
other parts. The RPS requires a detailed community
planning procedure to assure that the land is suitable for
its proposed use, complies with all government legislation,
and does not impose development that would create
financial, physical, or other serious problems for the
community.
3.2 The basic legal structure
Subsection 50(3) of the Act prohibits most transactions
involving real property in Ontario, unless
ƒ the property is located within an RPS under
s. 50(3)(a) and complies with s. 50(5); or
ƒ a transaction falls into one of the exceptions listed
in ss. 50(3)(b)–(h).
Subsection 50(3) effectively says to land owners, “You
may not subdivide your land that is not on an RPS, unless
you obtain land development planning approval.”
Properties located within an RPS are regulated by s. 50(5),
which prohibits most transactions involving RPSs, unless
the transaction falls into one of the exceptions in
ss. 50(5)(a)–(h). In this case, s. 50(5) tells land owners,
“You may not subdivide any lot or block on an RPS unless
you obtain land development planning approval.”
Subsections 50(3) and (5) have a similar structure:
opening words setting out types of prohibited conveyances
(transfer, mortgage, etc.), followed by a list of exceptions.
The exception applicable to any given transaction allows
the routine purchase and sale of real property in Ontario.
If no exception applies, then and only then does the owner
need to obtain planning approval.
RPSs are dealt with in detail later in this chapter. For now,
understand that each RPS is created and regulated by the
Act. The RPS is one of the planning mechanisms that bring
orderly development of land in conformity with
government goals. RPSs consist of numbered lots and/or
blocks and roads as shown on a numbered plan. The
subdivision of a lot or block within an RPS is the subject
of s. 50(5). The RPS is used in almost all new residential
subdivisions in Ontario, with a new home being built on
each lot of the plan.
When the Act first came into effect in the 1940s, its reach
in terms of the land affected was limited. The Act
originally only affected land if the municipality passed a
by-law declaring that the Act applied to specifically
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identified land and registered the by-law on title. There
were also more exceptions to and exemptions from the
Act. Over the years up to 1970, this “reach” was gradually
broadened by reducing the exceptions. In addition, as of
June 27, 1970, the Act applied to all land in Ontario
without the need for municipalities to adopt it via by-laws.
Important dates in the development of the Act since 1967
are the subject of “Identifying Planning Act
contraventions,” further in this chapter.
Since 1967, loopholes in ss. 50(3) and (5) have been
periodically found by lawyers, approved by judges, and
then plugged by the Legislature. Further subsections of
s. 50 plugged loopholes and created special exceptions, as
discussed below.
3.3 Bill 276: modernizing the Planning Act
Bill 276, the Supporting Recovery and Competitiveness
Act, 2021, received Royal Assent on June 3, 2021, and
came into force on January 1, 2022. Bill 276 was
undertaken with the intent of modernizing various
regulations that are considered long overdue by real estate
practitioners. Amendments effected by Bill 276 are noted
throughout the chapter and include both substantive and
procedural changes to the Act.
4. Subdivision control under s. 50(3)
4.1 The lands to which s. 50(3) applies
Subsection 50(3) applies to all land that is not all or part
of one or more lots or blocks within an RPS; thus, the
subdivision of lots on concessions and of lots on various
plans that are not RPSs, such as deregistered plans and
registrars’ compiled plans, are all regulated by s. 50(3).
4.1.1 Concessions vs. registered plans
Because of the distinction between ss. 50(3) and (5), it is
important to understand the difference between a
concession and an RPS.
Ontario was originally divided into counties. Counties
were divided into townships, townships into concessions,
and concessions into, typically, 200-acre lots, which the
Crown often granted to favoured citizens and early
settlers. Thus, a legal description consisting of Lot 5,
Concession 12, Township of Tiny, County of Simcoe,
pinpoints the exact surveyed location and boundaries of
that 200-acre parcel of land called Lot 5 on a very large
section of surveyed land called a concession. Since the
1790s, describing land in terms of lots on concessions has
been the underlying method of legal description for all
land in Ontario, both in the original registry system and in
the more recent land titles system.
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An RPS (the subject of s. 50(5)) is created by a
municipality under the Act, on the application of a land
developer. The RPS is “superimposed” on top of the
original lots and concessions. Most RPSs consist of parts
or all of one or more lots on one or more concessions.
4.1.2 Deregistered plans of subdivision:
s. 50(4)
It is possible for a municipality, for the purposes of s. 50,
to deem a plan of subdivision that has been registered for
eight years or more not to be an RPS by passing a by-law
under s. 50(4). A municipality might pass such a by-law to
regain planning control over an established area, perhaps
because of changes in patterns of development or
municipal policy where the previously approved plan is
considered obsolete. Note that the plan remains a “plan of
subdivision” for all purposes but one: it is now regulated
by s. 50(3), not by s. 50(5), because it is no longer an RPS,
i.e., a registered plan of subdivision.
4.1.3 Reference plans
A reference plan is a plan that illustrates the boundaries of
a parcel of land. It is prepared by an Ontario land surveyor
solely for that purpose. It replaces the old, lengthy, and
verbose legal descriptions by “metes and bounds.” It is not
an RPS.
4.1.4 Registrar’s compiled plans
These were created by land registry offices in the past as
an aid to title searching. A registrar’s compiled plan is not
an RPS.
4.2 The prohibited transactions: s. 50(3)
The following transactions are prohibited in the opening
words of s. 50(3):
ƒ conveying land by deed or transfer.
ƒ granting, assigning, or exercising a power of
appointment (a power to appoint is equivalent to a
power to convey with respect to land—the land is
held by an owner “to uses” (primarily seen in
conveyancing before 1985) and includes a power of
appointment).
ƒ mortgaging or charging land with any encumbrance.
ƒ entering into an agreement of sale and purchase of
land.
ƒ entering into any agreement that has the effect of
granting the use of or right in land, either directly or
by entitlement to renewal, for a period of 21 years or
more. For example, this would include
— granting a right-of-way or easement over land
in perpetuity;
— granting a lease with a term of 21 years or
more;
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— granting a 15-year lease with an option to
renew for six or more years; or
— granting an option to purchase.
These prohibitions are intended to apply to almost all real
property transactions.
4.3 The exceptions to the prohibitions in
s. 50(3)
With the coming into force of Bill 276, there are now more
exceptions in s. 50(3) to which the basic prohibitions do
not apply. Other than the RPS exception in s. 50(3)(a),
fitting into any one of these exceptions makes a
transaction permissible. Each exception involves either a
transaction in which land is not being divided or one in
which government consideration of planning issues is
present. If any of these exceptions applies to a transaction,
then s. 50(3) will not prohibit the transaction. In addition,
there are a few other exceptions, which include vesting
orders under the Trustee Act and under the Family Law
Act.
4.3.1 The exception for RPSs: s. 50(3)(a)
As stated above, a transaction is not prohibited by s. 50(3)
of the Act if the land being conveyed is “described in
accordance with and is within a registered plan of
subdivision” (s. 50(3)(a)). This is a logical exception. Prior
government approval has already been granted to the
pattern of land division laid out on the registered plan. The
underlying purpose of s. 50(3) has thus already been
served so that s. 50(3) need no longer hinder or prevent
the conveyance of or other dealings with whole lots or
blocks within the registered plan.
While land within an RPS will not be affected by s. 50(3),
this does not mean that the Act has nothing to say about
such land. There is still the possibility of subdivision of
land that is within an RPS. Any whole lot or block excepted
by s. 50(3)(a) can still be severed into part lots or part
blocks. This potential dividing of whole lots or blocks on
an RPS into smaller parcels is regulated by the “part-lot”
control provisions contained in s. 50(5) of the Act.
4.3.2 The “no abutting lands” exception:
s. 50(3)(b)
With Bill 276, s. 50(3)(b) has been expanded to three
exceptions. Clause 50(3)(b) constitutes the first of these
exceptions to the prohibitions in the opening words of
s. 50(3) and is the exception that applies to most routine
conveyancing transactions involving land not within an
RPS. This exception allows an owner to carry out a
transaction if the owner does not own land abutting the
land being conveyed or, in the language of the statute, the
owner does not retain the fee (ownership) or the equity of
redemption (the right to recover unencumbered
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ownership upon repayment of a mortgage loan) in any
land “abutting the land that is being conveyed or otherwise
dealt with.”
Clause 50(3)(b) also creates an “exception to the
exception”: the owner is allowed to carry out the
transaction while owning abutting land if the abutting
land consists of the whole of a lot or block on an RPS.
If an owner conveys all of the land owned and retains no
abutting land—that is, no ownership interest in any land
having a common boundary with the land being dealt
with—then such dealing is permitted since it complies
with s. 50(3)(b). Selling only a part of a parcel of land
while retaining ownership of abutting land is prohibited
by s. 50(3) because the transaction would have the effect
of dividing the parcel into two (or more) parcels. Again,
note the exception to the rule: where the retained abutting
land is the whole of a lot or block on an RPS, the
prohibition does not apply. From a planning perspective,
this makes sense: if the whole lot or block is exempt in any
event because it is on a plan of subdivision (and not
subject to the part-lot control rule), it should not hinder
the separate conveyance of the abutting land that is not
within the RPS.
Examples
The following examples will assist in appreciating the
practical manner in which the “no abutting lands”
exception to the prohibition operates and how the Act can
be contravened. Figure 1 below consists of parts (labelled
A through F) of a lot on a concession. They are parts of a
concession lot; therefore, none of A to F is the whole of a
lot or block on an RPS.
If Owner owns only B, Owner is able to convey any interest
in all of B in any manner and rely on the “no abutting
lands” exception to avoid a contravention of s. 50(3).
If Owner owns B and C and wants to sell B only, while
retaining C, the transaction will fall outside the “no
abutting lands” exception because Owner retains C, which
abuts B. Owner must find some other exception in order
to sell B and retain C.
The same analysis applies if Owner owns B and C and
wants to mortgage B but not C, or grant an option to
purchase B but not C, or lease B with a term of 21 years or
more but not C. B and C abut, so in the absence of an
exception, they must be conveyed together.
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Figure 1
A B C
D E F
Variations on the above fact situation give some idea as to
how the subsection has been interpreted and applied:
ƒ Historical separation: Owner acquired B in
May 1985 and C in June 1985. Historically, they had
been separate properties. Can Owner now sell B
alone and rely on the “no abutting lands” exception,
arguing that the two parcels were historically
separate?
Subsection 50(3) does not give any consideration
merely to the prior history of the lands in question.
All abutting land once under the same ownership
“merges” into one parcel, and the transaction is
prohibited.
ƒ Touching at a single point: If Owner owned B and F,
can Owner sell B and retain F? B and F meet only at
a single point. Lands that only meet at a single point
have been held not to abut, and therefore Owner
can sell B and retain F. A “single point” is where two
straight lines intersect.
ƒ Horizontal planes: May Owner sell the underground
mineral rights to B and still retain the surface rights
without the transaction contravening s. 50?
Subsection 50(2) provides that interests in lands do
not abut when they meet on a horizontal plane only.
As of December 9, 1994, s. 50(2.1) deems land to
exclude mining rights in or under land, but not
mining rights on the land.
ƒ Abutting land as a whole lot on an RPS: Owner
owns B and C. B is part of a lot on a concession. C is
a whole lot on an RPS. Can Owner sell B only and
have the conveyance remain within the “no abutting
lands” exception?
Yes. As discussed above, the last phrase of
s. 50(3)(b) provides that the “no abutting lands”
exception applies if the abutting land is “the whole
of one or more lots or blocks within one or more
registered plans of subdivision.”
With the coming into force of Bill 276, s. 50(3)(b) has now
been expanded to three exceptions such that an owner is
allowed to carry out the transaction while owning abutting
land in the following situations: (i) the abutting land
consists of the whole of a lot or block on an RPS, (ii) the
abutting land is within a registered description under the
Condominium Act, 1998, or (iii) the abutting land is the
identical parcel of land that was previously conveyed or
mortgaged with a consent under s. 53.
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4.3.3 The government consent exception:
s. 50(3)(f)
Relief from the prohibitions in s. 50(3) occurs if the
transaction is effected with the consent of the relevant
government body. Obtaining a consent to sever land under
s. 53 of the Act will permit an owner to convey part of the
owner’s land while retaining an interest in the abutting
remainder of the owner’s land.
“Consent” is defined in s. 50(1) of the Act. Approval of an
otherwise prohibited transaction may be given by the
appropriate municipal, city, or county council or the
Ministry of Municipal Affairs and Housing, depending on
the location of the land, once it has determined that
planning principles will not be sacrificed or may be
compensated for in some way. Often the consent will be
granted by a committee of adjustment or land division
committee, which are simply bodies to which powers to
grant consent have been delegated.
Regulation of the consent process is set out in s. 53, which
is largely procedural. Pursuant to s. 53(43), a consent
lapses on the expiry of two years following the date on
which the certificate of decision of consent was given if the
transaction approved for consent has not been carried out.
The body granting consent may also shorten the lapse date
or grant its consent subject to conditions that must be
satisfied before the consent takes effect. Previously, failure
to satisfy the conditions within one year rendered the
consent void under s. 53(41). Bill 276 increased the period
within which to fulfill the conditions to two years.
For example, Owner obtains consent under s. 53 to divide
a parcel of concession land into parts A and B, and to sell
A while retaining B. The consent is subject to conditions.
If Owner satisfies the conditions within two years and then
sells A within two years after the date on which the consent
was given, while retaining B, the transaction is permitted
under the exception in s. 50(3)(f). The registered transfer
of A will include a certificate issued to Owner under
s. 53(42) that consent to the transaction has been given.
However, if the transfer of A is registered more than two
years after the date of the consent, then the consent has
lapsed, s. 50(3)(f) no longer applies, and the transfer of A
is null and void, regardless of registration.
Bill 276 further modernized procedural aspects for
obtaining consents. Other notable amendments from
Bill 276 include the following:
ƒ ss. 53(4.2.1)–(4.2.2), which now allow an applicant
to amend a consent application any time before a
decision is rendered; and
ƒ amendments to s. 53(1), which allow purchasers to
apply for a consent in their own name, whereas
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previously only a vendor could apply on the
purchaser’s behalf.
4.3.4 Transactions involving government:
ss. 50(3)(b.1)–(e) and (g)–(h)
The rationale for these exceptions to the general
prohibition is identical. If a government or a government
agency wishes to acquire or dispose of lands in such a way
that additional parcels will be created or land will be
divided, or creates a specific exception in furtherance of a
government policy, one can only assume that it, as the
body with control over planning, has considered the
planning implications of the transaction and found them
to be satisfied.
Clause 50(3)(b.1) creates an exception for leases of
abutting land having terms between 21 and 99 years where
the land will contain affordable housing units.
Clause 50(3)(c) creates an exception for the acquisition or
disposition of land by federal, provincial, and municipal
governments. As a result, for example, there can be no
contravention of the Act regarding conveyances of parts of
lots to municipalities for road-widening purposes.
Clause 50(3)(d.1)(i) creates an exception where the lands
are within a site plan control area and for which plans or
drawings have been approved.
Clause 50(3)(d.1)(ii) creates an exception for leases of a
land lease community home having terms between 21 and
49 years.
Clauses 50(3)(d) and (g) relate more specifically to the
acquisition of land or rights in land for the purpose of
transmission lines pursuant to Part VI of the Ontario
Energy Board Act, 1998. Clause 50(3)(e) creates an
exception for the acquisition of land or rights in land for
purposes of flood control, erosion control, bank
stabilization, shoreline management, or the preservation
of environmentally sensitive lands. Clause 50(3)(h)
excepts the grant of an easement or covenant under the
Conservation Land Act.
4.3.5 Abutting lands owned by joint
tenants: s. 50(3)(a.1)
Bill 276 added a new s. 50(3)(a.1), which deals with land
that abuts land previously owned by joint tenants. Under
the previous regime, where a landowner, who also owns
abutting lands, obtains title to a property through the right
of survivorship upon the death of the other joint tenant,
the two properties merge under the surviving landowner’s
name. The survivor would then require a consent to deal
with each property separately. Now under s. 50(3)(a.1), no
merger occurs upon the death of one joint tenant, and the
survivor is able to convey each property separately.
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5. Lots within an RPS: s. 50(5)
5.1 General principles
Clause 50(3)(a) allows a transaction to proceed without
being in contravention of s. 50(3) as long as the land being
dealt with is “within a registered plan of subdivision.”
Subsection 50(5) was enacted to deal with the further
problem of the owner who wishes to divide a registered lot
or block that is already “within a registered plan of
subdivision.”
A proposed plan of subdivision takes a large parcel of land
and, through a detailed planning process, divides the
parcel into many smaller parcels called lots or blocks.
These lots and blocks are conveyable parcels once the
proposed plan has been approved and registered as an
RPS, even though the developer may own abutting lots or
blocks. Under s. 50(3)(a), the whole lots and blocks are
exempted from the general prohibition imposed by the
opening words of s. 50(3) because they have been
recognized for planning purposes as lots that may be dealt
with without regard to s. 50 of the Act.
5.2 Problems arising from the word “lot”
The phrase “lot or block on a registered plan of
subdivision” has a specific technical meaning. The terms
“lot,” “parcel,” and “part” often arise in the description of
land, but not every lot, parcel, or part is a “lot or block” on
an RPS. Therefore, a conveyance of land described as a
“lot,” “parcel,” or “part” does not necessarily refer to a lot
on an RPS as referred to in s. 50(3)(a). The following are
examples of land descriptions involving a “whole lot” or
“part” that do not qualify for the exception under the last
phrase of s. 50(3)(a) nor, hence, under s. 50(5); they are
regulated by s. 50(3), not 50(5), because they are not
whole lots on an RPS:
ƒ the whole or any part of a lot on a concession;
ƒ the whole of a “parcel” in a “section” registered in
the land titles system (this is old terminology);
ƒ the whole of a lot on a registrar’s compiled plan;
ƒ the whole of a lot on a deregistered plan; and
ƒ the whole of a numbered “part” on a reference plan.
5.3 Controlling the division of whole lots
into part lots: s. 50(5)
If an owner of a whole lot or block on an RPS wants to
convey only a part of such lot or block, such a transaction
may be contrary to the original pattern of land division
created when the plan of subdivision was approved
because it creates two potential building “part lots” out of
one whole lot. Subsection 50(5) regulates “part lot”
transactions such as this.
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Similar in structure to s. 50(3), s. 50(5) prohibits a person
from dealing with “a part of any lot or block of the land”
within an RPS, unless the transaction falls within one or
more of the specific exceptions set out in ss. 50(5)(a)–(h).
Accordingly, one can rely on the s. 50(3)(a) plan of
subdivision exception only if the land being dealt with is
the whole of a lot or block on an RPS. If one is not dealing
with the entire lot or block as found on the plan of
subdivision, s. 50(3)(a) is of no assistance, and one must
look for an exception in s. 50(5).
Assume that Owner owns the whole of Lots 1 and 2 on an
RPS as in Figure 2 below. Owner may sell all of Lot 1 (that
is, the west and east halves) while retaining Lot 2, and vice
versa, without contravening s. 50(3) due to the combined
protection of s. 50(3)(a) (within and described on an RPS)
and s. 50(5)(a) (abutting land retained is a whole lot or
block on a plan of subdivision). In either conveyance,
Owner is dealing with the whole of a lot on an RPS.
Figure 2
WEST ½ EAST ½ WEST ½ EAST ½
LOT 1 LOT 1 LOT 2 LOT 2
However, if Owner builds four houses, consisting of one
house on each part lot as in Figure 2, Owner could not sell
any one of the houses individually without being in breach
of s. 50(5)(a). In the case of each such part lot, even
though Owner is dealing with land within an RPS, Owner
runs afoul of s. 50(5)(a) because Owner retains ownership
of abutting land that is not the whole of a lot or block on
an RPS. Note that Owner could, in compliance with
s. 50(5)(a), sell together the east and west halves of a
whole lot, selling two houses at a time.
5.4 Exceptions allowing conveyances of
part of a lot or block
5.4.1 Clauses 50(5)(a)–(h) and the
special case of s. 50(5)(e)
If one wishes to sell or otherwise deal with a part of a lot
within an RPS, one must look to s. 50(5) for exceptions to
the general prohibition.
The exceptions are essentially the same as those set out in
ss. 50(3)(b)–(h). Clause 50(5)(a.1) is essentially the same
as s. 50(3)(b.1). To deal with part of a lot or block on an
RPS, one must retain no ownership interest in abutting
land (other than ownership of a whole lot or block within
the RPS), obtain a consent to the transaction, or be dealing
with a government.
The novel exception, applicable to transactions on or after
August 1, 1983, is s. 50(5)(e), which applies to dealings
with the remainder of the lot or block after part of a lot has
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been “acquired by a body that has vested in it the right to
acquire land by expropriation.”
Assume that Owner owns all of Lots 1 and 2 on an RPS.
Owner has conveyed (per s. 50(5)(b)) a strip of land from
Lots 1 and 2 to the municipality for road-widening
purposes (Figure 3). If Owner later wants to sell the
remainder of Lot 1 (the part of Lot 1 not conveyed to the
municipality) while keeping the abutting part of Lot 2, the
transaction would appear to be prohibited by s. 50(5),
which prohibits dealing with part of a lot (in this example,
the remainder of Lot 1) while retaining ownership of
abutting land that is not the whole of a lot or block on an
RPS (the remainder of Lot 2).
Figure 3
LOT 1 LOT 2
However, Owner will be able to rely on the exception
contained in clause (e) to protect the transaction, since
Owner will be dealing with all of Lot 1 except the portion
conveyed to the municipality, which has the power of
expropriation.
Bill 276 added s. 50(5)(a.2), which is a similar to
s. 50(3)(a.1) dealing with land that abuts land previously
owned by joint tenants. See “Abutting lands owned by
joint tenants: s. 50(3)(a.1),” above.
5.4.2 Exempting by-law under s. 50(7)
A municipality can pass a by-law pursuant to ss. 50(7)–
50(7.5) that exempts specified lands from the part-lot
control provisions of s. 50(5) of the Act. In such an
instance, part-lot transactions are permitted. Such by­
laws are commonly found during title searches. It is
important to review such a by-law to determine the exact
parameters of the permission since it will very likely
restrict the extent of the permitted part-lot transactions.
6. Statutory responses: new exceptions
and closing loopholes
Section 50 contains many subsections that are highly
specific in focus. One can come to grips with their effects
by classifying them according to two groupings:
subsections that plug loopholes, and subsections that
create loopholes so that desirable transactions will not be
caught by the sweeping effect of the prohibition.
6.1 Creating new exceptions
For conveyances caught by the Act but to which it was not
intended to apply, exceptions have been made:
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ƒ Subsection 50(8)—vendor take-back (VTB)
mortgages (see Chapter 47 (Agreement of purchase
and sale) of these Study Materials): VTB mortgages
are allowed as part or all of the consideration for the
purchase of land, provided that the mortgage
applies to all of the land purchased. If the owner of
Parcel B on a concession purchases abutting Parcel
A and gives a mortgage of all of A to the seller as
part of the purchase price, the mortgage would
contravene s. 50(3)(b) since the owner would be
mortgaging A while retaining B; however, s. 50(8)
permits this VTB mortgage. Note that the mortgage
must apply to all of A and must be given to the
vendor and not to a third party.
ƒ Subsection 50(9)—leases of part of a building: The
prohibition in ss. 50(3) and (5) of “any agreement
that has the effect of granting the use of or right in
land directly or by entitlement to renewal for a
period of twenty-one years or more” has the effect of
prohibiting all leases of real property exceeding
21 years. However, a lease such as a 25-year lease of
one floor of a 20-storey office building was never
intended to be caught by this prohibition because it
does not compromise planning principles. The
s. 50(9) exception thus allows leases for any period
of years where only “part of a building or structure”
is being leased. Note that a lease of outdoor surface
rights for more than 21 years (i.e., parking lots and
patios) that may accompany a lease of a portion of a
building was not previously included in this
exception and was, therefore, prohibited. Bill 276
amended s. 50(9) to permit leases of a part of a
building or structure that include ancillary uses of
land, such as outdoor spaces, which is a logical
implication of this exception.
ƒ Subsection 50(10)—drainage systems: This
subsection allows owners of adjacent lands who
wish to co-operate in the building and maintenance
of drainage systems to make the necessary
agreements regarding easements and mutual rights­
of-way, etc., without contravening s. 50.
ƒ Subsection 50(11)—Agricultural Rehabilitation and
Development Directorate: This subsection allows
the Agricultural Rehabilitation and Development
Directorate of Ontario to deal with lands acquired
separately as individual parcels, despite the fact that
they may abut.
6.2 Closing loopholes
The following subsections were enacted over a period of
years to close loopholes:
ƒ Subsection 50(15)—simultaneous conveyances: This
subsection prohibits subdivision of land by means
of simultaneous conveyances. This was inserted to
prevent schemes whereby the owner would
theoretically convey the two halves of the owner’s
land at the same instant so that, at the time of either
conveyance, the owner could not be said to retain
the fee in abutting land.
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ƒ Subsection 50(16)—partial discharge of mortgage:
Suppose that Owner owns Parcel A on a concession
and mortgages Parcel A to Friend. Friend then gives
Owner a partial discharge of the mortgage
(releasing part of the land described in the
mortgage) from a portion of A while retaining the
mortgage against the remainder of A. Friend then
forecloses on the mortgage of the remainder of A
and becomes the registered owner of A through the
foreclosure process. Before s. 50(16) was enacted,
this technique could be used to sever land without
consent.
Subsection 50(16) prohibits such partial discharges
of a mortgage by deeming the mortgagee to “hold
the fee” in the lands subject to the mortgage and to
be “conveying” the part that is the subject of the
partial discharge. Subsection 50(17) contains
several logical exceptions to this rule.
ƒ Subsection 50(18)—foreclosure or power of sale:
Before s. 50(18) was enacted, nothing in s. 50(3) or
(5) prevented a mortgagee from enforcing its
mortgage by foreclosure or power of sale against
only a part of the land that was subject to the
mortgage. It could then sell the foreclosed portion
of the land to a third party, effecting a severance
without consent. For example, an owner could give
a mortgage to a co-operating mortgagee/purchaser,
fail to make mortgage payments, and allow the
mortgagee/purchaser to “foreclose” on only the pre­
arranged portion of the land. Subsection 50(18) now
requires government consent to foreclosures and
power of sale proceedings where not all of the land
that is the subject of the mortgage will be affected,
subject to certain exceptions. The court foreclosure
order itself is not a prohibited transfer under
s. 50(3) and is effective to divide the parcel, subject
to Ministerial approval. The permitted exceptions
are logical since they do not compromise planning
principles.
ƒ Subsection 50(19)—ownership change between two
existing owners: Subsection 50(19) prohibits joint
tenants and/or tenants in common from changing
the ownership of land through a “release” of one
owner’s interest as a preliminary to what would
otherwise be a prohibited transaction. For example,
Owner 1 and Owner 2 own Parcel A as joint tenants
and abutting Parcel B as tenants in common. A and
B are lots on a concession. Neither A nor B can be
sold separately due to s. 50(3)(b). Owner 2 transfers
Owner 2’s interest in B to Owner 1 so that Owner 1
becomes the sole owner of B. This involves only a
change of legal tenure of one parcel, which is not a
prohibited transaction. The abutting lands are now
owned by different legal entities and thus could be
conveyed separately without contravening
s. 50(3)(b). Subsection 50(19) now prohibits this
practice.
ƒ Subsection 50(20)—Partition Act orders: “To
partition” means to divide. The Partition Act allows
any person claiming an interest in land to apply to
the Superior Court of Justice for an order
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(1) physically partitioning the land among more
than one party; (2) partitioning the registered title,
for example, by converting a joint tenancy to a
tenancy in common; and in both cases (3) if
appropriate, authorizing the sale of the land and the
division of the proceeds of sale. Such orders may be
sought where two or more owners of land cannot
agree on the terms of sale of the land or as to
whether the land should even be sold. Any person
interested in land in Ontario may bring an action for
the partition of such land or for the sale thereof
under the directions of the court if such sale is
considered by the court to be more advantageous to
the parties interested.
Before s. 50(20) took effect, Partition Act orders
were sometimes made without a consent under s. 53
of the Act. Such an order could physically divide
land among two or more claimants, thus
circumventing ss. 50(3) and (5); or the order might
change the tenure of land in circumstances similar
to the situation described above with respect to
s. 50(19). Partition orders now require consents
under s. 53 unless each part of land described in the
order could be conveyed without contravening s. 50.
ƒ Section 50.1—Division of land by will: Deemed in
force on July 26, 1990, s. 50.1 prohibits lands being
divided by a will. Any division of land by will creates
a tenancy in common in all of the land unless the
Act has been complied with.
7. Identifying Planning Act contraventions
The many amendments to the Act since June 15, 1967,
close loopholes and create exceptions for unintended
consequences. A transaction that appears to be a
contravention under the current version of the Act may
not have been prohibited under the legislation in force
when the suspect transaction was completed. Therefore,
one must consider the effective dates of the amendments,
as well as case law, in order to determine the validity of a
transaction when it occurred.
Every time a title search is done as part of a real estate
transaction, consideration must be given to the possibility
of present and past violations of ss. 50(3) and (5). There
will be two questions to consider:
ƒ Will the present transaction violate s. 50(3) or (5)?
ƒ Did a violation of s. 50(3) or (5) occur in the past, as
a result of which the present owner, as a matter of
law, has no title to convey?
As we know from s. 50(21), a past violation (that has not
been cured) will have the effect of voiding the transaction
in which the violation occurred. If that void transaction
was a transfer of the title, then very likely every registered
instrument beginning with the one that caused the breach
will be null and void, since no title would have been
transferred by the defective instrument and the owner in
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SUBDIVISION CONTROL: SECTION 50 OF THE PLANNING ACT
the present transaction will have no title to sell, mortgage,
etc.
It is therefore essential to confirm by searches of all
abutting lands that there has been no prior contravention
of s. 50(3) or (5).
In each transaction, there will be a “starting date” in the
past, from which the abutting-land search must begin.
7.1 The starting date for the search
How far back in time must searches of abutting lands for
violations of ss. 50(3) and (5) be made? There are different
answers to this depending on various circumstances.
June 15, 1967 is the “default start date.” Unless an event
occurred, or legislation was passed, after June 15, 1967,
that had the effect of changing the default date to a later
date (that is, shortening the abutting-land search period),
the abutting-land search must begin at June 15, 1967.
The following constitutes some of the more significant
dates of substantive changes in the law under the Act that
may serve to satisfy objections to title based on a
contravention of the Act.
7.1.1 June 15, 1967 — The Planning
Amendment Act, 1967, S.O. 1967,
c. 75
Any contravention of the Act occurring prior to June 15,
1967, does not have and is deemed never to have had the
effect of preventing the conveyance or creation of any
interest in land. As a result, any alleged contravention of
the Act regarding land that was then subject to the Act is
deemed not to have been a contravention.
For transactions occurring after June 15, 1967, but before
June 27, 1970, there is no such forgiveness. However,
during this period, the Act applied to land only if a by-law
had been enacted and registered by the municipality,
bringing the land in question under the Act. If there is no
such by-law registered against title, one need not be
concerned with contraventions of the Act until June 27,
1970, when all land in Ontario became subject to the
mandatory application of the Act and municipal by-laws
were no longer required for this to be the case.
The following examples help one appreciate the timing
problem. Assume in each case that Owner conveyed a
parcel of land on a concession in the year indicated while
retaining ownership of abutting land on the concession:
(a) No by-law ever passed; conveyance in 1968 —
No violation
(b) By-law passed 1960; conveyance in 1968 —
Violation
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(c) By-law passed 1960; conveyance in 1965 —
Violation forgiven
(d) No by-law ever passed; conveyance in 1971 —
Violation
(e) By-law passed 1969; conveyance in 1968 —
No violation
(f) By-law passed 1969; conveyance in May 1970 —
Violation
7.1.2 May 3, 1968 — The Planning
Amendment Act, 1968, S.O. 1968,
c. 96
Prior to this date, it was permissible to deal with 10 or
more acres of land if the vendor retained the fee in 10 or
more acres of abutting land. From and after this date, the
10-acre rule was abolished.
7.1.3 June 27, 1970 — The Planning
Amendment Act, 1970, S.O. 1970,
c. 72
A new s. 26 (now s. 50) was enacted, making the Act
applicable to all transactions throughout Ontario. Prior to
this date, the Act applied only if a municipality had passed
a by-law designating the lands as within an area of
subdivision control.
Part-lot control provisions were also changed. Prior to this
date, land on a plan of subdivision was exempt from the
Act unless the municipality passed a by-law making
subdivision control applicable. The new Act reversed the
process and made part-lot control applicable, unless the
municipality exempted the plan of subdivision from the
prohibitions.
7.1.4 December 17, 1973 — The Planning
Amendment Act, 1973, S.O. 1973,
c. 168
What is now s. 50(16) was added to the Act to prevent a
partial discharge of a mortgage from being used to avoid
the provisions of the Act. A partial discharge discharges a
mortgage from only part of the land the mortgage is
registered against. A person giving a partial discharge of
mortgage is deemed to hold the fee in lands mentioned in
the mortgage and to retain the fee in the balance of the
lands and is deemed to convey the lands mentioned in the
partial discharge. The rule does not apply if the partial
discharge is for the whole of a lot or block on a plan of
subdivision.
7.1.5 June 28, 1974 — The Planning
Amendment Act, 1974, S.O. 1974,
c. 53
Taking effect retroactively on December 17, 1973, partial
discharges were permitted in respect of land for which a
consent to convey has been given or where the discharged
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land is owned by the Crown. The provision is now found
in ss. 50(16)–(17).
Effective June 28, 1974, what is now s. 50(2) was added to
deem that land does not abut if it abuts on a horizontal
plane only. This permits the conveying of rights in land
strata (i.e., the conveying of underground mineral rights)
while retaining the ownership of the land itself.
In addition, what is now s. 50(8) was added to create an
exception to the general prohibition and permits VTB
mortgages provided that all of the land that is purchased
is made subject to the mortgage. Pursuant to the
provision, it is the vendor who must take the mortgage
back, and there might be some question as to the validity
of such a mortgage if the mortgage is registered in favour
of some other party. Notwithstanding this amendment,
Drewery v. Century City Developments Ltd. (No. 2)
confirmed that the giving back of mortgages did not offend
the Act in any event, since the section dealt with land-use
control and did not cover the situation of
contemporaneous sales and purchase-money mortgages
given back.
7.1.6 December 18, 1975 — The Planning
Amendment Act, 1975 (2nd Sess.),
S.O. 1975 (2nd Sess.), c. 18
What is now s. 50(18) was added to prohibit foreclosures
or power of sale transactions without the approval of the
Minister unless all of the land referred to in the mortgage
is included in the foreclosure or exercise of power of sale.
Prior to this amendment, foreclosures of part of the
mortgaged land were an effective way of avoiding the
statute.
7.1.7 June 7, 1976 — The Planning
Amendment Act, 1976, S.O. 1976,
c. 38
Further amendment was made to the rule regarding
foreclosures or powers of sale to permit such transactions
where land being foreclosed consists of one or more lots
or blocks on a plan of subdivision or a parcel of land that
does not abut another parcel of land that is subject to the
same mortgage (now s. 50(18)). This provision was
deemed to have come into effect on December 18, 1975, by
s. 5(2).
7.1.8 December 15, 1978 — The Planning
Amendment Act, 1978, S.O. 1978,
c. 93
What is now s. 50(14) was added to cure contraventions
that precede the registration of a plan of subdivision, a
condominium description, or a conveyance made with
consent. It is dealt with in greater detail in “The retroactive
effect of s. 50(14),” below.
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REAL ESTATE
What is now s. 50(19), deemed in force on November 23,
1978, was added to provide that any release by a joint
tenant or tenant in common of an interest to one or more
of the other joint tenants or tenants in common while
retaining the fee in abutting lands is deemed to constitute
a conveyance of that owner’s interest by deed while
retaining the fee in abutting lands.
What is now s. 50(20) (as finally amended in 1983) of the
Act was added to require notice to be given to the Minister
of Housing in a partition action. Prior to this time,
partition orders, being court vesting orders and not
conveyances by deed or transfer, were excluded from the
Act’s application.
Effective March 31, 1979, what are now ss. 50(12)–(13)
were added to provide that where a parcel was created by
consent under the Act and subsequently the same parcel
was purchased by an owner of abutting land, a further
consent would not be required on a subsequent sale of the
same parcel unless the original consent stipulated
otherwise. This is often referred to as the “once a consent,
always a consent” rule and applies so long as the identical
parcel of land conveyed with consent is being dealt with.
Refer to “The subsequent effect of a prior consent:
ss. 50(12) and (13),” below, for further details.
7.1.9 June 26, 1981 — Planning
Amendment Act, 1981, S.O. 1981,
c. 15
Partition Act orders require consent, or otherwise each
part of the land described in the order must have been
conveyable without contravening the section (s. 50(20)).
7.1.10 August 1, 1983 — Planning Act,
1983, S.O. 1983, c. 1
Section 50 was amended to add new provisions regarding
ƒ the ability to convey part of a lot on a plan of
subdivision where the abutting land is the whole of
a lot on a plan of subdivision (the last phrase of
ss. 50(3)(b) and (5)(a) (“other than land that is…”));
ƒ the ability to deal with part lots on a plan of
subdivision if the only other part of the lot is owned
by an expropriating authority (s. 50(5)(e));
ƒ exceptions for Ontario Hydro, transmission lines,
and conservation authorities (ss. 50(3) and (5));
ƒ exception for dealings with parts of a building
(s. 50(9));
ƒ new exception for simultaneous conveyances
(s. 50(15)).
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SUBDIVISION CONTROL: SECTION 50 OF THE PLANNING ACT
7.1.11 July 26, 1990 — Planning Statute
Law Amendment Act, 1991, S.O.
1991 c. 9
The predecessor to s. 50.1 took effect. A previous loophole
permitting land divisions by a will is addressed, effective
July 26, 1990. As a result, no provision in any will, whether
made before or after July 26, 1990, that purports to divide
land is of any effect unless each parcel of land could be
conveyed without contravening s. 50. The only exception
to the prohibition would be if the testator died prior to
July 26, 1990.
7.1.12 December 9, 1994 — Planning and
Municipal Statute Law Amendment
Act, S.O. 1994, c. 23
Amendments were made to s. 50(14) permitting the
application of the subsection to mortgages with consent.
Subsection 50(18) was amended to add two further
exceptions to the prohibition.
7.1.13 December 8, 2016 — Promoting
Affordable Housing Act, 2016, S.O.
2016, c. 25
Subsection 50(3)(b.1) creates an exception to the general
prohibition for leases of abutting land having terms
between 21 and 99 years where the land will contain
affordable housing units.
7.1.14 January 1, 2022 — Supporting
Recovery and Competitiveness Act,
2021, S.O. 2021, c. 25 (Bill 276)
Substantive amendments from Bill 276 include an
expansion of the “no abutting lands” exceptions in
ss. 50(3)(b) and 50(5)(a) to exempt from consent
requirements those conveyances of (i) land abutting land
that is within a registered description under the
Condominium Act, 1998, and (ii) land abutting land
previously conveyed with a consent.
New ss. 50(3)(a.1) and 50(5)(a.2) grant an exception from
the consent requirement for land that is the whole of a
parcel previously owned or abutted by joint tenants. There
is no longer a merger of lands upon the death of a joint
tenant if the survivor owns abutting land.
Subsection 50(9) permits the conveyance of ancillary uses
to long-term leases without a consent, such as outdoor
spaces.
Subsection 50(3)(g), the transmission-line exception to
the consent requirement, extends to successors in title of
the body or person to whom the land is being disposed of.
Bill 276 also made procedural changes to consent
applications. See “The government consent exception:
s. 50(3)(f),” above.
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Bill 276 is silent as to whether the amendments are
retroactive, although most commentators agree that
legislation is generally not retroactive.
7.2 The subsequent effect of a prior
consent: ss. 50(12) and (13)
Prior to March 1979, it was generally held that a consent
to convey had no effect on any subsequent transaction and
was only effective for the one transaction for which it was
sought and given. A consent to convey or mortgage Parcel
A validated only that particular transaction in question
and conferred no future or subsequent benefit on the
parcel.
On March 31, 1979, s. 50(12) was added to the Planning
Act. Where a parcel of land is conveyed with consent, the
prohibitions in ss. 50(3) and (5) do not apply to
subsequent conveyances or other transactions involving
the identical parcel of land, unless it is stipulated
otherwise when the consent is granted.
Figure 4
A B C
In Figure 4, assume Parcels A, B, and C are parts of a lot
on a concession and that Owner 1 owns A and B and
Owner 2 owns C. Owner 1 sells B to Owner 2 with consent.
Owner 2 later wishes to sell B to a third party.
In this example, assuming the consent was obtained after
March 1979, Owner 2 would be free to sell B without
obtaining another consent, since the identical parcel, for
which a previous consent to transfer the land had been
obtained, is now being conveyed again and there was no
stipulation in the earlier consent that it was to be
applicable to the first conveyance only. While there have
been cases indicating that this section is also applicable in
respect of consents granted prior to March 1979, care
should be taken in relying on these cases.
It is only a consent to a transfer of the fee simple in land
that has this lasting effect. A consent given to a mortgage,
for instance, has no lasting or future effect, and s. 50(12)
is not applicable. In addition, a previous consent to a
transfer would allow a future owner of both parcels to not
only transfer the same consented land, but also mortgage
or otherwise deal with it because mortgages and other
dealings involve a conveyance of lesser interests than does
a transfer of the fee simple.
Similarly, where land is divided and one parcel is sold with
consent and the remainder parcel is sold later, only the
consented parcel gets the future benefit of the subsection
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CHAPTER 51
even though the committee granting the consent
considered that two new parcels of land were being
created. The subsection affords the benefits only on the
parcel sold with consent. The remainder parcel gets no
such protection or benefit.
In Figure 4, therefore, where Owner owns Parcels A and B
and a consent had been used in the past to transfer B
previously, Owner can sell or mortgage B without concern
for the ownership of abutting land because B had been
previously sold with consent. Although s. 50(12) provides
relief, Owner cannot sell or mortgage A because it was
never previously conveyed with consent. Owner would be
dealing with A and retaining abutting land, and such a
transaction would contravene the Act. There is no
exception under ss. 50(3) and (5) to dealings with land
where only the abutting land was previously conveyed
with a consent.
Bill 276 expands the list of exceptions under ss. 50(3) and
(5) such that if a parcel of land that is being conveyed abuts
a parcel of land that was previously conveyed with consent
to divide the property, no consent shall be required. Lands
abutting a parcel of land previously conveyed with a
consent is referred to as “retained land” under the Act.
Previously, once a parcel was separated into the severed
land and retained land, consenting authorities would only
give consent certificates for the severed parcel, not the
retained parcel. The Act now allows consent certificates to
be obtained for both the severed and retained lands,
enabling a property owner to convey the retained land
before conveying the severed land.
8. Events that have a retroactive effect for
abutting land searches
In each of the following instances, all contraventions of
s. 50(3) or (5) occurring before the described “starting
date” will be cured so that abutting-land searches in all of
the described situations need go back only to the
respective starting dates. “Starting date” is a generic term,
not a legal term, used here to help explain the effects of
legislation on abutting-land searches.
Under the Land Registration Reform Act (LRRA), most
lands registered in the registry system were converted to
land titles beginning in 1992 with “land titles conversion
qualified” (LTCQ) qualifiers, which include almost all of
the benefits that accrue to a Land Titles Absolute parcel of
land; however, for all land registered in the land titles
system, one must always review the restrictions and
limitations on each land titles parcel, which typically state
that the title is “subject to the unregistered liabilities,
rights and interests that are itemized in s. 44(1) of the
Land Titles Act.” Ordinarily, none of those liabilities,
rights, or interests need to be registered. Many of the
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REAL ESTATE
exceptions create a requirement for off-title searches. In
the context of this chapter, s. 44(1)11 (which specifically
refers to ss. 50–50.1 of the Act) can have serious
consequences if disregarded.
8.1 Land registered under the Registry
Act—an “automated registry” estate
qualifier
For properties still in the registry system, every
transaction in the 40-year chain of title must prima facie
be examined for violations of ss. 50(3) and (5) (Registry
Act, s. 112) unless there exists some legal basis for
abridging the search. Where the first good root of title
precedes the 40-year search period, a search for violations
of the Act must be made back to the instrument that
provides the good root of title. Again, however, violations
of ss. 50(3) and (5) that occurred before June 15, 1967, are
of no concern.
8.2 Land registered under the Land Titles
Act with a LTCQ qualifier
For land converted administratively under the LRRA from
the registry system into the land titles system with an
LTCQ qualifier, the parcel register will contain a statement
(such as the following extract) that the land is not subject
on first registration to s. 44(1)11 of the Land Titles Act:
Subject, on first registration under the Land Titles Act,
to:
Subsection 44(1) of the Land Titles Act, except
paragraphs 11 and 14 …
[Emphasis added.]
It is important to read and understand s. 44(1). The
para. 11 exception, as found on LTCQ parcels, must be
explicitly stated on the parcel and exempts such land from
violations of ss. 50(3) and (5) that occurred before the first
registered instrument on the LTCQ title. In such instances
only, the start date is shortened compared to
requirements for land still in the registry system. The
parcel register must clearly set out the exception from
para. 11; without that, the abutting-land search
requirement is identical to that for automated registry
parcels.
8.3 Land registered under the Land Titles
Act with an “Absolute” qualifier
For properties with Land Titles Absolute qualifiers, the
start date for abutting-land searches is June 15, 1967.
Paragraph 44(1)11 and s. 87 of the Land Titles Act make
all such titles subject to any Planning Act violation that
existed before and after the first registration of the land
under the Land Titles Act.
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SUBDIVISION CONTROL: SECTION 50 OF THE PLANNING ACT
8.4 Land registered under the Land Titles
Act with an “Absolute Plus” qualifier
“Absolute Plus” qualifiers were originally LTCQ qualifiers,
but by way of an application under the Land Titles Act, the
LTCQ qualifier was changed to “Absolute Plus” by
eliminating certain title qualifications. All Absolute Plus
titles are explicitly stated to be exempt from s. 44(1)11 up
to the date of first registration with Absolute Plus
qualifiers. Accordingly, the starting dates for abutting-
land searches for Absolute Plus titles will always be the
date of first registration of the land as Absolute Plus.
8.5 A registered transfer containing
Planning Act statements made under
ss. 50(22) and (23)
The LRRA added a new curative provision to the Act by
providing that if a deed or transfer contains the three
statements set out in s. 50(22) by the grantor, the
grantor’s solicitor, and the grantee’s solicitor, any
contravention of s. 50 or its predecessors does not and
shall be deemed never to have had the effect of preventing
the conveyance of any interest in land.
As a result, if the three statements in the deed or transfer
are completed, then conveyances of any interest in the
land prior to such deed or transfer will not be affected by
any contravention of the Act up to the registration of that
deed or transfer and, arguably, are not affected by any
contravention in the deed or transfer itself.
Thus, the registration of a deed or transfer containing the
three statements creates a shortened start date for the
abutting-land searches.
8.6 The retroactive effects of s. 50(14)
The curative provisions of s. 50(14) of the Act in force from
December 15, 1978, and revised December 9, 1994, create
a shortened start date where one of the following is
registered:
ƒ an RPS;
ƒ a registered description under the Condominium
Act, 1998; or
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ƒ a conveyance made pursuant to a consent under
s. 53 of the Act
Subsection 50(14) has the effect of curing contraventions
of s. 50 occurring before any of the foregoing registrations.
Planning issues were dealt with before registration of the
plan, description, or consent so that for planning purposes
any prior contravention is irrelevant. The registration date
of the plan, description, or consent, as the case may be, is
the starting date of the abutting-land search.
8.7 A “certificate of title”
Was a certificate of title registered on the land pursuant to
s. 13 of the Certification of Titles Act (which was repealed
in 2009)? If so, such certificate is conclusive that the
owner’s title at the time of the registration was absolute,
subject only to exceptions mentioned in the certificate.
Such a certificate will cure all prior defects.
9. Searching title to abutting lands
In order to determine if any property title has any prior
contraventions of the Act that would nullify the owner’s
title or the owner’s ability to convey or otherwise deal with
the land, one must search the ownership of all abutting
lands backwards to the most recent starting date for
abutting-land searches.
Every starting date listed above is an exception to the
general requirement that all searches must begin on
June 15, 1967. Once you determine the start date for your
title search, you search the chain of title of all abutting
lands from the start date to the present. If no owner during
that period of time or at the present time simultaneously
owned abutting land, you can be sure that the title you are
examining is not subject to any previous violation and that
your current transaction will not be in violation of s. 50(3)
or (5).
Where simultaneous ownership of abutting land is found
during the abutting-land search, you must look to the
other exceptions or otherwise requisition compliance with
respect to what may be a fatal title defect.
667

1. What is a survey?
The only document that can be called a “survey” is a two-
part report prepared by a qualified Ontario land surveyor
pursuant to the Surveys Act. The report must bear the seal
of the surveyor. A survey describes the quantity of the title
the client is dealing with.
The survey consists of a plan showing the features of the
land, such as buildings, fences, improvements, and
natural features, and a written report (often endorsed on
the plan) indicating any encroachments or other problems
revealed by the surveying process. It also will disclose the
extent of title by showing the frontage, depth, and area
occupied. The location of the land relative to adjoining
property will also be shown.
It is extremely important to remember that a survey is
similar to a photograph, in that it represents the property
at a specific point in time, namely, the date of preparation
shown on the survey. Any feature shown on a survey could
change or be eliminated immediately following the
preparation of the survey. For example, fences could be
relocated, additions could be made to buildings, or
buildings could be demolished and new ones constructed.
Things such as retaining walls can move over time. The
older a survey, the more suspect its accuracy.
It is common practice for purchasers and mortgagees to
accept surveys that are not current as long as a vendor or
mortgagor provide a sworn statement that the survey still
accurately represents the property and its features
(usually buildings) and that no new buildings, decks,
patios, pools, etc., have been erected since the date of
preparation of the survey. While it is understandable that
parties wish to avoid the cost of a new survey, this practice
should be treated with caution. In the first place, such
declarations are self-serving when made by vendors or
mortgagors, and in most cases, the deponent is not
qualified to make such representations or statements. If
this practice is followed, it is advisable to obtain a client’s
written authorization to obtain and rely on such a
declaration. Mortgage institutions often set out their
requirement with respect to a survey in their initial
instructions to solicitors.
There are many different types of sketches or plans that
also describe the quantity of title, and the solicitor must be
aware of this when deciding whether what has been
provided is suitable. Some sketches or plans may show the
foundation of a building, whereas the client may be
Chapter 52
The survey
purchasing a completed building. These plans often have
the letters “D.U.C.” on them; they stand for “dwelling
under construction.” Various overhangs or protrusions
may have the effect of causing a breach of zoning
regulations, and of course, this would not be disclosed by
a foundation plan. A reference plan is generally used for
registration purposes to simplify the legal description.
Instead of land being described by way of a metes and
bounds description, it will be described as a part or parts
on a reference plan. This procedure is often followed
where land is newly severed or where the registry office
personnel will not accept an existing complicated or
difficult metes and bounds description. While buildings
may be depicted on a reference plan, it may not be a
suitable document to rely upon for purposes other than
boundary location. Site plans, building permit sketches,
plot plans, and many other plans may be offered, but
solicitors should be on guard to accept nothing less than a
properly prepared and current, dated survey.
Solicitors should also note that the making of copies of a
survey without the surveyor’s consent is an infringement
of copyright. More importantly, the surveyor would likely
not be liable for errors in the survey either on the basis of
negligence or contract where the injured party has relied
upon a photocopy of a survey originally prepared for
someone else.
Finally, it is clear that while a review of the registered title
and other documents will allow the solicitor to determine
the quality of title, only a surveyor can determine the
extent or quantity of title. Until both are available, a
solicitor should not provide an opinion as to title, or if an
opinion is offered, it must be qualified accordingly.
2. No survey available
If a survey is not available, it is advisable for the solicitor
to send a written communication to the client advising
that a survey is not available and that one should be
obtained. The letter should set out the matters that can
only be assessed with the benefit of a survey. The client’s
instructions to proceed without a survey, notwithstanding
the solicitor’s advice, should be obtained in writing. There
is case law to suggest that a solicitor’s standard practice
should include a warning to clients of the dangers of
proceeding with a transaction in the absence of a survey
(Case Lac Mortgage Company v. Tolton). It should be
noted that this case pre-dated the advent of title
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insurance. Please review it in conjunction with “Title
insurance,” below.
3. Reviewing a survey
We now focus on the survey itself and review the various
features and its implications for the solicitor. Before
proceeding, it is worth noting that, as with all aspects of
the transaction, the solicitor has an obligation to exercise
care in reviewing the survey. This obligation is clearly
expressed in the case of Nielson v. Watson et al. As above,
this decision should be read in conjunction with “Title
insurance,” below, but this does not diminish a solicitor’s
responsibility.
The survey should always be reviewed with the client,
either in the solicitor’s office or by sending a copy to the
client. Clients can often point out discrepancies between
features on older surveys and current features. The client
may also know about encroachments, rights of way, and
easements that are either not shown on the survey or have
not been observed. Mortgagees should be advised of any
matters revealed by the survey; particularly those that, in
the opinion of the solicitor, will affect value, marketability,
or title. Again, reference to mortgage instructions will
often provide an outline of what is expected of the solicitor
in this regard. As with any client, written instructions
should be obtained from mortgagees in appropriate
circumstances.
3.1 Boundaries/fences
Start with the apparent boundaries of the land. This may
often be the lot limits shown on a plan of subdivision. The
survey will show these boundary limits and then detail the
location of fences, which often do not follow the boundary.
If the fence is inside the boundary, it may indicate that the
adjoining owner occupies a portion of the land being
purchased or mortgaged. If the fence is located outside the
boundary, it may indicate that the vendor or mortgagor
occupies a portion of the neighbour’s land. In most cases
the discrepancy between fence and boundary lines is de
minimis, in other words, small, and clients will authorize
the solicitor to proceed without objection to the
discrepancy. Where the discrepancy is substantial or of
particular concern to the client, the true boundary line
must be determined. It may be that the registered title
incorrectly describes the boundary. Alternatively, the
fence may not be on the proper line, and the registered
title may be accurate. One option is to obtain a surveyor’s
assistance in making a determination. The lawyer can then
counsel the client as to options. The survey generally
indicates the location of stakes, usually at the lot corners,
which have been used by the surveyor in determining
distances, angles, and so on. While the client may not be
concerned with the small deviations between fence and
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boundary lines, it is worth noting that there would be
some cost and inconvenience should a dispute arise
between adjoining land owners culminating in one party
being forced to relocate the fence to the proper line.
Should the discrepancy be serious, the parties may be able
to negotiate and mutually agree upon an abatement in the
purchase price. If the discrepancy has a major impact on
the purchaser’s declared use for the property, the
purchaser may have a legitimate basis for ending the
transaction. A major discrepancy may effect a lender’s
decision to lend, and written instructions must be sought
in this regard.
Do not always assume that strips of land involved in such
encroachments belong to the occupier who can invoke the
rules of possessory title. In the first place, these rules may
not apply to lands subject to the Land Titles Act nor might
they apply to lands owned by the Crown or municipalities.
Further, possessory title is often not available because the
applicable parts of the test cannot be met. With respect to
the quality of possession, there are six parts to proving
adverse possession. The possessor must prove that the
possession is actual, continuous, open, visible, notorious,
and exclusive. The proof of the claim can fail for any part
of the test or for general equitable principles. A solicitor
can assist through the title search, a review of the case law,
and other investigations, such as speaking with adjoining
owners, in assessing the merits of a possessory claim.
3.2 Buildings/structures
The location of buildings and other structures as shown on
the survey is extremely important for a number of reasons.
3.2.1 Zoning
Municipal by-laws usually provide for minimum setbacks
from street lines, minimum clearances from sides of
buildings or foundation walls to lot lines or boundaries,
maximum lot coverage by buildings (that is, the number
of square metres the building can be relative to the size of
the lot) and many other standards and requirements. This
information may be obtained by making a simple enquiry
of the municipality and submitting the appropriate fee
together with the survey to obtain this information. Most
municipalities will not comment on surveys. In this case,
the appropriate sections of the zoning by-law can be
reviewed. It is often discovered that older buildings do not
conform to the current zoning by-law because they were
built before the by-law was enacted. Such situations are
known as “legal non-conforming” uses. However, this
status is only available where there is appropriate
evidence that the non-compliance existed pre-by-law and
continued uninterrupted to date. The same rules apply as
to use of buildings.
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THE SURVEY
3.2.2 Utilities/rights of way
If a building encroaches upon a right of way or utility
easement, it will be necessary to secure the consent of the
party enjoying the benefit of the easement to allow it to
continue. Utility commissions and municipalities will
usually either issue such consent letters or require the
landowner to enter into an encroachment agreement,
which has the same legal effect but often includes a
provision requiring the encroachment to be removed upon
demand and an insurance indemnity. This approach is
often used where the encroachment is onto a public street
or highway.
3.2.3 Adjoining land
The building may actually straddle the boundary with
adjoining land, and of course, the only proper way to deal
with this major problem is to acquire title to the land
under the building from the adjoining owner. In addition,
it would be necessary to acquire sufficient land to allow
access to maintain the walls of the building. This should
either be an outright purchase or an easement. If this
course becomes necessary, it should be remembered that
the Planning Act requires a consent to sever the land in
question, and a reference plan of the area will need to be
prepared and registered. Costs for such an exercise can be
considerable. In the case where a Planning Act consent is
required in order to remedy the situation, the purchaser’s
lawyer should requisition that the vendor obtain the
consent at the vendor’s own expense, and this should be
done before closing. The agreement of purchase and sale
may need to be amended in order to accommodate this
situation. The purchaser’s lawyer must obtain the client’s
instructions with respect to these issues.
Where a building on an adjoining property encroaches
upon the property being purchased or mortgaged, the
ideal remedy is for the building to be removed. This option
is rarely available, and a purchaser will often require an
abatement in the purchase price accompanied by an
acknowledgement from the adjoining owner that title is
not claimed with respect to the land under the
encroaching building.
3.3 Public access
It is extremely important to ensure that the property
enjoys the benefit of access to a public street or highway.
It is often necessary to review the survey in conjunction
with a subdivision plan to ensure that such access is
available. Typically, in an attempt to control access to
uncompleted subdivisions, municipalities will demand
that strips of lands at the end of streets be created, called
“reserves,” and then be transferred to the municipality.
Often these strips are only one foot wide but they have the
technical legal effect of denying access from the
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subdivision to a public highway. Occasionally, there will
be a reserve across the front of a lot. In these
circumstances, it is necessary to ensure that the
municipality passes a by-law dedicating these reserves as
a public highway (unless that was already done by the
subdivider and endorsed on the plan).
3.4 Comparison
Compare the information shown on the survey with that
obtained from the agreement of purchase and sale, title
search, municipal searches, and comments made by the
client. Discrepancies can be found in lot measurements,
type of buildings, accessory buildings, etc. If the client
commented that additions or a pool are contemplated,
look at the survey to see if utility easements or other
features will prevent or impede such plans. The solicitor
can use the Internet and various mapping programs to
visually look at the property and discuss these findings
with the client in conjunction with the survey or sketch.
4. Remedies
The appropriate remedy to be followed when dealing with
issues arising out of the survey will, of course, depend in
large measure upon the nature of the problem, the extent
of the problem, and the client’s wishes. A brief review of
the various remedies follows.
4.1 Variance applications
Where minor breaches of zoning by-laws are noted or
where the solicitor is not satisfied that a property enjoys
legal non-conforming status, an application may be made
to the appropriate authority to allow these breaches to
continue and, in effect, legitimize them. Obviously, a
purchaser will insist that an application for a variance
from the appropriate by-law be done by the vendor at no
expense to the purchaser prior to closing. This process can
be time consuming and would likely involve an extension
of closing. See also “Extend closing,” below.
4.2 Acknowledgement
Where the encroachments are minor, a simple written
acknowledgement from the person enjoying the benefits
from them can be sufficient.
4.3 Abatement
Many discrepancies found on the examination of a survey
are extremely minor, and the clients do not want any
action taken. However, where the discrepancy has
nuisance value and the clients want to close, the
appropriate remedy may be an abatement in the purchase
price. When the problem is of a more serious nature (e.g.,
the client cannot install a swimming pool because the
backyard is too small), again, an abatement may satisfy
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the clients. Obtain the client’s instructions as to the range
of abatement sought and negotiate accordingly. Obviously
a vendor may be quite hesitant to grant any abatement for
such minor matters. Abatements are not rights that can be
enforced; they are merely an option for a negotiated
settlement.
4.4 Extend closing
While it may be possible to solve a problem arising from a
review of the survey prior to closing, sometimes more time
is required to reach a party to obtain a signature or to
negotiate terms. In these circumstances, ask the other
solicitor for an extension of the closing date. Rather than
take an undertaking for something to be done after
closing, mutually agree to extend the closing to a date
where the problem may be resolved. Make sure that
extensions are authorized by the client in writing and are
to definite, fixed dates. The lender’s consent must
similarly be obtained to any extension of closing.
Several statutes and procedures can assist in resolving
difficulties discovered from reviewing the survey. Some
examples are the Vendors and Purchasers Act, the
Planning Act, the Boundaries Act, and the Land Titles
Act.
Extensions must be mutual. Time is of the essence under
the agreement of purchase and sale. One party cannot
unilaterally extend closing. This is only one option to deal
with survey issues since this can be time consuming and
costly.
4.5 Line Fences Act
This statute allows fence disputes to be resolved by
municipal appointees. The Line Fences Act does not apply
in areas where municipal council has passed a by-law
under the Municipal Act, 2001. In that case, that specific
by-law will govern. The process, which is set out in the
Line Fences Act, is an arbitration conducted by fence-
viewers.
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4.6 Title insurance
Title insurance has provided real estate lawyers and their
clients with insurance coverage for survey-related issues
or where no survey exists. Where there is insufficient time
to obtain an up-to-date survey or the client simply wishes
to avoid the expense of a new survey, consideration can be
given to an alternative, a title insurance policy, which may
be cheaper. The instructions from many institutional
lenders today provide for acceptance of such policies in
lieu of a survey. However, the practitioner should
approach this area with caution. In the first instance,
make sure the client appreciates that title insurance does
not solve any problems but merely provides coverage
against financial loss. Further, your opinion as to title
should be qualified to the extent that you cannot comment
as to encroachments, zoning compliance, or anything else
that would have been disclosed by a survey. In addition, it
is obviously necessary to ascertain exactly what the title
insurance product selected covers. Finally, written
instructions from the client to accept this alternative along
with an acknowledgement that it only “papers over” any
problems are an absolute necessity. Some policies of title
insurance, as an example, do not cover fence disputes.
Had title insurance existed when Case Lac Mortgage
Company and Nielson, referred to above, were decided,
the outcome may have been different. The litigation might
never have been commenced, since claims might have
been made to the title insurer. Again, this should in no way
diminish the solicitor’s responsibilities or change the
importance of the survey.
4.7 Litigation
If the parties cannot agree, litigation may be an
appropriate remedy. Throughout the transaction, the
lawyer must document carefully and safeguard the client’s
interest in the event that litigation ensues.
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1. Introduction
After completion of the title search, return of letter
enquiries, and completion of all off title searches, all in a
timely manner, the purchaser’s lawyer would then write a
letter to the vendor’s lawyer, requesting the rectification
of various defects in title, as well as any other problems
that the purchaser’s lawyer feels need to be resolved in
accordance with the terms of the agreement of purchase
and sale. The language of law is unique and precise, and
the letter of requisitions must be clear and unequivocal.
The requisitions must be submitted in a timely manner, as
stated in the agreement of purchase and sale. If the
purchaser’s lawyer misses the time, the purchaser has
foregone any rights to make any complaints about title.
Root of title and conveyancing requisitions are exceptions
to this statement.
2. Types of requisitions
There are three kinds of requisitions:
ƒ title;
ƒ conveyancing; and
ƒ contract.
2.1 Title requisitions
2.1.1 Ordinary title requisitions
These are requisitions that have arisen as a result of your
review of title. Any such requisition must be submitted
within the time noted in the agreement of purchase and
sale. In the Ontario Real Estate Association (OREA)
agreement of purchase and sale form, this is located in
para. 8. Unlike some previous real estate board agreement
forms, this paragraph limits the submission of
requisitions not only to a specific date but also to a specific
time of day. If, for some reason, the date has not been
noted on the agreement, the date is set to be 30 days after
acceptance by s. 4(b) of the Vendors and Purchasers Act.
Example:
The search of title reveals that a spousal statement
was not completed on a deed on the subject
property.
Example:
A Transfer/Deed describes the Transferor as John
G. Blue. When John purchased the property, the
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Requisitions
Transfer/Deed set out his name as John George
Blue.
Example:
There is a telephone easement registered against
title to the subject property that was not disclosed
by the Agreement of Purchase and Sale.
This category of requisition encompasses any matters that
you discover on the registered title of a seller that, while
not fatal to the transaction, give cause for concern.
2.1.2 Root of title requisitions
Root of title requisitions pertain to issues that, if not
satisfied, result in the seller not conveying what was
originally agreed upon. These requisitions may be
submitted up to the completion of the transaction, and
this is the exception to the rule that missing the requisition
deadline foregoes the buyer’s rights to make further
complaints about title.
Example:
The title search reveals a breach of the Planning
Act.
Example:
A corporate search reveals that a prior corporate
owner on the title was at the time of its conveyance
dissolved, the appropriate notices were registered
under the Escheats Act, 2015, and therefore, the
property had escheated to the Crown.
In both of the foregoing examples, the seller is unable to
convey title.
2.2 Conveyancing requisitions
The satisfaction of conveyancing requisitions are within
the control of the seller. The buyer has a vested right to
require compliance through the acts of the seller or a third
party. These requisitions may be submitted up to
completion of the transaction.
Example:
There is an old mortgage registered on title that
appears to have been paid in full, but no discharge
has ever been registered.
Example:
There is registered on title in the land titles office a
temporary right in the nature of an easement that
has expired.
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In the foregoing examples, the seller is able to obtain a
discharge (because the mortgage has been paid in full) in
the first case and may actually register an application to
delete the right in the second case.
2.3 Contract requisitions
The agreement of purchase and sale determines
requisitions on the matter of the contract. Therefore, these
must be submitted within the time period specified in the
agreement. If there is no time set out in the agreement,
then the time for submission is up to the completion of the
transaction.
There are a number of different contractual requisitions.
Example:
A reply to an inquiry regarding work orders has
been received. The relevant authority advises that
there are a number of outstanding work orders.
Example:
The Agreement of Purchase and Sale provides that
the property has a frontage of fifty feet (50’) by a
depth of one hundred and twenty feet (120’). A
review of the survey reveals that the property
actually has a frontage forty-three feet (43’) by a
depth of one hundred and ten feet (110’).
The OREA agreement of purchase and sale provides for
two separate time periods relating to certain searches. The
first is the time to examine title. This is referred to as the
“Requisition Date.” The second is a period extending for
30 days beyond the Requisition Date or when all the
conditions in the agreement have been fulfilled or waived
and in no event later than five days prior to the date of
completion. These searches include a search of work
orders or deficiency notices, whether the present use may
be lawfully continued, and whether the property is
insurable against risk of fire.
In addition to matters that arise as a result of enquiries
with third parties such as local authorities, the agreement
provides for a number of issues that the buyer may insist
upon from the seller. One is the entitlement to a survey.
The agreement provides in para. 12 of the OREA form that
the buyer is entitled to any title documents including a
survey if in the possession of the seller. The paragraph
goes on to state “if requested by the buyer, seller will
deliver any sketch or survey … as soon as possible and
prior to the Requisition Date.”
Paragraph 16 of the OREA form provides that “if
requested by buyer, seller covenants” the statements
contemplated by s. 50(22) of the Planning Act will be
completed.
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In order to activate these provisions of the agreement of
purchase and sale, it is necessary to include the requests
in a letter of requisitions. These requests should be made
at the time the file is opened or when the other requisitions
are submitted.
While the contract provides that the “title to the property
is good and free from all registered … charges, liens, and
encumbrances” and that this obligation lies with the seller,
courtesy dictates that the buyer’s solicitor notify the seller
or the seller’s solicitor if there are any outstanding
charges, liens, and encumbrances registered on the title.
In some instances, the lack of notification can hamper the
ability to complete the transaction in a timely manner.
3. Construction of the requisition letter
There are certain rules that a solicitor must follow in
preparing a letter of requisitions. If the rules are not
followed, there may be severe implications for the client
that the lawyer had not anticipated or intended. It is
important to realize that all the agreement forms contain
an annulment clause permitting the transaction to be
terminated. Therefore, when submitting requisitions, it is
imperative that the lawyer allow for the possibility that the
lawyer will change position on the matter being
submitted.
A requisition letter should begin as follows:
I act as solicitor for the buyers herein and
understand that you act on behalf of the sellers.
Without prejudice to my clients’ rights under the
terms of the Agreement of Purchase and Sale, I wish
to submit the following requisitions.
This affords the opportunity to revise the lawyer’s position
on a matter.
The next portion of the requisition letter should refer to
those matters that require the attention of the seller and
the seller’s solicitor. It should be noted that a large
number of requisition letters are of a general nature. In an
attempt to blanket all the possibilities, these requisitions
are structured to be vague and all encompassing. In that
regard, the decision of Stykolt v. Maynard should be
noted:
A reading of this letter, it seems to me, makes it very
clear, not only that its author was in complete
ignorance of the title, but also that the letter was
written without any reference to the actual
agreement between the parties. I am not able to
find in it any “valid objection” to the title of the
lands in question. (emphasis added) (at 254)
One is not to structure a requisition letter so that the
seller’s solicitor is then required to search title. That is the
buyer’s solicitor’s obligation.
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REQUISITIONS
In addition, it is mandatory that communication of any
requirements must be clear and understandable. At a later
date someone else may be reviewing your requisitions,
namely, a court.
Each requisition commences by outlining the facts that
cause the requisition to arise. These “facts” are to be
sufficiently detailed so that anyone who has not
investigated the title or other problem raised will be able
to determine without any further enquiry exactly what the
issue is. Once the lawyer has outlined the facts, the lawyer
then proceeds to request specific relief.
The relief demanded should be the best possible solution
to the requisition. It is not appropriate to offer alternatives
unless they are equally satisfactory. The seller is entitled
to choose between alternatives when they are offered.
Based on the foregoing, the requisition letter should first
address those matters of title that the seller, or the seller’s
lawyer, is to direct their attention to. These are to include
defects or clouds on the title and matters that will prevent
the transaction from being completed. Examples of these
are demands respecting documents that are deficient.
Example:
(1) Instrument No. 1234565 is a Transfer from Jane
Smith to Joan Brown registered on the 5th day of
October 2005. It contains a restrictive covenant
that expires five years from the date of
registration.
REQUIRED: On or before closing, registration
of an application to amend the register to delete
the said covenant.
Example:
(2) Instrument No. 987654 is a Lease between
Company A and Company B registered July 12,
1985. The Agreement of Purchase and Sale does
not call for the assumption of this lease.
REQUIRED: On or before closing, a release of
the said lease from title.
At this point in the letter, it is appropriate to set out any
outstanding mortgages, liens, or other encumbrances.
Most standard form agreements of purchase and sale are
set up to provide for acceptance of the seller’s solicitor’s
undertaking to obtain and register the discharge for any
Charge/Mortgage of an institutional nature. However, one
is to accept the undertaking only if a discharge is not
available. If the Charge/Mortgage is not within the
discharge parameters provided for in the agreement, the
buyer’s solicitor must insist upon a discharge being
registered by closing.
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Example:
(3) Instrument No. 567980 is a Charge/Mortgage of
Land from Walter Green, as mortgagor, in
favour of the Bank of Ontario, as mortgagee,
registered the 5th day of March 1992.
REQUIRED: On or before closing, registration
of a good and valid discharge in accordance with
the Agreement of Purchase and Sale.
(4) Instrument No. 567981 is a Charge/Mortgage of
Land from Walter Green, as mortgagor, in
favour of Jane Brown, as mortgagee, registered
on the 5th day of March 1992.
REQUIRED: On or before closing, registration
of a good and valid discharge. Kindly note that
this is not an institutional Charge/Mortgage as
set out in the Agreement of Purchase and Sale,
and we must insist upon the discharge being
registered on or before closing.
The next portion of the letter to the seller’s solicitor should
communicate requests that do not relate to title but are
required to complete the transaction.
If the manner in which title is to be taken has not been
communicated, the next portion of the letter should
address that question.
If more than one individual is taking title to the property,
the lawyer must indicate if title will be held as joint tenants
or tenants in common. The difference is the right of
survivorship. In a joint tenancy, in the event of the death
of one of the joint tenants, the other joint tenants take
automatically by right of survivorship. In a tenancy in
common, each co-owner takes title as to a specific
percentage of ownership, always totalling 100%. In the
event of a co-owner’s death, the deceased co-owner’s
interest is dealt with by the rules of estate law and does not
automatically transfer to the remaining title holders by
right of survivorship. In the event the designation is
missing, in accordance with s. 13(1) of the Conveyancing
and Law of Property Act, the owners will be deemed to be
tenants in common.
Example:
(5) Would you kindly provide a draft Transfer
engrossed as follows:
GREEN, Mary — date of birth — June 3, 1966
GREEN, John — date of birth — May 1, 1963 as
joint tenants
The address for service of the transferees will be
the property.
For both the registry and land titles systems, rules apply
as to how parties should be described. Individuals must be
described in the following order:
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— surname;
— first name in full; and
— another given name, if any, in full.
Initials are not acceptable for registration. Single names
are now acceptable for registration.
If there are certain forms that you wish to have executed
by the seller, these should be included at this time.
Example:
(6) REQUIRED: the enclosed Undertaking,
Declaration of Possession, Warranty respecting
Urea Formaldehyde Foam Insulation, and Bill of
Sale executed by your clients and delivered on
closing.
Next, if there has not been any correspondence on matters
to be requested, provide for those matters that the
agreement requires the seller to provide upon request.
(7) REQUIRED: delivery of such documents of
title that may be in the possession of or under
the control of the sellers.
(8) REQUIRED: a survey of the subject property as
required under the Agreement of Purchase and
Sale.
(9) REQUIRED: pursuant to the Agreement of
Purchase and Sale, a Transfer with the
appropriate Planning Act statements completed.
(10) REQUIRED: a statutory declaration that the
sellers are not non-residents of Canada within
the meaning of s. 116 of the Income Tax Act
pursuant to the Agreement of Purchase and Sale.
The letter of requisitions should end with the following:
I reserve the right to make such other and further
requisitions as I may deem necessary.
In so doing, if an additional matter arises that was omitted
in the original letter, it may be submitted later on. In the
absence of this reservation, the buyer’s solicitor may be
precluded from making any further requisitions.
It should be noted that there is one more opportunity to
submit requisitions. This occurs when fresh or new
matters have arisen after the time of requisitions has
passed, but before closing.
Example:
The local authority issues a work order after the
time for searching for work orders has expired.
If this issue did not arise when the time set for the
requisitions had expired, the buyer’s lawyer may submit it
later.
Finally, and most importantly, it should be noted that the
letter of requisitions is to be in the hands of the seller or
the seller’s solicitor within the time set out in the
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agreement of purchase and sale. It is not enough to mail it
out before the Requisition Date; the seller or the seller’s
solicitor must receive it no later than the time for
submitting requisitions as stated in the agreement of
purchase and sale. Typically these letters are sent via fax,
with the fax confirmation sheet kept in the file. They can
also be emailed with the sent email kept in the file as
evidence of timeliness.
There have been cases where the seller has not retained a
lawyer during the deadlines set for submitting
requisitions. In that situation, the buyer’s lawyer should
make all efforts to inquire of the real estate agent involved
in order to ascertain if a lawyer has been retained. If no
lawyer has been retained, in order not to miss the
requisition deadline, the buyer’s lawyer may want to send
the requisition letter by courier to the vendor directly, as
well as to the vendor’s agent. The buyer’s lawyer will
indicate in the accompanying letter that as a result of the
seller not retaining a lawyer within the period set for the
requisition date, the buyer’s lawyer is submitting the
requisition letter to the seller directly and requesting that
a lawyer be retained immediately. This will in most cases
ensure that requisitions are dealt with once a lawyer is
retained and not denied just because one was not
available.
4. Replying to a letter of requisitions
The reply to a letter of requisitions is also very important.
Once again, it is possible that a third party, possibly a
court, will review the reply. In that respect, answers must
be suitable and, on issues that may be contentious, offer a
reasonable solution.
The seller has certain rights under the agreement of
purchase and sale and may be able to terminate the
transaction without any liability. Therefore, it is important
to safeguard those rights.
It is suggested that a reply to a requisition letter
commence as follows:
I acknowledge your letter of requisitions dated
May 1, 2010, and received in our office May 3, 2010.
Without prejudice to my clients’ rights under the
Agreement of Purchase and Sale and without
admitting the validity of your requisitions, I would
reply as follows using your numbers as a reference.
Requisitions of the buyer that are of a general nature or of
matters that should be investigated or can be satisfied by
the buyer’s solicitor are answered as follows:
Kindly satisfy yourself.
Requisitions that require a specific reply are ones that
disclose or appear to disclose the necessity for the seller’s
solicitor to prepare or obtain documents beyond the
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standard documentation prepared in the sale transaction
of the property. Requisition 1 states the following:
(1) Instrument No. 1234565 is a Transfer/Deed from
Jane Smith to Joan Brown registered on the 5th day
of October 2005. It contains a restrictive covenant
that expires five years from the date of registration.
The reply:
(1) Please find enclosed a draft application to amend
the register. I shall register same on title on closing.
The restrictive covenant will be deleted from title.
It is imperative that your reply to requisitions be done as
expeditiously as possible. The solution you suggest as
satisfactory may not be acceptable to the buyer’s lawyer,
who may offer another solution to the requisition. The
seller and the seller’s solicitor must act in good faith and
make every reasonable effort to satisfy a requisition.
Sources of answers to requisitions can be found in a
variety of places. Ask the vendor to produce old title
documents, which may have been included in a reporting
letter from the time of acquisition. Neighbours can be
interviewed, and the title search itself may contain
answers or building blocks to find a solution. Inquiries can
be made to appropriate government authorities. The
lawyer must be resourceful in looking for solutions.
Discharges of mortgages should be addressed as required
by the agreement of purchase and sale. The OREA form
makes specific provisions for attending to a discharge of a
mortgage of an institutional nature. Requisition 3 states
the following:
(3) Instrument No. 567980 is a Charge/Mortgage of
Land from Walter Green, as mortgagor, in favour of
the Bank of Ontario, as mortgagee, registered the
5th day of March 1992.
The reply might be as follows:
(3) I do not anticipate that a Discharge of this mortgage
will be available on closing for registration. In the
alternative, please find enclosed a copy of the
Discharge Statement from the Bank of Ontario,
together with my draft form of undertaking to
obtain and register a discharge after closing. I shall
direct from the proceeds on closing sufficient funds
to obtain the said discharge.
Where a discharge must be available on closing, there is
no choice but to make arrangements for the Discharge to
be registered on closing.
The reply to the letter of requisitions should always be
concluded with the following:
We respectfully deny your right to make any further
requisitions.
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4.1 Annulment clause
The annulment clause in the agreement of purchase and
sale provides that if the buyer submits requisitions that
the seller is “unable or unwilling to remove, remedy or
satisfy or obtain insurance” against, then the agreement is
over. The seller is able to terminate the transaction if there
is a requisition that the seller is unable or unwilling to
remove, remedy, or satisfy, and if the buyer is unwilling to
waive this requisition, then the agreement is over. It
should be noted that this annulment capability is in
reference to the searches and problems or requisitions
arising from those searches and is provided for in para. 10
of the OREA agreement of purchase and sale. The seller is
not entitled to exercise the right to terminate the
transaction in a capricious and arbitrary manner
(Freedman v. Mason).
5. Solutions
As noted above, the requisition letter is to demand the best
possible solution to a concern or a problem. However, in
many instances, the best answer to a problem may not be
available. In those circumstances, other solutions may be
available that will adequately address the situation.
The appropriate method of resolution must comply with
the electronic registration system.
5.1 Sworn statements
On occasion, documents on title require additional
support in the form of a statutory declaration to confirm
their veracity. A statutory declaration is much like an
affidavit. It is a sworn statement that can be used to
connect the owner of the property who is registered on
title with the person who is purporting to convey (i.e., a
person who took title in one name, later married, and
transferred title in another name). A statutory declaration
deposing to the circumstances of the marriage would be
sufficient to connect the two.
In circumstances where there is an estate and information
has to be provided to show compliance with the Estates
Administration Act, a statutory declaration would be
appropriate to set out details surrounding the right to
transfer.
Where a search with the sheriff reveals judgments
outstanding against the seller or debtors with identical or
similar names to the seller, depending on the amount
outstanding, a statutory declaration by the seller setting
out the facts of the writ and the fact the seller is not one
and the same person as the judgment debtor is utilized in
some instances to help clear the problem. If the amount
exceeds the threshold set by the land titles or registry
office, it will be necessary to obtain a solicitor’s affidavit or
a letter from the creditor stating that the debtor is not one
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and the same as the client. For more details, see
Chapter 56 (Preparation for closing, closing and post-
closing) of these Study Materials.
A statutory declaration may also be used to state that the
seller is not a non-resident for the purpose of s. 116 of the
Income Tax Act. The statutory declaration should provide
that the seller will not be a non-resident as of the date the
declaration is signed and sworn and as of the completion
of the transaction.
Thus, a statutory declaration can be utilized in a wide
variety of situations to address and rectify problems that
might otherwise hinder the completion of a transaction.
Reference should be made to the Commissioners for
taking Affidavits Act for the procedure to follow. Section 9
sets out that the declaration or oath shall be taken in the
presence of the commissioner, the commissioner must
satisfy himself or herself as to the genuineness of the
signature of the declarant or deponent, and the
commissioner shall administer the oath prior to signing
the jurat or declaration.
As a result of the COVID-19 pandemic, counsel should
note that the Commissioners for Taking Affidavits Act
and O. Reg. 431/20, made under the Act, now permits the
commissioning of affidavits by videoconference.
Reference should be made to the “Best Practice for
Remote Commissioning” and the “Remote
Commissioning Checklist” available on the Law Society of
Ontario’s website.
5.2 Declaration of possession
This document is one that should be obtained on every
transaction where the property is registered under the
Registry Act and for those properties that are Land Titles
Conversion Qualified. The entitlement is contained in
s. 5(1)1.iii of the Land Registration Reform Act, which
obliges the transferor to execute such further assurances
of the land as may be reasonably required. Since land
registered under the Registry Act may be subject to
prescriptive rights or claims of adverse possession, a buyer
is entitled to know that there are no such claims.
The “declaration of possession” will set out the fact that
there have not been any claims made against the
registered owners during the time of their ownership. It is
possible to join together successive periods of ownership
from previous owners to the period of ownership of the
current owners. The purpose is to arrive at a period of 10
consecutive years to obtain the protection of the Real
Property Limitations Act.
This document has been used to clarify misdescriptions on
deeds, encroachments of fences and structures, and a
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variety of other problems that may arise in the process of
completing a transaction.
5.3 Vendors and Purchasers Act
Section 1 of the Vendors and Purchasers Act provides that
recitals, statements, and descriptions of facts that are 20
years old or older are sufficient evidence of the truth of
such facts unless there is evidence to the contrary. This has
been used in a number of instances where it would not be
feasible to obtain declaratory evidence.
5.4 Construction Act
There are instances where a claimant has registered a
construction lien on title. Unless dealt with, these will be
inherited by subsequent owners of the property if the
claim for lien will be or has been perfected by registration
of a certificate of action. A construction lien may be
discharged by the registration of a release signed by the
lien claimant. A court order may be obtained by payment
of moneys into court to vacate the lien and certificate of
action, if registered. Finally, the Construction Act provides
that a certificate of action must be registered on the title
within 90 or 150 days of substantial performance of the
work or supply of materials, depending on the date of the
construction contract. There are key differences in the old
Construction Lien Act and the current Construction Act,
and they must be read carefully to determine which
governs. In the absence of registration of the certificate of
action, the construction lien expires. If the lien is expired,
the vendor’s solicitor may make an application to amend
the register with a solicitor’s statement confirming that
pursuant to the Construction Act, the lien has expired. For
more information on construction liens, see Chapter 66
(Construction liens) of these Study Materials.
5.5 Discharges of mortgages
5.5.1 Mortgages in favour of chartered
banks, trust companies, insurance
companies, and companies
registered under the Trust and Loan
Companies Act (Canada)
The OREA agreement of purchase and sale form provides
for the method by which these mortgages are to be
discharged. If a discharge is available on closing, then the
obligation is to register it on closing. In most instances,
that will not be the case, and the OREA agreement form
provides that upon delivery of a mortgage discharge
statement, an undertaking by the seller’s lawyer to obtain
and register a discharge within a reasonable time after
closing is to be accepted by the buyer if a direction is
provided to pay a sufficient portion of the proceeds of sale
to the financial institution.
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REQUISITIONS
5.5.2 Other mortgages
Mortgages other than those set out in the OREA pre­
printed form must be discharged on closing.
5.6 Real Property Limitations Act
There are a number of sections within the Real Property
Limitations Act that provide remedies for defects on title.
Section 25 provides that a dower interest ceases to exist
after 10 years. Subsection 43(1) provides that an action on
a covenant in a mortgage expires on the later of 10 years
after (a) the cause of action arose, and (b) the date upon
which the person liable on the covenant transferred the
person’s interest.
5.7 Rules of Civil Procedure
Clause 14.05(3)(d) of the Rules of Civil Procedure
provides for an application to court for a determination of
rights that depend on the interpretation of a deed, will,
contract, or other instrument.
5.8 Vendors and purchasers application
If all else fails and there is a difference of opinion between
the parties’ lawyers that cannot be resolved and where
each lawyer believes that the lawyer’s position is correct,
namely, the buyer’s lawyer feels that the answer to a
requisition provided by the seller’s lawyer is not adequate
but the seller’s lawyer feels that the answer is in fact
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appropriate, the parties can take their dispute to a third
party. An application can be made under s. 3(1) of the
Vendors and Purchasers Act (colloquially referred to as a
“V. and P. application”) to have a judge make such a
determination. It should be noted that while any orders
obtained on such an application will bind the immediate
transaction, they may not be binding upon future
transactions on the same property.
5.9 Title insurance
Within the annulment clause of para. 10, there is
provision for the seller to obtain insurance to correct a
problem. There are instances where the conventional
means are unable to rectify a problem. In those
circumstances, it may be possible to obtain title insurance
to facilitate completion of the transaction. One example
might be that it has been determined that the setbacks of
the dwelling do not comply. Time will not permit an
application to the committee of adjustments for a minor
variance. It may be possible to obtain title insurance
against this risk in order to allow the transaction to be
completed. The insurance company must make specific
provision for the problem at hand and be willing to
underwrite the risk. Title insurance does not fix this or any
other problem. It merely insures over the risk to the
purchaser and the lender, and each party must understand
that distinction.
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The standard loan transaction
1. Introduction
Most acquisitions of real property are financed by way of
a loan to the purchaser. As security for its promise to repay
this loan, the borrower/chargor grants a mortgage or
charge against its real property in favour of the
lender/chargee. This chapter outlines the steps usually
taken in such a loan transaction and examines standard
clauses in a typical form of charge.
2. Terminology
Section 1 of the Land Registration Reform Act (LRRA)
defines “charge” as that which secures the payment of a
debt or the performance of an obligation and includes a
charge under the Land Titles Act and a mortgage but does
not include a rent charge. A “chargor” and “chargee” are,
respectively, the borrower and the lender. A charge can be
transferred or assigned by one lender to another by a
transfer of charge. A “discharge” is defined as a discharge
of a charge and includes a cessation under the Land Titles
Act and a certificate of discharge under the Registry Act.
One may also encounter references to “mortgagor,”
“mortgagee,” and “mortgage,” which are the equivalent
terms to “chargor,” “chargee,” and “charge,” respectively,
and which were used under the registry system.
When negotiating a loan, the chargor and the chargee will
document the agreed-upon business terms in a
“commitment letter” or “commitment.” After the
commitment has been finalized, the chargee and chargor
will forward a copy to their respective solicitors. An
example commitment can be found in Appendix A (all
appendices referred to are located at the end of this
chapter).
The chargee will also provide instructions to its solicitor
setting out the conditions that must be satisfied before the
solicitor can advance the loan. Example instructions can
be found in Appendix B. Section 2 of these instructions
contains the standard provision that a charge must be
registered that constitutes a valid first charge subject only
to certain approved encumbrances.
3. Legal effect of a charge
The old form of mortgage in the registry system was an
actual conveyance of the legal estate in the land subject to
ƒ the mortgagor’s right to remain in possession of the
land; and
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ƒ the mortgagor’s right to a reconveyance when the
mortgagor had repaid the debt.
In other words, the mortgagor retained the equity of
redemption. Subsection 6(1) of the LRRA reverses this
system and provides that a charge “does not operate as a
transfer of the legal estate in the land to the chargee.”
Rather, a charge is an encumbrance on the legal estate of
the chargor.
However, s. 6(3) of the LRRA provides as follows:
6.—(3) Despite subsection (1), a chargor and chargee
are entitled to all the legal and equitable rights and
remedies that would be available to them if the chargor
had transferred the land to the chargee by way of
mortgage, subject to a proviso for redemption.
The intent of ss. 6(1) and (3) of the LRRA is to harmonize
the different concepts of the registry and land titles
systems by preserving the rights of the chargor and
chargee while eliminating the need for a transfer of title.
4. Form of charge
Form of Documents, R.R.O. 1990, Reg. 688, made under
the LRRA, states that, when a charge is required to be in
written form when it is submitted for registration under
the Registry Act or the Land Titles Act, it shall be in the
form entitled “Charge/Mortgage of Land” (formerly
known as Form 2). Subsection 20(1) of the LRRA states
that an electronic document submitted for registration
shall be in an electronic format approved by the Director
of Titles appointed pursuant to the LRRA. Currently, this
means an electronic document completed using Teranet
Inc.’s Teraview software, a copy of which is found at
Appendix C.
Form 2 can be completed in one of three ways:
ƒ Pursuant to s. 4(1) of the LRRA, a schedule may be
attached as part of the form, containing the terms of
the chargee’s own standard form of mortgage.
ƒ Form 2 can incorporate by reference a set of
standard charge terms that have been filed pursuant
to s. 8 of the LRRA.
ƒ The one-page form can constitute a complete charge
without incorporation of any additional terms but
with the implied covenants contained in s. 7 of the
LRRA (which are set out below in “Implied
covenants”).
An electronic charge can also be completed by attaching
an electronic schedule of mortgage terms, relying on
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standard charge terms filed under the LRRA, or relying on
the implied covenants contained in the LRRA.
5. Review of a typical form of charge
The following is a review, on a clause-by-clause basis, of
the typical electronic form of charge that can be used in a
loan transaction. Generally, identical information is
required for the completion of non-electronic charges and
electronic charges. For specific instructions on the
completion of electronic documents, including charges,
lawyers should consult the Teraview software instruction
manuals and training materials.
For this review, a hypothetical fact situation and
completed forms are set out below.
Hypothetical fact situation
January 15, 2006 — Mary Smith borrows $100,000
from Acme Lending Company Limited
(Appendices A, C, and D).
March 12, 2006 — The chargee, Acme, transfers the
charge to William Brown (Appendix J). Brown gives
notice of the transfer to the chargor, Mary Smith
(Appendix K), and obtains an acknowledgment
from the chargor (Appendix L).
April 16, 2006 — Mary Smith sells the property to
David Wood. Wood obtains an assumption
statement from the chargee, William Brown
(Appendix M), and signs an assumption agreement
in favour of William Brown (Appendix N).
June 18, 2006 — David Wood pays off the loan and
gets a discharge statement and a discharge
(Appendices O–P).
5.1 Electronic form
The following paragraphs comment on the most
important elements of the electronic charge.
5.1.1 Properties and interest charged
As noted above, there is one standard electronic form of
charge for land. The applicable property identification
number (PIN), legal description, address, and interest
being charged must be indicated.
In most instances, the interest charged is the fee simple or
freehold interest. It is also possible for a tenant to create a
leasehold charge on the tenant’s leasehold interest in the
property. Leasehold charges should be drafted carefully
since they contain a mixture of real property concepts and
landlord and tenant concepts. Since the charge will only
encumber real property, the issue of adequately securing
fixtures and chattels is addressed in other security
documentation. For example, an assignment of rents and
leases would be used to secure the income generated at the
charged property, and a general security agreement would
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be used to secure personal property located at or used in
connection with the charged property.
Pursuant to s. 15(1) of the Conveyancing and Law of
Property Act, buildings and fixtures are included in any
“conveyance of land” unless there is a provision to the
contrary. At common law, this included not only such
items in existence at the time of the mortgage, but also
anything that was later annexed to the property.
Therefore, any future additions or installation of fixtures
by the chargor were automatically covered by the
mortgage for the benefit of the chargee. Since a charge is
not a conveyance of land, it is possible for charges to make
specific reference to the fact that all present and future
fixtures are encumbered by the charge. Language such as
the following is sometimes included:
It is hereby mutually covenanted and agreed by and
between the parties hereto that all erections and
improvements fixed or otherwise now on or
hereafter put upon the said premises, including but
without limiting the generality of the foregoing, all
fences, heating, piping, plumbing, aerials, air-
conditioning, ventilating, lighting and water heating
equipment, cooking and refrigeration equipment,
window blinds, radiators and covers, fixed mirrors,
fitted blinds, storm windows and storm doors,
window screens and screen doors, shutters and
awnings, floor coverings, and all apparatus and
equipment appurtenant thereto, are and shall, in
addition to other fixtures thereon, be and become
fixtures and an accession to the freehold and a part
of the realty as between the parties hereto, their
heirs, executors, administrators, successors, legal
representatives and assigns, and all persons
claiming by, through, or under them and shall be a
portion of the security for the indebtedness herein
mentioned.
Depending on the transaction, the chargee may also insist
on other terms of security (such as a general security
agreement) in order to more fully secure its interests.
5.1.2 Fixtures and the Personal Property
Security Act
Provisions of the Personal Property Security Act (PPSA)
recognize certain prior rights to such later additions to the
land. Section 34 of the PPSA provides, in part, as follows:
34.—(1) A security interest in goods that attached,
(a) before the goods became a fixture, has priority
as to the fixture over the claim of any person
who has an interest in the real property; or
(b) after the goods became a fixture, has priority
as to the fixture over the claim of any person
who subsequently acquired an interest in the
real property, but not over any person who had
a registered interest in the real property at the
time the security interest in the goods attached
and who has not consented in writing to the
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THE STANDARD LOAN TRANSACTION
security interest or disclaimed an interest in
the fixture.
(2) A security interest mentioned in subsection (1) is
subordinate to the interest of,
(a) a subsequent purchaser for value of an interest
in the real property; or
(b) a creditor with a prior encumbrance of record
on the real property to the extent that the
creditor makes subsequent advances,
if the subsequent purchase or subsequent advance
under a prior encumbrance of record is made or
contracted for without knowledge of the security
interest and before notice of it is registered in
accordance with section 54.
The priority of the chargee’s security interest in the real
property will not be affected so long as the charge was
properly registered.
5.1.3 PPSA regarding chattels
This form of charge does not cover chattels on the
property. If the chattels on the property are also to be
encumbered as security for the loan, a general security
agreement should be executed. The chargee should
comply with the provisions of the PPSA regarding
perfection of security interests by registering a financing
statement under the PPSA.
5.1.4 Chargors and charging language,
etc.
The chargor is the person who owns the property and is
borrowing the money and encumbering the property with
the charge as security for the chargor’s promise to repay
the loan. All of the owners of the property must sign the
charge if the chargee is to have full security.
The statement by the chargor that the chargor is at least
18 years old has replaced the old affidavit of age.
The former affidavit with respect to marital status has
been replaced by a statement, which must be completed,
as to the chargor’s marital status. Part II of the Family
Law Act, gives to a non-owner spouse certain possessory
rights in any “matrimonial home” and the right to consent
to any encumbering of it (“spouse” in Part II of the Family
Law Act means a married spouse or either of two persons
who have together entered into a marriage that is voidable
or void, in good faith on the part of a person relying on the
applicable clause in the Family Law Act to assert any
right). Therefore, if the property being charged is a
matrimonial home, the chargee must ensure that the
spouse of the chargor joins in the charging instrument as
chargor or consents to the charge pursuant to s. 21 of the
Family Law Act. If the spouse does not join in the charge
in order to consent, the charge is no less valid but may be
subject to the non-owner spouse’s prior possessory rights
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in the property. Spouses should obtain independent legal
advice before giving consent. The solicitor for the spouse
should always ensure that any consent given is limited to
the particular loan transaction so that the spouse retains a
possessory right in the property for all other purposes. If
the property is not a matrimonial home, the chargor
should so declare.
The statement to the effect that the chargor has received a
true copy of the charge is inserted because of s. 4 of the
Mortgages Act, which requires the chargee to deliver a
true copy of the mortgage to the chargor.
An electronic charge is “signed” for the chargor by the
person who submits it for registration. The Teraview
username, pass phrase, and RSA SecurID Hardware
Token or RSA SecurID Software Token of a person acting
for the chargor essentially serves as the electronic
“signature” of the chargor. Such person registering for the
chargor should obtain an acknowledgement and direction
(see Appendix D) signed by the chargor authorizing the
person submitting the charge for registration to sign and
register the charge for the chargor. The acknowledgement
and direction confirms that the chargor is bound by the
electronic charge as if the chargor had executed it himself
or herself. A spouse’s consent to the charge is evidenced
by the spouse’s execution of the acknowledgement and
direction authorizing the registration of the charge. A
printed copy of the draft electronic charge and all
schedules should be attached to the acknowledgement and
direction.
5.1.5 Chargee
If there is more than one chargee, either the words “on
joint account with right of survivorship” or the percentage
interest of each chargee should be inserted.
5.1.6 Statements
This section is to be completed if the statutory covenants
are to be amended or if relevant law statements are
required to be made.
5.1.7 Provisions
(a) Financial terms
The essential financial provisions of the charge are
contained in this section, including a statement of the
principal amount, the interest rate and the calculation
period for interest, and the term or “balance due date” of
the loan.
(b) Interest rate
With respect to interest, s. 6 of the federal Interest Act,
provides that where repayment is by way of an amount
that blends both principal and interest (and in two other
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rare situations), no interest whatsoever is chargeable,
payable, or recoverable unless the charge contains a
statement showing the following:
ƒ the amount of principal money; and
ƒ the rate of interest chargeable thereon calculated
either “yearly or half-yearly, not in advance.”
Section 6 of the Interest Act was not intended to protect
the chargor from a high rate of interest, but to ensure that
the chargor was fully aware of the amount of interest for
which the chargor was responsible. If interest is calculated
other than yearly or half-yearly and if repayment is by way
of blended payments, then to comply with s. 6 of the
Interest Act, the equivalent rate of interest as if calculated
yearly or half-yearly must also be stated. For example,
interest at the rate of 12% per annum calculated monthly
should also be stated to be 12.3% per annum calculated
half-yearly.
If the interest rate is stated but the frequency of
calculation of interest is omitted, the case law has implied
that interest is calculated yearly not in advance.
Payments are blended if the total amount of each payment
remains the same while its interest and principal
components vary from month to month. The monthly
blended payments are due on the same day of each month
(e.g., the first day of the month). The “interest adjustment
date” is the first day of the period that the first monthly
blended payment relates to—in our hypothetical fact
situation, February 1, 2006. The first monthly payment
would be due one month after the interest adjustment
date—i.e., March 1, 2006. If money is advanced before the
interest adjustment date, then interest alone from the date
of the advance to the interest adjustment date is payable
on the interest adjustment date, after which date a fixed
amount containing a blend of principal and interest is
payable monthly, in arrears. In other words, a payment on
September 1 covers the month of August, and so on.
Whatever interest has accrued is deducted from the
monthly payment, and the balance of the payment is then
used to reduce the principal outstanding.
(c) Calculation of interest
The calculation of accrued interest each month can be
tricky since how often interest is calculated and how often
it is payable need not be the same. If interest is calculated
(or compounded) at the same frequency as payments are
made, the determination of that part of the monthly
payment that is interest is a simple matter. Section 1 of the
repayment (or amortization) schedule in Appendix G
gives an example of this.
If payments are made more frequently than interest is
calculated (i.e., if the chargee receives payments monthly
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when interest is calculated half-yearly), the determination
of accrued interest in each payment may become
complicated if the “deemed reinvestment principle” is
either expressly applied by the parties or is deemed to
apply. Basically, this principle provides that if the chargee
has received any interest in advance of the time it is to be
calculated, the chargee is deemed to have reinvested that
interest and to have earned interest on it at the same rate
as the interest rate set out in the charge. The actual
interest paid by the chargor and the interest the chargee is
deemed to have earned from reinvestment must total no
more than the yield stated in the charge. Therefore, in this
situation, an interest factor is applied, and the effective
interest payable under the charge is reduced accordingly.
Section 2 of Appendix G contains an example of this.
In Ontario, whether the deemed reinvestment principle
applies will depend on the wording used in the mortgage
or loan to describe the calculation of interest. In
Metropolitan Trust v. Morenish Land Developments Ltd.,
the Supreme Court of Canada held that if there was no
reference to the interval for the calculation of interest and
no explanation as to whether interest should be calculated
in advance or not in advance, then the deemed
reinvestment principle does not apply. Pursuant to Bunn
v. Lock, the Court of Appeal for Ontario clarified that the
deemed reinvestment rule does apply if interest is to be
calculated “not in advance” and the mortgagor agrees to
pay interest more frequently than it is to be calculated.
(d) Term
The interest adjustment date is the effective
commencement date of the term of the mortgage. The
term of the mortgage is the period of time for which the
lender agrees to lend money and the borrower agrees to
borrow it. There is no limitation on how short or how long
the term of a charge may be.
The term of any charge by an individual person is normally
five years or less. Section 10 of the Interest Act and s. 18 of
the Mortgages Act both provide that if the term of any
mortgage is longer than five years, the mortgagor (unless
it is a corporation) has the right, at any time after five years
following the date of the mortgage, to pay it off together
with three months’ interest in lieu of notice.
The Supreme Court of Canada in Royal Trust Co. v.
Potash held that a mortgagor may elect not to exercise its
right under s. 10 of the Interest Act and s. 18 of the
Mortgages Act and instead enter into an otherwise valid
and enforceable renewal agreement that “deems” the date
of the original mortgage to be the date of maturity of the
existing loan. If the term of the renewal agreement does
not itself exceed five years, the mortgagor cannot pay off
the mortgage until the end of the five-year renewal period.
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It should be noted that in the absence of a provision in the
charge to the contrary, the chargor has no right to prepay
the loan or shorten the term (except as noted above)
without the agreement of the chargee. This is normally
referred to as a “closed” mortgage. Likewise, in the
absence of a default by the chargor, the chargee has no
right to shorten the term and accelerate repayment
without the agreement of the chargor. Closed mortgages
may require the chargor to pay a yield maintenance fee if
the chargor would like to prepay the loan. This yield
maintenance fee may be (1) interest that would be payable
over a period of time, for example, three months; (2) the
amount computed by a formula that is designed to
compensate the chargee for the lost interest payments
received over the term of the loan due to the prepayment;
or (3) the greater of such amount and interest payable
over a period of months. In a mortgage normally referred
to as an “open” mortgage, a provision is inserted
permitting the chargor to prepay the loan (see the
“Additional Provisions” section in Appendix C for an
example).
A loan is generally amortized over a period (usually
25 years) that is much longer than the term. In other
words, using the monthly payment figure in the charge, it
would take 25 years of the monthly blended payments of
principal and interest for the loan to be completely repaid.
Therefore, on the maturity date of a charge with a term of
only 5 years but an amortization period of 25 years, a large
lump sum or balloon payment of the outstanding amount
of the loan will be due.
(e) Standard charge terms
Section 9 of the LRRA provides that a charge is deemed to
include a set of standard charge terms if the charge terms
are referred to in the charge by their filing number. By
inserting the relevant number, the set of standard charge
terms filed as that number will be incorporated into the
charge. If no number is inserted, this option is inoperative.
Unless Form 2 or the electronic charge expressly excludes
the implied covenants set out in s. 7 of the LRRA, the
charge will be deemed to include them.
(f) Insurance
Either a monetary amount or the words “full replacement
value” or a similar provision can be inserted. If the chargee
requires extra provisions concerning the obligation of the
chargor to keep insurance in place and pay premiums,
these should be inserted in a schedule to the charge.
Insurance is a key financial provision, since the insurance
proceeds are the replacement for the security if the
building that has been charged is destroyed. Accordingly,
on closing, solicitors for chargees should require evidence
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that the insurance is in place, usually by way of insurance
certificates showing the chargee as an additional named
insured and showing proceeds as payable to the chargee.
5.1.8 Additional provisions
This section can be completed if there are any important
terms of the charge that need to be documented (e.g., a
pre-payment privilege).
5.1.9 File Number
The lawyer’s office file number can be inserted in this
section.
5.2 Implied covenants
Section 7 of the LRRA provides as follows:
7.—(1) A charge in the prescribed form shall be deemed
to include the following covenants by the chargor, for
the chargor and the chargor’s successors, with the
chargee and the chargee’s successors and assigns:
1. In a charge of freehold or leasehold land by the
beneficial owner:
i. That the chargor or the chargor’s successors
will pay, in the manner provided by the charge,
the money and interest it secures, and will pay
the taxes assessed against the land.
ii. That the chargor has the right to give the
charge.
iii. That the chargor has not done, omitted or
permitted anything whereby the land is or may
be encumbered, except as the records of the
land registry office disclose.
iv. That the chargor or the chargor’s successors
will insure the buildings on the land as
specified in the charge.
v. That the chargee on default of payment for the
number of days specified in the charge or in the
Mortgages Act, whichever is longer, may on
giving the notice specified in the charge or
required by that Act, whichever is longer, enter
on and take possession of, receive the rents
and profits of, lease or sell the land.
vi. That where the chargee enters on and takes
possession of the land on default as described
in subparagraph v, the chargee shall have quiet
enjoyment of the land.
vii. That the chargor or the chargor’s successors
will, on default, execute such assurances of the
land and do such other acts, at the chargee’s
expense, as may be reasonably required.
viii. That the chargee may distrain for arrears of
interest.
ix. That on default of payment of the interest
secured by the charge, the principal money
shall, at the option of the chargee, become
payable.
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2. In a charge of freehold land by the beneficial owner,
that the chargor has a good title in fee simple to the land,
except as the records of the land registry office disclose.
3. In a charge of leasehold land by the beneficial
owner:
i. That, despite anything done, omitted or
permitted by the chargor, the lease or grant
creating the term or estate for which the land
is held is, at the time the charge is given, a valid
lease or grant of the land charged, in full force,
unforfeited and unsurrendered, and that there
is no subsisting default in the payment of the
rents reserved by or in the performance of the
covenants, conditions and agreements
contained in the lease or grant at the time the
charge is given.
ii. That the chargor or the chargor’s successors
will, while the money secured by the charge
remains unpaid, pay, observe and perform all
the rents reserved by and all the covenants,
conditions and agreements contained in the
lease or grant and will indemnify the chargee
against all costs and damages incurred by
reason of any non-payment of rent or non­
observance or non-performance of the
covenants, conditions and agreements.
—(2) Where a charge to which subsection (1) applies is
given by or to more than one person, the covenants
deemed to be included by that subsection are made,
(a) by the chargors jointly and severally, unless
the charge specifies otherwise; and
(b) with the chargees jointly, unless the money
secured is expressly secured to them in several
shares or distinct sums.
—(3) A covenant deemed to be included in a charge by
subsection (1) may, in a schedule to the charge, or in a
set of standard charge terms filed under subsection 8(1)
and referred to in the charge by its filing number, be
expressly excluded or be varied by setting out the
covenant, appropriately amended.
—(4) A covenant deemed to be included in a charge by
subsection (1) may be enforced by a successor or
assignee of the chargee.
—(5) A charge in the prescribed form shall be deemed
to include the prescribed standard charge terms, unless
a set of standard charge terms filed under
subsection 8(1) is referred to in the charge by its filing
number.
—(6) A prescribed standard charge term deemed to be
included in a charge by subsection (5) may, in a
schedule to the charge, be expressly excluded or be
varied by setting out the term, appropriately varied.
Section 28 of the LRRA states that s. 7 of the LRRA also
applies to charges registered in an electronic format.
The deemed covenants in the LRRA replaced covenants
contained in two other statutes. Before April 1, 1985,
ss. 7–8 of the Mortgages Act set out extensive implied
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covenants. However, s. 9 of the Mortgages Act provides
that ss. 7–8 do not apply to any mortgage or charge that is
executed after the LRRA has come into effect.
As stated in s. 7 of the LRRA, the use of Form 2 or an
electronic charge, absent any limiting language, will deem
certain covenants on the part of the chargor. These cover
all of the matters of critical concern (i.e., that the chargor
will repay the loan, pay taxes, insure the building, and so
on). However, the deemed covenants contained in the
LRRA are limited in scope, especially compared to those
contained in the Short Forms of Mortgages Act. A practice
has developed to exclude the LRRA deemed covenants (as
permitted by s. 7 of the LRRA) and replace them with a
more detailed set of covenants such as those from the Dye
& Durham standard charge terms (see Appendix E),
reviewed below.
Apart from the LRRA, there are other statutes that imply
terms in a charge in certain circumstances.
Section 24 of the Mortgages Act provides that three
months after default in payment, the mortgagee will have
the following powers as if they were included in the
mortgage:
ƒ the power to sell; and
ƒ the power to insure.
Subsection 88(1) of the Condominium Act, 1998 provides
that all mortgages of a condominium unit are deemed to
contain certain provisions including the following:
ƒ The mortgagee may collect the unit owner’s
common expenses from the unit owner and remit
them to the condominium corporation.
ƒ The owner’s default in payment of common expense
is a default under the mortgage.
ƒ If the mortgagee makes payments of common
expenses that are not reimbursed by the owner,
these can be added to the mortgage debt, and the
mortgagee can accelerate the mortgage if these
amounts are not reimbursed following notice to the
owner.
The reasoning for these deemed inclusions is that s. 86(1)
of the Condominium Act, 1998 makes arrears of common
expenses a lien having priority to the charge in certain
circumstances.
Note should also be made of the Unconscionable
Transactions Relief Act, which may relieve a chargor, in
certain circumstances, from the onerous provisions of a
loan. If the cost of the loan is excessive, the court may
revise the contract if it finds the effective rate of interest to
be criminal pursuant to s. 347 of the Criminal Code.
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5.3 Standard charge terms
As noted above, Form 2 and an electronic charge may
contain a statement that the parties to the charge are
bound by the provisions of certain standard charge terms
identified by a filing number.
Incorporating standard charge terms by reference to those
on file, rather than setting the terms out in full in the
charge, greatly simplifies the charge.
Section 8 of the LRRA grants authority to file standard
charge terms, and s. 9(1) provides that a charge will be
deemed to include a set of standard charge terms if the set
is referred to in the charge by its filing number. Section 9
of the LRRA states:
9.—(1) A charge shall be deemed to include a set of
standard charge terms filed under subsection 8(1) if the
set is referred to in the charge by its filing number.
—(2) A term deemed to be included in a charge by
subsection (1) may, in a schedule to the charge, be
expressly excluded or may be varied by setting out the
term, appropriately amended.
—(3) Where a charge refers to more than one set of
standard charge terms by their filing numbers, the
charge shall be deemed to include only the set that was
filed last.
—(4) Where there is a conflict between an express term
in a charge and a term deemed to be included in the
charge by subsection (1), the express term prevails.
Any set of standard charge terms that has been filed can
be used by any parties entering into a charge simply by
completing the “charge provisions” section of an
electronic charge with the filing number of that set. For
purposes of this chapter, the set of standard charge terms
filed by Dye & Durham will be examined, a copy of which
is in Appendix E. While the Dye & Durham standard
charge terms are incorporated into many private
mortgages, Canadian institutional lenders have each
developed their own standard charge terms. The Dye &
Durham standard charge terms may not contain all terms
in each or any of the standard charge terms developed by
institutional lenders
The following comments on this set of standard charge
terms are premised on the assumption that they are being
reviewed for the first time and the comments are,
therefore, very basic. Each paragraph has been extracted
from the set and then examined. The numbering of each
of the following sections corresponds to the numbering on
the Dye & Durham form (e.g., s. 5.3.1 corresponds to
para. 1 of the Dye & Durham form).
5.3.1 Exclusion of statutory covenants
The wording follows standard practice that has developed
and excludes the implied covenants contained in the
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LRRA. The excluded covenants are effectively replaced by
the standard charge terms.
5.3.2 Right to charge the land
The wording is similar to but expands on the implied
covenant in s. 7(1)1.ii of the LRRA, which states that “the
chargor has the right to give the charge.”
5.3.3 No act to encumber
Again, the wording expands upon the implied covenant in
s. 7(1)1.iii of the LRRA. It should be noted that excluded
from this statement are any matters that are registered
against the title to the property. Therefore, the
responsibility for ensuring there are no prior
encumbrances on the property lies with the solicitor giving
the title opinion to the chargee.
5.3.4 Good title in fee simple
The wording replaces the implied covenant in s. 7(1)2 of
the LRRA and does not contain the qualification as to
matters registered on title, with the only exception being
those items contained in the original grant from the
Crown.
If the chargor’s title is not totally free of all encumbrances
or limitations, this clause must be amended accordingly.
5.3.5 Promise to pay and perform
The wording replaces the implied covenant in s. 7(1)1.i of
the LRRA and sets out the obligation of the chargor to
repay the loan, etc. This obligation is not terminated by
any sale of the property by the chargor, who remains liable
on this covenant until
ƒ the loan is repaid; or
ƒ the chargee releases the chargor, either by specific
deed or by the chargee’s actions.
Section 20 of the Mortgages Act provides that, in certain
circumstances in an action to recover money, the
mortgagee can sue either the current owner or the original
mortgagor.
5.3.6 Interest after default
This paragraph provides that unpaid interest in default
becomes capitalized at certain intervals, after which
interest is also charged on this unpaid capitalized interest.
Unless this paragraph is inserted in the charge, the
chargee can only charge interest on the principal
outstanding. At common law, if the charge did not provide
that interest at the rate set in the charge was payable after
the maturity date, it was only chargeable until the
maturity date.
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5.3.7 No obligation to advance
This paragraph provides that the chargee is not compelled
to advance all the money secured by the charge and is
significant in connection with construction loans where
the face amount of the charge is not advanced in full at the
time of registration of the charge. The case of Reid v.
Garnet B. Hallowell Ltd. et al. confirmed the validity of
this type of provision while stating that there may be
certain extraordinary circumstances in which the chargee
may be liable for failing to advance the full amount of the
loan.
If the loan is advanced in stages, consider s. 93(4) of the
Land Titles Act:
93.—(4) A registered charge is, as against the chargor,
the heirs, executors, administrators, estate trustees and
assigns of the chargor and every other person claiming
by, through or under the chargor, a security upon the
land thereby charged to the extent of the money or
money’s worth actually advanced or supplied under the
charge, not exceeding the amount for which the charge
is expressed to be a security, although the money or
money’s worth, or some part thereof, was advanced or
supplied after the registration of a transfer, charge or
other instrument affecting the land charged, executed
by the chargor, or the heirs, executors, administrators
or estate trustees of the chargor and registered
subsequently to the first-mentioned charge, unless,
before advancing or supplying the money or money’s
worth, the registered owner of the first-mentioned
charge had actual notice of the execution and
registration of such transfer, charge or other
instrument, and the registration of such transfer, charge
or other instrument after the registration of the first-
mentioned charge does not constitute actual notice.
Section 73 of the Registry Act contains a similar provision.
Thus, on all subsequent advances, the solicitor for the
chargee must conduct appropriate subsearches to ensure
priority.
In addition, s. 78 of the Construction Act, which applies to
lands in both the registry and land titles systems, contains
numerous provisions with respect to the priorities
between construction liens and charges. It is important
that this section be considered when an advance on the
loan is being made to ensure its priority.
5.3.8 Costs added to principal
Certain payments outside of the charge may, if not paid,
create liens on the land in priority to any charge (e.g.,
realty taxes) or may put the chargee’s security at risk (e.g.,
insurance premiums). Therefore, it is in the chargee’s
interest to ensure that they are paid. This paragraph
allows the chargee to make certain payments with respect
to the property and to add these to the debt. If the chargor
does not reimburse the chargee “forthwith” with respect to
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all such items, the chargee has the right to accelerate the
loan.
5.3.9 Power of sale
This paragraph contains the chargee’s remedy of sale
under a power of sale and replaces the implied covenant
contained in s. 7(1)1.v of the LRRA. It is also subject to
Part III of the Mortgages Act.
5.3.10 Quiet possession
Pursuant to the charge, the chargor is entitled to remain
in possession until the chargor defaults. After that point,
the chargee is entitled to quiet possession. The wording
used in this paragraph is taken from the expanded
wording contained in the Short Forms of Mortgages Act.
Quiet possession essentially means that the chargee can
obtain and maintain its possession of the property free
from interference by the chargor or those claiming
through the chargor. This wording replaces the implied
covenant in s. 7(1)1.vi of the LRRA.
5.3.11 Right to distrain
This paragraph gives to the chargee the right of distress
(i.e., the right to seize chattels of the chargor if the charge
is in default) (see ss. 14–16 of the Mortgages Act).
The wording replaces the implied covenant contained in
s. 7(1)1.viii of the LRRA, which allows the chargee to
distrain for arrears of interest. The above paragraph
further provides that the chargee may distrain for arrears
of principal.
5.3.12 Further assurances
The wording replaces the implied covenant in s. 7(1)1.vii
of the LRRA and provides that the chargor, after default,
will do whatever is necessary to convey the property
absolutely to the chargee.
5.3.13 Acceleration of principal and
interest
The wording replaces the implied covenant contained in
s. 7(1)1.ix of the LRRA, which provides that upon default
of any payment of principal or interest, the entire balance
may become immediately due at the option of the chargee.
This does not cover a breach of any other covenant. See
below for the chargee’s right to accelerate for a breach of
covenant.
Section 22 of the Mortgages Act provides some relief
against this acceleration by providing that,
notwithstanding any agreement to the contrary, where
there has been default and acceleration, the chargor may
pay all arrears and expenses and put the charge into good
standing at any time
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ƒ before the sale of property pursuant to the power of
sale contained in the charge; or
ƒ before any action has been commenced,
whereupon the chargor is relieved from the consequences
of the acceleration clauses. The amount the chargor must
pay does not include any accelerated amounts. After a
“sale” has taken place, no relief against acceleration is
available.
Once an action has been commenced, s. 22 of the
Mortgages Act no longer provides any relief against
acceleration. However, the chargor can resort to s. 23 of
the Mortgages Act, which provides that notwithstanding
any agreement to the contrary, if an action by the
mortgagee has been commenced for enforcement of its
rights and the charge has been accelerated, the chargor
can apply to the court to put the charge into good standing
by paying the arrears and certain costs.
Moreover, s. 17 of the Mortgages Act provides that,
notwithstanding any agreement to the contrary, the
chargor may put the mortgage into good standing at any
time by paying
ƒ the amount of principal in arrears; and
ƒ a bonus of three months’ interest on the principal in
arrears or giving three months’ notice of the
chargor’s intention to put the mortgage into good
standing.
This provision protects the chargor by permitting
payment of arrears without penalty. The chargor is not
required to make further payments of interest except to
the date of payment. Such interest would merely
constitute payment for the use of the principal during the
three-month notice period. This provision also protects
the chargee by giving a three-month period during which
to arrange for reinvestment of the chargee’s principal or
compensation for lack of that notice. The option is that of
the chargor.
However, s. 17 of the Mortgages Act does not give the
chargor the right to also pre-pay the balance of principal
that was not in arrears without paying the interest that is
payable on this balance of principal to the maturity date,
unless the chargee has taken steps to compel payment.
Case law also holds that this provision does not apply if the
chargee is exercising its remedies to recover the money on
default and asking for this bonus as well. Subsection 17(3)
further provides that s. 17(1) does not limit the right of the
mortgagee to pursue any of the mortgagee’s remedies with
respect to the amount in default.
5.3.14 Unapproved sale
This is the “due upon sale” provision, which provides that
the amount secured under the charge shall, at the option
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of the chargee, become immediately due and payable if the
chargor disposes of its interest in the property.
Accordingly, a chargor should first obtain the chargee’s
consent before selling the property if the purchaser is to
assume the charge.
5.3.15 Partial releases
This paragraph provides that the chargee may, at any time,
release part of the property from the charge. If released,
the remainder of the property remains as security for the
repayment of the full amount owing under the charge.
If the chargor contemplates subdividing the lands, the
chargor should ensure that a provision is inserted in the
charge that
ƒ obligates the chargee to give partial discharges; and
ƒ apportions the principal over the property pro rata.
5.3.16 Obligation to insure
The wording replaces the implied covenant in s. 7(1)1.iv of
the LRRA and contains a covenant by the chargor to carry
insurance for the full insurable value of the buildings that
are located on the lands at any time during the term of the
charge. It also provides that any recovery pursuant to such
insurance shall be paid directly to the chargee as the
chargee’s interest may appear.
Section 6 of the Mortgages Act gives the chargee the
choice of requiring that the insurance moneys be used
either for repair or for paying off the moneys due under
the mortgage. Therefore, the chargor cannot insist on
using the insurance proceeds to rebuild, unless the
chargee has consented.
The chargee is not entitled to make a windfall profit in this
regard. If the premises are not repaired, the first chargee
has first entitlement to that part of the insurance proceeds
equal to the amount then due to that first chargee
pursuant to the charge. It appears this chargee can then
hold an amount sufficient to cover the remainder of all
amounts owing under the charge that, in effect, replaces
the buildings as security. Any second chargee then
becomes entitled to similar rights and so on, with any
balance going to the chargor.
The requirement that the standard form of mortgage
clause be attached to all insurance policies is important,
since this creates a more direct relationship between the
insurer and the chargee. This clause, an example of which
is contained in Appendix H, provides, among other things,
that the insurance proceeds are payable to the chargee,
that the policy will not be cancelled by the insurer without
notice to the chargee, that the policy is valid vis-à-vis the
chargee regardless of any act of the insured chargor, and
that subject to the insured’s liability, the rights of the
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insurer shall be subrogated to those of the chargee.
Section 147 of the Insurance Act also contains similar
notice provisions.
5.3.17 Obligation to repair
This provision contains the chargor’s covenant to keep the
property in a state of good condition and repair. If the
chargor does not do so or if the chargor commits waste or
defaults in any of the covenants contained in the charge,
the chargee has the right to accelerate the charge and to
employ all the usual remedies on default. This is because
failure to repair or the commission of waste reduces the
value of the chargee’s security. Technically, any
demolition or alteration to the buildings on the property
constitutes waste. If such demolition or alterations are
contemplated, this provision should be amended
accordingly.
This provision also provides that any default in any prior
charge automatically constitutes an act of default under
the charge, entitling the chargee to all of its remedies,
including acceleration.
5.3.18 Building charge
The first part of this provision states that where any
portion of the principal amount advanced by the chargee
is used to finance construction, the chargor must provide
the chargee with details concerning the proposed
improvements. The second portion deals with the
provisions of the Construction Act that require certain
holdbacks of funds during construction.
5.3.19 Extensions not to prejudice
This paragraph provides that no dealings between the
chargee and the chargor or the owner of the property shall
prejudice the rights of the chargee against the chargor or
such other person.
This should be read in light of s. 20(3) of the Mortgages
Act, which states that where a mortgagee obtains a
judgment against the current owner of the property
satisfying the mortgagee’s claim, the mortgagee ceases to
have a right to claim against the guarantor or mortgagor,
as the case may be. In addition, the case law suggests that
if the chargee alters the original contract in any material
manner without the consent of the original mortgagor, the
original mortgagor may be relieved from the original
mortgagor’s continuing personal liability.
While normally the chargor is not released from the
chargor’s personal covenant even when the chargor sells
the property, the chargor and the chargee can agree, in a
“limited recourse” or “non-recourse” provision, that the
recourse of the chargee will be limited to the property and
the chargor will have no personal obligation to repay the
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debt if the property is worth less than the amount
outstanding on the loan.
This provision permits (but does not obligate) the chargee
to renew the charge and alter the interest rate without
losing priority over subsequent encumbrances,
notwithstanding the provisions of the Registry Act dealing
with priority of registration.
Note should also be made of the comments set out above
in “Term” regarding renewals and the right of a chargor
who is an individual person to repay the loan after five
years.
5.3.20 No merger of covenants
This paragraph provides that if the chargee obtains
judgment against the chargor with respect to any
covenant, such covenant does not merge in the judgment,
and the chargee is still entitled to be paid according to the
terms of the charge. Also, interest shall run on the amount
of the judgment at the same rate as is contained in the
charge.
5.3.21 Change in status
This provision imposes an obligation on the chargor to
advise the chargee regarding any sale of the property,
which allows the chargee to keep its records up to date
since future payments will be made by the new owner. It
also provides the chargee with necessary information
regarding the name, spousal status, and address of the
current owner for any power of sale proceedings by the
chargee.
5.3.22 Condominium provisions
This provision states that the chargor must comply with
the provisions of the Condominium Act, 1998 relating to
the chargor’s unit. The chargor must provide the chargee
with all notices, assessments, by-laws, etc., that the
chargor receives from the condominium corporation. The
chargor must abide by all terms of the condominium
agreements to which it is a party. Moreover, the chargor
must also maintain insurance above and beyond that of
the condominium corporation. Finally, the chargor
irrevocably authorizes the chargee to exercise the
chargor’s rights under the Condominium Act, 1998 to
vote, consent, and dissent to any changes to the particular
condominium corporation’s by-laws.
5.3.23 Discharge
The paragraph provides that any required discharge of the
charge is to be prepared by the chargee at the expense of
the chargor.
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5.3.24 Guarantee
This paragraph provides that in the event a third party
provides a guarantee of the obligations of the chargor
under the charge, the guarantor may be treated as a
principal covenantor under the charge and therefore may
be considered as primarily liable for all the obligations
under the charge.
5.3.25 Severability
This paragraph provides that if any term of the charge is
found to be unenforceable or inconsistent with the
provisions of any applicable statute or regulation or if the
effect of any such applicable statute or regulation would
prevent the chargee from being able to collect the amount
of any loss sustained by it as a result of making the loan
secured by the charge, then such provision shall be
deemed to not apply to the extent that it is so illegal,
invalid, or inconsistent.
5.3.26 Interpretation
This paragraph provides that the terms of the charge are
binding on and exercisable by all successors to the parties
to the charge. It also provides that if there is more than
one chargor at any time, all covenants are joint and
several.
5.3.27 Paragraph headings
This paragraph explains that the paragraph headings are
for reference only and are not part of the charge and are
not to be used in its interpretation.
5.3.28 Date of charge
This paragraph deems that the date of the charge is the
date of delivery for registration, unless otherwise
provided.
5.3.29 Effect of delivery of charge
This paragraph is required in connection with the
electronic registration of the charge and provides that the
electronic form is to have the same effect for all purposes
as if the charge were in written form, signed by the parties,
and delivered to the chargee.
5.3.30 Matters not in Dye & Durham
standard charge terms
As mentioned earlier, the Dye & Durham standard charge
terms are not exhaustive terms. Some matters not
provided for in the Dye & Durham standard charge terms
are
ƒ provisions related to leasehold mortgages;
ƒ lender inspection rights;
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ƒ provisions prohibiting hazardous substances and
other environmental provisions; and
ƒ provisions whereby the borrower consents to
receiving lender notices through electronic mail.
5.4 Acknowledgment
Appendix F contains a form of acknowledgment that
addresses s. 11 of the LRRA, which provides that the
chargee is guilty of an offence unless the chargor or
chargor’s solicitor has been provided with a copy of the
standard charge terms before taking the charge.
6. Special additional provisions
6.1 Charge of condominium
A charge of a condominium unit should contain the
following additional provisions:
ƒ a covenant by the chargor to comply with the
Condominium Act, 1998;
ƒ a covenant by the chargor to pay common expenses,
with failure to do so constituting an event of default;
ƒ an assignment to the chargee of the right to vote;
ƒ a covenant to give the chargee notices regarding
meetings, demands for payment, etc.; and
ƒ an amendment of the usual insurance provisions.
Sample provisions are contained in Appendix I.
7. Transfers by chargee and chargor
7.1 Transfer by chargee
The chargee may sell to a third party the chargee’s right to
repayment of the loan by the chargor. In this event, the
chargee causes the electronic transfer of charge (an
example of which is located at Appendix J) to be registered
on its behalf. A transfer of charge replaces the old
assignment of mortgage in the registry system, which
included both an assignment of the debt and a conveyance
of the property.
Note that s. 53(1) of the Conveyancing and Law of
Property Act provides as follows:
53.—(1) Any absolute assignment made on or after the
31st day of December, 1897, by writing under the hand
of the assignor, not purporting to be by way of charge
only, of any debt or other legal chose in action of which
express notice in writing has been given to the debtor,
trustee or other person from whom the assignor would
have been entitled to receive or claim such debt or chose
in action is effectual in law, subject to all equities that
would have been entitled to priority over the right of the
assignee if this section had not been enacted, to pass and
transfer the legal right to such debt or chose in action
from the date of such notice, and all legal and other
remedies for the same, and the power to give a good
discharge for the same without the concurrence of the
assignor.
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Therefore, the assignee should always give the chargor
“express notice in writing” of the transfer of the charge in
order to take advantage of the provisions of s. 53(1) and to
preclude any further payments by the chargor to the
original chargee. In Hopman et al. v. Carleton Credit Ltd.,
the court confirmed that such notice by either the assignor
or the assignee was acceptable. An example of a notice is
contained in Appendix K.
Subsection 101(4) of the Land Titles Act provides that
every transfer of a charge is subject to the state of account
upon the charge between the chargor and the chargee. As
the transferee of the charge takes it subject to the state of
accounts between the chargor and the original chargee at
the time notice of the transfer of charge is given to the
chargor, the transferee should always obtain an
acknowledgment from the chargor as to the amount
outstanding on the charge at the time of the transfer. The
chargor is then stopped from later claiming that the
chargor had prepaid certain amounts under the charge or
had a right of set-off against the amount owing to the
original chargee. This acknowledgment should also
contain a covenant by the chargor to make all future
charge payments to the transferee. An example of such an
acknowledgment is contained in Appendix L.
Section 13 of the Mortgages Act provides as follows:
13.— The purchaser in good faith of a mortgage may, to
the extent of the mortgage, and except as against the
mortgagor, set up the defence of purchase for value
without notice in the same manner as a purchaser of the
mortgaged property might do.
Note should also be taken of s. 7 of the Conveyancing and
Law of Property Act, which provides as follows:
7.— A statement of consideration money or other
consideration in the body of a conveyance or endorsed
thereon is, in favour of a subsequent purchaser not
having notice that the money or other consideration was
not in fact paid or given wholly or in part, sufficient
evidence of the payment or giving of the whole amount
thereof.
As mentioned above, Form 2 or the corresponding
position of an electronic charge may constitute an
acknowledgment by the chargor of receipt of the entire
loan amount (whether or not it has, in fact, been advanced
at that point). It may be that the transferee of the charge
is entitled to rely on this unless the transferee has
knowledge to the contrary.
7.2 Transfer by chargor
The owner/chargor may sell the chargor’s freehold
interest in the property subject to an existing charge. Upon
the sale, the purchaser would assume the outstanding loan
and pay the owner/chargor on closing the balance of the
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purchase moneys less the amount owing on the
outstanding charge.
The purchaser inherits the true state of accounts between
the original chargor and the chargee. Therefore, the
purchaser should obtain from the chargee an assumption
statement setting out the state of accounts between the
chargor and the chargee as of the closing date. Once again,
this statement is received to prevent the chargee from later
claiming that a greater amount was owing under the
charge. The purchaser should ensure that the assumption
statement is not marked “E. & O.E.” (“Errors and
Omissions Excepted”), which may give the chargee the
right, at some later date, to claim a greater amount
because of an error or omission in the statement by the
chargee. The assumption statement may be made subject
to certain payments by the original chargor being
honoured by the bank. The purchaser should ensure that
this has taken place by closing or should withhold funds
from the balance due on closing. An example of an
assumption statement is contained in Appendix M.
As noted above, a transfer of the property by the original
chargor does not automatically relieve the chargor of
possible liability if the charge later falls into default.
Section 20 of the Mortgages Act provides as follows:
20.—(1) In this section, “original mortgagor” means
any person who by virtue of privity of contract with the
mortgagee is personally liable to the mortgagee to pay
the whole or any part of the money secured by the
mortgage.
—(2) Despite any stipulation to the contrary in a
mortgage, where a mortgagor has conveyed and
transferred the equity of redemption to a grantee under
such circumstances that the grantee is by express
covenant or otherwise obligated to indemnify the
mortgagor with respect to the mortgage, the mortgagee
has the right to recover from the grantee the amount of
the mortgage debt in respect of which the grantee is
obligated to indemnify the mortgagor; provided that the
right of the mortgagee to recover the amount of the
mortgage debt under this section from the grantee of the
equity of redemption shall as against such grantee
terminate on the registration of a grant or transfer of the
equity of redemption by such grantee to another person
unless prior to such registration an action has been
commenced to enforce the right of the mortgagee.
—(3) Where a mortgagee has the right to recover the
whole or any part of money secured by a mortgage from
an original mortgagor and also has a right by virtue of
this section to recover from a grantee of the equity of
redemption from a mortgagor, if the mortgagee
recovers judgment for the amount of the mortgage debt
against the original mortgagor, the mortgagee
thereupon forever ceases to have a right to recover
under this section from a grantee, and if the mortgagee
recovers judgment under this section against a grantee
the mortgagee thereupon forever ceases to have a right
to recover from the original mortgagor; provided that
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where there is more than one original mortgagor this
section does not affect the right of a mortgagee after the
recovery of judgment against one original mortgagor to
recover judgment against the other original mortgagor
or mortgagors.
The original chargor can only escape later responsibility in
the following circumstances:
ƒ by obtaining from the chargee a specific release of
the chargor from the chargor’s personal covenant;
or
ƒ by the actions of the chargee (i.e., obtaining
judgment against a subsequent owner or, possibly,
agreeing with a subsequent owner to materially
alter the charge without the consent of the chargor).
Subsection 20(2) of the Mortgages Act provides that the
chargee has the right to recover the amount outstanding
on the mortgage from either the original covenantor or the
owner at the time of the default if that subsequent owner
has become “by express covenant or otherwise obligated
to indemnify the mortgagor with respect to the mortgage.”
Once the chargee obtains a judgment against one, the
chargee’s rights against the other cease. Clearly, it is to the
benefit of the original chargor to ensure that the
subsequent owner is so obligated.
The prudent solicitor for the transferor in this situation
should require that the transfer contain a covenant by the
transferee to indemnify the transferor with respect to the
debt being assumed. Ideally, the transfer should be
executed by the transferee as well as the transferor.
At common law, the transfer of property subject to a
charge did not impose upon the transferee any personal
responsibility to the chargee to pay the mortgage loan,
since there was no privity of contract between the chargee
and such subsequent owner. Section 20 of the Mortgages
Act provides further rights to the chargee in this regard so
long as the subsequent owner is the owner of the property.
Once the subsequent owner sells the property, this
subsequent owner’s liability to the chargee ceases.
However, if this subsequent owner had entered into an
assumption agreement such as the one contained in
Appendix N, this subsequent owner’s personal contractual
liability to the chargee will remain in effect even after the
completion of the transfer.
The chargee cannot prohibit the chargor from selling the
property. However, as noted above, many printed forms of
charges now contain a clause permitting the chargee to
accelerate full payment of the loan if the chargee does not
approve of any new purchaser (the so-called “due-on-sale”
clause). Obviously, in this case, the consent of the chargee
must be obtained to any transfer of the property. The
chargee may require that the new purchaser enter into an
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assumption agreement, such as the one attached as
Appendix N, as a condition to giving such consent.
8. Extinguishment of charges
8.1 Reconveyance
A mortgage entered into prior to the enactment of the
LRRA can be extinguished by the chargee reconveying the
property to the chargor by way of an ordinary grant or quit
claim deed.
8.2 Statutory discharge
The usual manner of extinguishing a charge is by a
discharge. A copy of the current electronic form of
discharge is contained in Appendix O.
Prior to forwarding funds to the chargee and requesting a
discharge, the chargor should obtain a discharge
statement from the chargee setting out the exact amount
owing on the charge as of the projected payment date. An
example of a discharge statement is contained in
Appendix P. It should be noted that many discharge
statements are marked “E. & O.E.,” indicating they may
not be binding on the chargees who issued them. If this is
the case, care should be taken by any solicitor who
undertakes to obtain a discharge that is to be registered
subsequent to closing. Any caveats in the discharge
statement as to cheques being honoured by the bank
should be followed up carefully.
8.3 Court order
Section 12 of the Mortgages Act provides that in certain
circumstances, an application can be made to the court for
an order discharging a mortgage. This can be of use where
the chargee cannot be found or where the amount due is
in dispute. Subsection 12(9) of the Mortgages Act states
that once the order discharging the mortgage is registered
on title, it has the same effect as the registration of a
certificate of discharge signed by the chargee.
8.4 Assignment
On rare occasions, the chargor may require the chargee to
assign the charge pursuant to the provisions of s. 2 of the
Mortgages Act.
9. Mortgage insurance
9.1 Statutory restriction on mortgage
lending by banks
Section 418 of the federal Bank Act provides as follows:
418.—(1) A bank shall not make a loan in Canada on
the security of residential property in Canada for the
purpose of purchasing, renovating or improving that
property, or refinance such a loan, if the amount of the
loan, together with the amount then outstanding of any
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mortgage having an equal or prior claim against the
property, would exceed 80 per cent of the value of the
property at the time of the loan.
—(2) Subsection (1) does not apply in respect of
(a) a loan made or guaranteed under the National
Housing Act or any other Act of Parliament by or
pursuant to which a different limit on the value of
property on the security of which the bank may make a
loan is established ….
Banks are therefore prohibited from giving residential
mortgage loans that exceed 80% of the value of the home
unless the loan is guaranteed under the federal National
Housing Act or subject to another exception in s. 418(2) of
the Bank Act. There are similar prohibitions in effect for
trust companies and other financial intermediaries under
provincial legislation (e.g., see s. 191 of the Credit Unions
and Caisses Populaires Act, 1994).
9.2 National Housing Act
A Crown corporation called Canada Mortgage and
Housing Corporation (often called CMHC and called the
Corporation in the National Housing Act) administers
and provides funding for the National Housing Act. The
purpose of the National Housing Act is contained in s. 3:
3.— The purpose of this Act, in relation to financing for
housing, is to promote housing affordability and choice,
to facilitate access to, and competition and efficiency in
the provision of, housing finance, to protect the
availability of adequate funding for housing at low cost,
and generally to contribute to the well-being of the
housing sector in the national economy.
Section 8 of the National Housing Act provides as follows:
8.—(1) The Corporation may provide insurance against
risks relating to housing loans.
—(2) For lenders, the purpose of insuring housing
loans is to indemnify lenders in the event of default by
borrowers. The obligations of borrowers or other
persons are not released or discharged by that insurance
or indemnification.
9.3 A typical insured residential mortgage
transaction
Because of s. 418(1) of the Bank Act, potential home
buyers require a minimum cash down payment of 20% of
the value of the home, unless they purchase insurance as
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REAL ESTATE
required under the National Housing Act. This provision
minimizes the risk of a bank losing money on a first
mortgage loan if the borrower should default and
increases the safety of the banking system. However,
many potential home buyers will not have the required
20% cash down payment and will therefore not qualify for
a first mortgage from a chartered bank unless they
purchase insurance as required under the National
Housing Act.
To resolve this problem, s. 8 of the National Housing Act
authorizes CMHC to insure mortgage loans, and s. 418(2)
allows banks to lend more than 80% of the value of the
home if the mortgage is insured by CMHC or such other
insurers approved by the Office of the Superintendent of
Financial Institutions from time to time, such as Sagen MI
Canada Inc.
A home buyer who requires an insured mortgage will
typically apply to CMHC, Sagen MI Canada Inc., Canada
Guaranty Mortgage Insurance Company, or others for the
insurance at the time the buyer applies to a bank for a first
mortgage.
If the borrower qualifies and the insurance application is
granted, the borrower will be required to pay an insurance
premium to CMHC or such other insurance provider. The
premium is paid once only, at the inception of the insured
loan. Usually, the bank remits the premium on the
borrower’s behalf out of the mortgage proceeds. CMHC
and other insurance providers set insurance premiums
from time to time.
The mortgage insurance insures the bank or other lender
against a loss on its mortgage account if the borrower
should default under the mortgage. Despite the fact that
the borrower pays the insurance premium, mortgage
insurance insures the lender, not the borrower. Thus, if a
borrower defaults under a mortgage and the lender
sustains a loss, CMHC will reimburse the lender for its
loss, but the borrower will remain liable, under the
mortgage covenants, for payment of the loss. Usually the
lender will sue the borrower for the loss, obtain judgment,
and assign its judgment to CMHC, which will then try to
enforce the judgment against the borrower. The insurance
remains in effect until the insured mortgage is discharged.
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Appendix A
Loan Commitment

APPROVAL OF MORTGAGE CORPORATION Mortgage No.

MORTGAGE LOAN ONTARIO REGIONAL OFFICE 80025

N.H.A. ჱ Application made through:

01812 - Yonge and Finch, Toronto
Insurer: C.M.H.C.

CONVENTIONAL ჳ Transit No. Branch: Ontario Insurer’s No. 31-675

CONV. INSURED ჱ

MORTGAGOR TO: Mary Smith

Your application for a loan to be secured by a first mortgage on the property hereinafter referred to has been
approved on the following basis, provided your title proves satisfactory. This commitment is not transferable and
the benefit thereof may not be assigned. The provisions of the National Housing Act, R.S.C. 1985, c. N-11 and the
regulations thereunder are in all respects to be observed if an N.H.A. loan.

LOAN Amount Term of Amortization Interest Monthly

Basic Ins. $100,000 Mortgage Period Rate (calc. Instalment
Fee (%) NIL half-yearly Payment (for
Total $100,000 5 yrs. 25 yrs. not in Principal &
advance) Interest)
12%
$1,031.90

DUE DATES Interest Adjustment

Date Feb. 1, 2006
First Regular
Monthly Payment Mar. 1, 2006
Final Regular
Jan. 1, 2011
Monthly Payment
Maturity Date Feb. 1, 2011

PROPERTY Civic Address: 360 Yonge Street Brief Description of Building (if other than
Toronto, Ontario single detached dwelling)
Brief Legal
Description: Part of Park Lot 9
Concession 1,
Township of York,
City of Toronto
Lot Size: 16.459 m x 60.121 m
Leasehold:

ADDITIONAL
COVENANTORS

CANCELLATION We reserve the right to cancel this commitment if your acceptance has not been received
within fourteen days from this date, or if, for any reason whatsoever, there have not been any
mortgage moneys advanced by February 1, 2006

HOLDBACKS Completion of required repairs and improvements $ NIL

Approved Sale $ NIL
Loan may be closed at amount advanced if
final disbursement is not made by February 1, 2006

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TAXES AND Under the terms of the mortgage an amount for taxes will be payable monthly in addition to
INTEREST ON the amortization payment applied to principal and interest. You are to pay or provide for all
ADVANCES taxes due or to become due up to the disbursement date, and you may be required to
create a tax credit equivalent to the fraction of the next levy, or estimated levy, that will
accrue to that date.

The monthly payment required on account of taxes is $ NIL

Tax credit required is – $ Holdback not requested

Any change in the Interest Adjustment Date may change these amounts. The required tax
credit, plus accrued interest on advances to interest adjustment date, if not otherwise paid,
shall be retained out of the proceeds of the loan.

SOLICITOR OR The legal work on our behalf will be done by the undernoted solicitor or notary, and you or
NOTARY your solicitor or notary should deliver your title deeds to him at once and the survey and
insurance policy as soon as possible. These documents are required before advances may be
made.

Name: Paul J. Morassutti, c/o Osler, Hoskin & Harcourt LLP

Address: P.O. Box 50, First Canadian Place
Toronto, Ontario M5X 1B8

LEGAL AND You are to pay all legal fees, appraisal fees and expenses incurred with respect to the loan
APPRAISAL COSTS and incurred in complying with the provisions stated herein, whether or not the loan is
completed.

SURVEY You are to provide an up-to-date survey, by a surveyor showing the size of lot and location
REQUIREMENTS of the buildings on the land, or title insurance.

FIRE HAZARD Coverage for not less than the amount of the loan, or a lesser amount if the insurer certifies
INSURANCE in writing such lesser amount is the full insurable value, with loss payable to us and with our
special form of mortgage clause attached must be exhibited to our solicitor or notary before
advances will be made.

ADVANCES In order that our solicitor will be in a position to release funds as required it is necessary
that you or your solicitor arrange beforehand with our solicitor a mutually satisfactory date
for disbursement.

PAYMENTS Payments may be made at any branch of Canadian Imperial Bank of Commerce.
Arrangements for payment by convenient pre-authorized cheques, free of service charges,
are available.

OTHER CONDITIONS On any payment date, this mortgage can be prepaid in full or any multiple of $500.00
without notice or bonus.

Office Use Only

Taxes 595 Date: Jan. 10/06 “J. Jones” (Signature of Approver)

Mun. Code June
Due Date

The accepted form should be I accept the within terms Date

returned to the above branch
“Mary Smith” Jan. 10/06
Signature of Mortgagor

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THE STANDARD LOAN TRANSACTION CHAPTER 54

Appendix B
Instructions to Lender’s Solicitor

Dear Sirs:
MORTGAGE REFERENCE No.
MORTGAGOR:
Please obtain first mortgage in favour of in accordance with the attached copy of the commitment letter and
the following instructions:
(1) (A) N.H.A. LOANS: Delete those sections in the mortgage applicable to graduated payment loans.
(B) CONVENTIONAL LOANS: change due dates for payment and gale dates from the last day to the first day.
(2) REPORT ON TITLE: Your report on Form MTG.126 must be received by us before we can disburse the loan. If an
existing loan is to be discharged from the proceeds of this new loan, please forward the report in interim form
indicating that prior encumbrances will be discharged from the proceeds of the loan. In due course, please let us
have a final report indicating the mortgage/deed of loan is a first/charge/hypothec against the said lands. Your
report should not be delayed pending receipt of the surveyor’s certificate from the Mortgagor.
PLEASE SHOW ON FORM MTG.126 PRELIMINARY REPORT, THE DATE FUNDS ARE REQUIRED. THIS
FORM SHOULD BE RECEIVED BY US AT LEAST 5 DAYS BEFORE FUNDS ARE REQUIRED BY YOU. IF YOU
ARE UNABLE TO DISBURSE FUNDS WITHIN 4 DAYS OF RECEIPT PLEASE REFUND TO US PROMPTLY. ANY
INQUIRIES CALL: (416) 927-5772. PLEASE SEND PRELIMINARY REPORT TO THE ABOVE ADDRESS.
(3) TAXES: Check and ensure municipal and school taxes are paid up to date and advise us of address of tax office.
(4) SURVEY : Up-to-date survey to be obtained from the Mortgagor and prepared by a qualified surveyor confirming
that the property conforms to all governing regulations.
(5) ADVANCES: Will be sent to you for release to the Mortgagor. Make advances after you have:
— ensured no liens are registered.
— taken necessary precautions with regard to provincial law as it relates to liens.
— ensured that the property conforms to all governing regulations as disclosed by the survey sketch or
certificate.
Advance will be the BASIC loan amount. NOTHING to be deducted unless specified on Commitment. Pre IAD INT.
to be collected by servicing branch prior to first payment date.
(6) FIRE INSURANCE: Have the Mortgagor furnish a policy of satisfactory coverage for full insurable value with loss
payable to and branch indicated above. The policy is to contain an extended coverage clause and either the
Mortgage clause Form MTG.42, the Standard Mortgage Clause No. I.B.C. 3000 or a mortgage clause indicating
“Approved by THE INSURANCE BUREAU OF CANADA.” The mortgage clause (if other than those indicated) and
insurance company are to be acceptable to us, and we suggest you consult us in this regard.
(7) OTHER INFORMATION: DRAFT MORTGAGE IS NOT REQUIRED AS STANDARD FORMS ARE PROVIDED.
WATER AND SEWAGE CERTIFICATES: Before requesting advance of funds, please obtain from the local health
unit an appropriately signed certificate to confirm that
(A) The well water system is adequate and potable.
(B) The septic tank system appears to be adequate and that no known defects exist.

IDENTIFICATION VERIFICATION

Prior to disbursing funds, we require that you verify the identity of each Mortgagor, Guarantor, Attorney, and signing
officer(s) of Corporate Mortgagor(s) in accordance with the Bank’s Instructions.

Upon completion of this transaction please forward your Final Report on Title, the duplicate registered mortgage, survey,
insurance certificate, and other documents to this office. Should you become aware of anything that is not in good order,
please refer the matter to us.

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Appendix C
Charge
LRO # 80 Charge/Mortgage
In preparation on at
This document has not been submitted and may be incomplete yyyy mm dd Page 1 of 1

Properties
PIN 21103 – 0073 LT Interest/Estate Fee Simple
Description PT PARKLT 9 CON 1 FTB TWP OF YORK AS IN EP138577; CITY OF TORONTO
Address 360 YONGE ST
TORONTO

Chargor(s)
The chargor(s) hereby charges the land to the chargee(s). The chargor(s) acknowledges the receipt of the charge and the standard charge terms, if any.
Name SMITH, MARY IRENE
Acting as an individual
Address for Service 360 Yonge Street
Toronto, Ontario
I am at least 18 years of age
SMITH, JOHN JEREMY is my spouse and has consented to this transaction.
This document is not authorized under Power of Attorney by this party.

Chargee(s) Capacity Share

Name ACME LENDING COMPANY LIMITED
Acting as a company
Address for Service 100 Bay Street
Toronto, Ontario

Statements
Schedule:

Provisions
Principal $ 100,000.00 Currency CDN
Calculation Period Half-yearly, not in advance
Balance Due Date 2011/02/01
Interest Rate 12.0%
Payments $ 1,031.90
Interest Adjustment Date 2006 02 01
Payment Date 1st monthly
First Payment Date 2006 03 01
Last Payment Date 2011 02 01
Standard Charge Terms 200033
Insurance Amount full insurable value
Guarantor n/a

Additional Provisions
PROVIDED THAT the Chargor shall have the privilege of paying all or any part of the Principal hereby secured at any time or times without notice or
bonus, provided that any partial repayment is in the amount of $500.00 or a multiple thereof.

File Number
Chargor Client File Number : 1128235 – P. MORASSUTTI

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Appendix D
Acknowledgement and Direction

TO: All Lawyers within the firm of Osler, Hoskin & Harcourt LLP

AND TO: Any and all designees of the above

RE: Charge/Mortgage in favour of Acme Lending Company Limited from Mary Irene Smith of 360 Yonge
Street, Toronto, Ontario, being legally described as Part of Park Lot 9, Concession 1, FTB, Township of
York, City of Toronto - PIN: 21103-0073 (the “Property”)

This will confirm that:

ƒ The undersigned have reviewed the information set out in the draft document attached and that this information is
accurate;
ƒ You are authorized and directed to sign and register electronically on behalf of the undersigned the following
document:

1. Charge/Mortgage of the Property in favour of Acme Lending Company Limited from Mary Irene Smith

as well as any other document(s) required to complete the transaction described above;
ƒ You are authorized to amend the attached document provided the amendments are minor in nature and necessary
to effect registration of the attached document;
ƒ The effect of the electronic document described in this Acknowledgement and Direction has been fully explained to
the undersigned, and the undersigned understand that the undersigned are parties to and bound by the terms and
provisions of this electronic document to the same extent as if the undersigned had signed the document; and
ƒ The undersigned are in fact parties named in the electronic document described in this Acknowledgement and
Direction, and the undersigned have not misrepresented the identity of the undersigned to you.
ƒ I, John Jeremy Smith, am the spouse of Mary Irene Smith within the meaning of the Family Law Act and hereby
consent to the attached Charge/Mortgage of the Property.

Dated at Toronto, Ontario, this 15th day of January, 2006.

Witness: (as to all signatures, if applicable)

____________________________ ____________________________
Mary Irene Smith

____________________________ ____________________________
John Jeremy Smith

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Appendix E
Land Registration Reform Act
Set of Standard Charge Terms

Filed by Filing Date: November 3, 2000

Dye & Durham Co. Inc. Filing number: 200033

The following Set of Standard Charge Terms shall be applicable to documents registered in electronic format under
Part III of the Land Registration Reform Act, R.S.O. 1990, c. L.4 as amended (the “Land Registration Reform Act”)
and shall be deemed to be included in every electronically registered charge in which this Set of Standard Charge
Terms is referred to by its filing number, as provided in Section 9 of the Land Registration Reform Act, except to
the extent that the provisions of this Set of Standard Charge Terms are modified by additions, amendments or
deletions in the schedule. Any charge in an electronic format of which this Set of Standard Charge Terms forms a
part by reference to the above-noted filing number in such charge shall hereinafter be referred to as the “Charge”.

Exclusion of 1. The implied covenants deemed to be included in a charge under subsection 7(1) of the Land
Statutory Registration Reform Act as amended or re-enacted are excluded from the Charge.
Covenants

Right to 2. The Chargor now has good right, full power and lawful and absolute authority to charge the
Charge the land and to give the Charge to the Chargee upon the covenants contained in the Charge.
Land

No Act to 3. The Chargor has not done, committed, executed or willfully or knowingly suffered any act,
Encumber deed, matter or thing whatsoever whereby or by means whereof the land, or any part or
parcel thereof, is or shall or may be in any way impeached, charged, affected or encumbered
in title, estate or otherwise, except as the records of the land registry office disclose.

Good Title in 4. The Chargor, at the time of the delivery for registration of the Charge, is, and stands solely,
Fee Simple rightfully and lawfully seized of a good, sure, perfect, absolute and indefeasible estate of
inheritance, in fee simple, of and in the land and the premises described in the Charge and
in every part and parcel thereof without any manner of trusts, reservations, limitations,
provisos, conditions or any other matter or thing to alter, charge, change, encumber or
defeat the same, except those contained in the original grant thereof from the Crown.

Promise to 5. The Chargor will pay or cause to be paid to the Chargee the full principal amount and interest
Pay and secured by the Charge in the manner of payment provided by the Charge, without any
Perform deduction or abatement, and shall do, observe, perform, fulfill and keep all the provisions,
covenants, agreements and stipulations contained in the Charge and shall pay as they fall
due all taxes, rates, levies, charges, assessments, utility and heating charges, municipal, local,
parliamentary and otherwise which now are or may hereafter be imposed, charged or levied
upon the land and when required shall produce for the Chargee receipts evidencing payment
of the same.

Interest After 6. In case default shall be made in payment of any sum to become due for interest at the time
Default provided for payment in the Charge, compound interest shall be payable and the sum in
arrears for interest from time to time, as well after as before maturity, and both before and
after default and judgment, shall bear interest at the rate provided for in the Charge. In case
the interest and compound interest are not paid within the interest calculation period
provided in the Charge from the time of default a rest shall be made, and compound interest
at the rate provided for in the Charge shall be payable on the aggregate amount then due,
as well after as before maturity, and so on from time to time, and all such interest and
compound interest shall be a charge upon the land.

No Obligation 7. Neither the preparation, execution or registration of the Charge shall bind the Chargee to
to Advance advance the principal amount secured, nor shall the advance of a part of the principal amount
secured bind the Chargee to advance any unadvanced portion thereof, but nevertheless the
security in the land shall take effect forthwith upon delivery for registration of the Charge by
the Chargor. The expenses of the examination of the title and of the Charge and valuation
are to be secured by the Charge in the event of the whole or any balance of the principal
amount not being advanced, the same to be charged hereby upon the land, and shall be,
without demand therefor, payable forthwith with interest at the rate provided for in the
Charge, and in default the Chargee’s power of sale hereby given, and all other remedies
hereunder, shall be exercisable.

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Costs Added 8. The Chargee may pay all premiums of insurance and all taxes, rates, levies, charges,
to Principal assessments, utility and heating charges which shall from time to time fall due and be unpaid
in respect of the land, and that such payments, together with all costs, charges, legal fees
(as between solicitor and client) and expenses which may be incurred in taking, recovering
and keeping possession of the land and of negotiating the Charge, investigating title, and
registering the Charge and other necessary deeds, and generally in any other proceedings
taken in connection with or to realize upon the security given in the Charge (including legal
fees and real estate commissions and other costs incurred in leasing or selling the land or in
exercising the power of entering, lease and sale contained in the Charge) shall be, with
interest at the rate provided for in the Charge, a charge upon the land in favour of the
Chargee pursuant to the terms of the Charge and the Chargee may pay or satisfy any lien,
charge or encumbrance now existing or hereafter created or claimed upon the land, which
payments with interest at the rate provided for in the Charge shall likewise be a charge upon
the land in favour of the Chargee. Provided, and it is hereby further agreed, that all amounts
paid by the Chargee as aforesaid shall be added to the principal amount secured by the
Charge and shall be payable forthwith with interest at the rate provided for in the Charge,
and on default all sums secured by the Charge shall immediately become due and payable
at the option of the Chargee, and all powers in the Charge conferred shall become
exercisable.

Power of Sale 9. The Chargee on default of payment for at least fifteen (15) days may, on at least thirty-five
(35) days’ notice in writing given to the Chargor, enter on and lease the land or sell the land.
Such notice shall be given to such persons and in such manner and form and within such
time as provided in the Mortgages Act. In the event that the giving of such notice shall not
be required by law or to the extent that such requirements shall not be applicable, it is
agreed that notice may be effectually given by leaving it with a grown-up person on the land,
if occupied, or by placing it on the land if unoccupied, or at the option of the Chargee, by
mailing it in a registered letter addressed to the Chargor at his last known address, or by
publishing it once in a newspaper published in the county or district in which the land is
situate; and such notice shall be sufficient although not addressed to any person or persons
by name or designation; and notwithstanding that any person to be affected thereby may
be unknown, unascertained or under disability. Provided further, that in case default be
made in the payment of the principal amount or interest or any part thereof and such default
continues for two months after any payment of either falls due then the Chargee may exercise
the foregoing powers of entering, leasing or selling or any of them without any notice, it being
understood and agreed, however, that if the giving of notice by the Chargee shall be required
by law then notice shall be given to such persons and in such manner and form and within
such time as so required by law. It is hereby further agreed that the whole or any part or
parts of the land may be sold by public auction or private contract, or partly one or partly
the other; and that the proceeds of any sale hereunder may be applied first in payment of
any costs, charges and expenses incurred in taking, recovering or keeping possession of the
land or by reason of non-payment or procuring payment of monies, secured by the Charge
or otherwise, and secondly in payment of all amounts of principal and interest owing under
the Charge; and if any surplus shall remain after fully satisfying the claims of the Chargee
as aforesaid same shall be paid as required by law. The Chargee may sell any of the land on
such terms as to credit and otherwise as shall appear to him most advantageous and for
such prices as can reasonably be obtained therefor and may make any stipulations as to title
or evidence or commencement of title or otherwise which he shall deem proper, and may
buy in or rescind or vary any contract for the sale of the whole or any part of the land and
resell without being answerable for loss occasioned thereby, and in the case of a sale on
credit the Chargee shall be bound to pay the Chargor only such monies as have been actually
received from purchasers after the satisfaction of the claims of the Chargee and for any of
said purposes may make and execute all agreements and assurances as he shall think fit.
Any purchaser or lessee shall not be bound to see to the propriety or regularity of any sale
or lease or be affected by express notice that any sale or lease is improper and no want of
notice or publication when required hereby shall invalidate any sale or lease hereunder.

Quiet 10. Upon default in payment of principal and interest under the Charge or in performance of any
Possession of the terms or conditions hereof, the Chargee may enter into and take possession of the
land hereby charged and where the Chargee so enters on and takes possession or enters on
and takes possession of the land on default as described in paragraph 9 herein the Chargee
shall enter into, have, hold, use, occupy, possess and enjoy the land without the let, suit,
hindrance, interruption or denial of the Chargor or any other person or persons whomsoever.

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Right to 11. If the Chargor shall make default in payment of any part of the interest payable under the
Distrain Charge at any of the dates or times fixed for the payment thereof, it shall be lawful for the
Chargee to distrain therefor upon the land or any part thereof, and by distress warrant, to
recover by way of rent reserved, as in the case of a demise of the land, so much of such
interest as shall, from time to time, be or remain in arrears and unpaid, together with all
costs, charges and expenses attending such levy or distress, as in like cases of distress for
rent. Provided that the Chargee may distrain for arrears of principal in the same manner as
if the same were arrears of interest.

Further 12. From and after default in the payment of the principal amount secured by the Charge or the
Assurances interest thereon or any part of such principal or interest or in the doing, observing,
performing, fulfilling or keeping of some one or more of the covenants set forth in the Charge
then and in every such case the Chargor and all and every other person whosoever having,
or lawfully claiming, or who shall have or lawfully claim any estate, right, title, interest or
trust of, in, to or out of the land shall, from time to time, and at all times thereafter, at the
proper costs and charges of the Chargor make, do, suffer, execute, deliver, authorize and
register, or cause or procure to be made, done, suffered, executed, delivered, authorized and
registered, all and every such further and other reasonable act or acts, deed or deeds,
devises, conveyances and assurances in the law for the further, better and more perfectly
and absolutely conveying and assuring the land unto the Chargee as by the Chargee or his
solicitor shall or may be lawfully and reasonably devised, advised or required.

Acceleration 13. In default of the payment of the interest secured by the Charge the principal amount secured
of Principal by the Charge shall, at the option of the Chargee, immediately become payable, and upon
and Interest default of payment of instalments of principal promptly as the same mature, the balance of
the principal and interest secured by the Charge shall, at the option of the Chargee,
immediately become due and payable. The Chargee may in writing at any time or times after
default waive such default and any such waiver shall apply only to the particular default
waived and shall not operate as a waiver of any other or future default.

Unapproved 14. If the Chargor sells, transfers, disposes of, leases or otherwise deals with the land, the
Sale principal amount secured by the Charge shall, at the option of the Chargee, immediately
become due and payable.

Partial 15. The Chargee may at his discretion at all times release any part or parts of the land or any
Releases other security or any surety for the money secured under the Charge either with or without
any sufficient consideration therefor, without responsibility therefor, and without thereby
releasing any other part of the land or any person from the Charge or from any of the
covenants contained in the Charge and without being accountable to the Chargor for the
value thereof, or for any monies except those actually received by the Chargee. It is agreed
that every part or lot into which the land is or may hereafter be divided does and shall stand
charged with the whole money secured under the Charge and no person shall have the right
to require the mortgage monies to be apportioned.

Obligation to 16. The Chargor will immediately insure, unless already insured, and during the continuance of
Insure the Charge keep insured against loss or damage by fire, in such proportions upon each
building as may be required by the Chargee, the buildings on the land to the amount of not
less than their full insurable value on a replacement cost basis in dollars of lawful money of
Canada. Such insurance shall be placed with a company approved by the Chargee. Buildings
shall include all buildings whether now or hereafter erected on the land, and such insurance
shall include not only insurance against loss or damage by fire but also insurance against
loss or damage by explosion, tempest, tornado, cyclone, lightning and all other extended
perils customarily provided in insurance policies including “all risks” insurance. The covenant
to insure shall also include where appropriate or if required by the Chargee, boiler, plate glass,
rental and public liability insurance in amounts and on terms satisfactory to the Chargee.
Evidence of continuation of all such insurance having been effected shall be produced to the
Chargee at least fifteen (15) days before the expiration thereof; otherwise the Chargee may
provide therefor and charge the premium paid and interest thereon at the rate provided for
in the Charge to the Chargor and the same shall be payable forthwith and shall also be a
charge upon the land. It is further agreed that the Chargee may at any time require any
insurance of the buildings to be cancelled and new insurance effected in a company to be
named by the Chargee and also of his own accord may effect or maintain any insurance
herein provided for, and any amount paid by the Chargee therefor shall be payable forthwith
by the Chargor with interest at the rate provided for in the Charge and shall also be a charge
upon the land. Policies of insurance herein required shall provide that loss, if any, shall be
payable to the Chargee as his interest may appear, subject to the standard form of mortgage
clause approved by the Insurance Bureau of Canada which shall be attached to the policy of
insurance.

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Obligation to 17. The Chargor will keep the land and the buildings, erections and improvements thereon, in
Repair good condition and repair according to the nature and description thereof respectively, and
the Chargee may, whenever he deems necessary, by his agent enter upon and inspect the
land and make such repairs as he deems necessary, and the reasonable cost of such
inspection and repairs with interest at the rate provided for in the Charge shall be added to
the principal amount and be payable forthwith and be a charge upon the land prior to all
claims thereon subsequent to the Charge. If the Chargor shall neglect to keep the buildings,
erections and improvements in good condition and repair, or commits or permits any act of
waste on the land (as to which the Chargee shall be sole judge) or makes default as to any
of the covenants, provisos, agreements or conditions contained in the Charge or in any
charge to which this Charge is subject, all monies secured by the Charge shall, at the option
of the Chargee, forthwith become due and payable, and in default of payment of same with
interest as in the case of payment before maturity the powers of entering upon and leasing
or selling hereby given and all other remedies herein contained may be exercised forthwith.

Building 18. If any of the principal amount to be advanced under the Charge is to be used to finance an
Charge improvement on the land, the Chargor must so inform the Chargee in writing immediately
and before any advances are made under the Charge. The Chargor must also provide the
Chargee immediately with copies of all contracts and subcontracts relating to the
improvement and any amendments to them. The Chargor agrees that any improvement shall
be made only according to contracts, plans and specifications approved in writing by the
Chargee. The Chargor shall complete all such improvements as quickly as possible and provide
the Chargee with proof of payment of all contracts from time to time as the Chargee requires.
The Chargee shall make advances (part payments of the principal amount) to the Chargor
based on the progress of the improvement, until either completion and occupation or sale of
the land. The Chargee shall determine whether or not any advances will be made and when
they will be made. Whatever the purpose of the Charge may be, the Chargee may at its
option hold back funds from advances until the Chargee is satisfied that the Chargor has
complied with the holdback provisions of the Construction Act as amended or re-enacted.
The Chargor authorizes the Chargee to provide information about the Charge to any person
claiming a construction lien on the land.

Extensions 19. No extension of time given by the Chargee to the Chargor or anyone claiming under him, or
not to any other dealing by the Chargee with the owner of the land or of any part thereof, shall in
prejudice any way affect or prejudice the rights of the Chargee against the Chargor or any other person
liable for the payment of the money secured by the Charge, and the Charge may be renewed
by an agreement in writing at maturity for any term with or without an increased rate of
interest notwithstanding that there may be subsequent encumbrances. It shall not be
necessary to deliver for registration any such agreement in order to retain priority for the
Charge so altered over any instrument delivered for registration subsequent to the Charge.
Provided that nothing contained in this paragraph shall confer any right of renewal upon the
Chargor.

No Merger of 20. The taking of a judgment or judgments on any of the covenants herein shall not operate as
Covenants a merger of the covenants or affect the Chargee’s right to interest at the rate and times
provided for in the Charge; and further that any judgment shall provide that interest thereon
shall be computed at the same rate and in the same manner as provided in the Charge until
the judgment shall have been fully paid and satisfied.

Change In 21. Immediately after any change or happening affecting any of the following, namely: (a) the
Status spousal status of the Chargor, (b) the qualification of the land as a family residence within
the meaning of Part II of the Family Law Act, and (c) the legal title or beneficial ownership
of the land, the Chargor will advise the Chargee accordingly and furnish the Chargee with
full particulars thereof, the intention being that the Chargee shall be kept fully informed of
the names and addresses of the owner or owners for the time being of the land and of any
spouse who is not an owner but who has a right of possession in the land by virtue of Section
19 of the Family Law Act. In furtherance of such intention, the Chargor covenants and agrees
to furnish the Chargee with such evidence in connection with any of (a), (b) and (c) above
as the Chargee may from time to time request.

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Condominium 22. If the Charge is of land within a condominium registered pursuant to the Condominium Act,
Provisions 1998 (the “Act”) the following provisions shall apply. The Chargor will comply with the Act,
and with the declaration, by-laws and rules of the condominium corporation (the
“corporation”) relating to the Chargor’s unit (the “unit”) and provide the Chargee with proof
of compliance from time to time as the Chargee may request. The Chargor will pay the
common expenses for the unit to the corporation on the due dates. If the Chargee decides
to collect the Chargor’s contribution towards the common expenses from the Chargor, the
Chargor will pay the same to the Chargee upon being so notified. The Chargee is authorized
to accept a statement which appears to be issued by the corporation as conclusive evidence
for the purpose of establishing the amounts of the common expenses and the dates those
amounts are due. The Chargor, upon notice from the Chargee, will forward to the Chargee
any notices, assessments, by-laws, rules and financial statements of the corporation that
the Chargor receives or is entitled to receive from the corporation. The Chargor will maintain
all improvements made to the unit and repair them after damage. In addition to the
insurance which the corporation must obtain, the Chargor shall insure the unit against
destruction or damage by fire and other perils usually covered in fire insurance policies and
against such other perils as the Chargee requires for its full replacement cost (the maximum
amount for which it can be insured). The insurance company and the terms of the policy
shall be reasonably satisfactory to the Chargee. This provision supersedes the provisions of
paragraph 16 herein. The Chargor irrevocably authorizes the Chargee to exercise the
Chargor’s rights under the Act to vote, consent and dissent.

Discharge 23. The Chargee shall have a reasonable time after payment in full of the amounts secured by
the Charge to deliver for registration a discharge or if so requested and if required by law to
do so, an assignment of the Charge and all legal and other expenses for preparation,
execution and registration, as applicable to such discharge or assignment shall be paid by
the Chargor.

Guarantee 24. Each party named in the Charge as a Guarantor hereby agrees with the Chargee as follows:

(a) In consideration of the Chargee advancing all or part of the Principal Amount to the Chargor,
and in consideration of the sum of TWO DOLLARS ($2.00) of lawful money of Canada now
paid by the Chargee to the Guarantor (the receipt and sufficiency whereof are hereby
acknowledged), the Guarantor does hereby absolutely and unconditionally guarantee to the
Chargee, and its successors, the due and punctual payment of all principal monies, interest
and other monies owing on the security of the Charge and observance and performance of
the covenants, agreements, terms and conditions herein contained by the Chargor, and the
Guarantor, for himself and his successors, covenants with the Chargee that, if the Chargor
shall at any time make default in the due and punctual payment of any monies payable
hereunder, the Guarantor will pay all such monies to the Chargee without any demand being
required to be made.

(b) Although as between the Guarantor and the Chargor, the Guarantor is only surety for the
payment by the Chargor of the monies hereby guaranteed, as between the Guarantor and
the Chargee, the Guarantor shall be considered as primarily liable therefor and it is hereby
further expressly declared that no release or releases of any portion or portions of the land;
no indulgence shown by the Chargee in respect of any default by the Chargor or any
successor thereof which may arise under the Charge; no extension or extensions granted by
the Chargee to the Chargor or any successor thereof for payment of the monies hereby
secured or for the doing, observing or performing of any covenant, agreement, term or
condition herein contained to be done, observed or performed by the Chargor or any
successor thereof; no variation in or departure from the provisions of the Charge; no release
of the Chargor or any other thing whatsoever whereby the Guarantor as surety only would
or might have been released shall in any way modify, alter, vary or in any way prejudice the
Chargee or affect the liability of the Guarantor in any way under this covenant, which shall
continue and be binding on the Guarantor, and as well after as before maturity of the Charge
and both before and after default and judgment, until the said monies are fully paid and
satisfied.

(c) Any payment by the Guarantor of any monies under this guarantee shall not in any event
be taken to affect the liability of the Chargor for payment thereof but such liability shall
remain unimpaired and enforceable by the Guarantor against the Chargor and the Guarantor
shall, to the extent of any such payments made by him, in addition to all other remedies, be
subrogated as against the Chargor to all the rights, privileges and powers to which the
Chargee was entitled prior to payment by the Guarantor; provided, nevertheless, that the
Guarantor shall not be entitled in any event to rank for payment against the lands in
competition with the Chargee and shall not, unless and until the whole of the principal,
interest and other monies owing on the security of the Charge shall have been paid, be
entitled to any rights or remedies whatsoever in subrogation to the Chargee.

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(d) All covenants, liabilities and obligations entered into or imposed hereunder upon the
Guarantor shall be equally binding upon his successors. Where more than one party is named
as a Guarantor all such covenants, liabilities and obligations shall be joint and several.

(e) The Chargee may vary any agreement or arrangement with or release the Guarantor, or any
one or more of the Guarantors if more than one party is named as Guarantor, and grant
extensions of time or otherwise deal with the Guarantor and his successors without any
consent on the part of the Chargor or any other Guarantor or any successor thereof.

Severability 25. It is agreed that in the event that at any time any provision of the Charge is illegal or invalid
under or inconsistent with provisions of any applicable statute, regulation thereunder or
other applicable law or would by reason of the provisions of any such statute, regulation or
other applicable law render the Chargee unable to collect the amount of any loss sustained
by it as a result of making the loan secured by the Charge which it would otherwise be able
to collect under such statute, regulation or other applicable law then, such provision shall
not apply and shall be construed so as not to apply to the extent that it is so illegal, invalid
or inconsistent or would so render the Chargee unable to collect the amount of any such
loss.

Interpretation 26. In construing these covenants the words “Charge”, “Chargee”, “Chargor”, “land” and
“successor” shall have the meanings assigned to them in Section 1 of the Land Registration
Reform Act and the words “Chargor” and “Chargee” and the personal pronouns “he” and
“his” relating thereto and used therewith, shall be read and construed as “Chargor” or
“Chargors”, “Chargee” or “Chargees”, and “he”, “she”, “they” or “it”, “his”, “her”, “their” or
“its”, respectively, as the number and gender of the parties referred to in each case require,
and the number of the verb agreeing therewith shall be construed as agreeing with the said
word or pronoun so substituted. And that all rights, advantages, privileges, immunities,
powers and things hereby secured to the Chargor or Chargors, Chargee or Chargees, shall be
equally secured to and exercisable by his, her, their or its heirs, executors, administrators
and assigns, or successors and assigns, as the case may be. The word “successor” shall also
include successors and assigns of corporations including amalgamated and continuing
corporations. And that all covenants, liabilities and obligations entered into or imposed
hereunder upon the Chargor or Chargors, Chargee or Chargees, shall be equally binding
upon his, her, their or its heirs, executors, administrators and assigns, or successors and
assigns, as the case may be, and that all such covenants and liabilities and obligations shall
be joint and several.

Paragraph 27. The paragraph headings in these standard charge terms are inserted for convenience of
headings reference only and are deemed not to form part of the Charge and are not to be considered
in the construction or interpretation of the Charge or any part thereof.

Date of 28. The Charge, unless otherwise specifically provided, shall be deemed to be dated as of the
Charge date of delivery for registration of the Charge.

Effect of 29. The delivery of the Charge for registration by direct electronic transfer shall have the same
Delivery of effect for all purposes as if such Charge were in written form, signed by the parties thereto
Charge and delivered to the Chargee. Each of the Chargor and, if applicable, the spouse of the
Chargor and other party to the Charge agrees not to raise in any proceeding by the Chargee
to enforce the Charge any want or lack of authority on the part of the person delivering the
Charge for registration to do so.

DATED this day of ,

(year)

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Appendix F
Acknowledgement

This Set of Standard Charge Terms filed as No. 200033 is included in a Charge dated the 15th day of January, 2006, made
by Mary Irene Smith, as Chargor, to Acme Lending Company Limited, as Chargee (the “Charge”), and the Chargor and
John Jeremy Smith, as Consenting Spouse, hereby acknowledge receipt of a copy of this Set of Standard Charge Terms
before signing the Charge.

DATED at Toronto, this 15th day of January, 2006.

Mary Irene Smith

DATED at Toronto, this 15th day of January, 2006.

John Jeremy Smith

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Appendix G
Repayment Schedule

Each monthly payment is $1,031.90.

(1) Where interest is payable at the same rate as interest is calculated
ƒ no deemed reinvestment
ƒ simple interest calculation

monthly
interest
principal
outstanding x interest
payment ( i.e.,
annual interest rate
12 )
i.e., interest payment of first payment $100,000 x 0.010000
( i.e.,
12%
12 ) $1000.00

Therefore, the balance ($1,031.90 - $1,000.00 = $31.90) of $31.90 of the first payment is applied against principal.

interest payment of second payment $99,968.10 x 0.010000 $999.68

Therefore, the balance ($1,031.90 - $999.68 = $32.22) of $32.22 of the second payment is applied against principal.
(2) Where interest is payable more frequently than interest is calculated
ƒ assuming the deemed reinvestment principle applies
annual interest rate less a figure
principal interest
monthly
interest
outstanding
this month
x payment
factor
( i.e.,
reflecting early receipt of interest
by the lender
12
)
The effective annual rate of interest = 0.00975894 x 12 = 11.7%
i.e., interest portion of first payment = $100,000.00 x 0.00975894 = $975.88
interest portion of second payment = $99,943.98 x 0.00975894 = $975.33

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Appendix H
Standard Mortgage Clause in Insurance Policy

MORTGAGE CLAUSE
(officially approved by The Insurance Board of Canada)
Special endorsement granted to Canadian Imperial Bank of Commerce, hereinafter called the “Mortgagee.”

IT IS HEREBY PROVIDED AND AGREED THAT:

Breach of conditions 1. This insurance and every documented renewal thereof — AS TO THE INTEREST OF THE
by mortgagor, owner, MORTGAGEE ONLY THEREIN — is and shall be in force notwithstanding any act, neglect,
or occupant omission or misrepresentation attributable to the mortgagor, owner or occupant of the
property insured, nor by transfer of interest, nor by any vacancy or non-occupation, nor by
the occupation of the property for purposes more hazardous than specified in the
description of the risk;
PROVIDED ALWAYS that the Mortgagee shall notify forthwith the Insurer (if known) of
any non-occupancy or vacancy extending beyond thirty (30) consecutive days, or of any
transfer of interest or increased hazard THAT SHALL COME TO HIS KNOWLEDGE, and
that every increase of hazard (not permitted by the policy) shall be paid for by the Mortgagee
— on reasonable demand — from the date such hazard existed, according to the established
scale of rates for the acceptance of such increased hazard, during the continuance of this
insurance.
Right of subrogation 2. Whenever the Insurer pays the Mortgagee any loss award under this policy and claims that
— as to the mortgagor or owner — no liability therefor existed, it shall be legally subrogated
to all rights of the Mortgagee against the Insured; but any subrogation shall be limited to
the amount of such loss payment and shall be subordinate and subject to the basic right of
the Mortgagee to recover the full amount of its mortgage equity in priority to the Insurer;
or the Insurer may at its option pay the Mortgagee all amounts due or to become due under
the mortgage or on the security thereof, and shall thereupon receive a full assignment and
transfer of the mortgage together with all securities held as collateral to the mortgage debt.
Other insurance 3. If there be other valid and collectible insurance upon the property with loss payable to the
Mortgagee — at law or in equity — then any amount payable thereunder shall be taken into
account in determining the amount payable to the Mortgagee.
Who may give proof 4. In the absence of the Insured, or the inability, refusal or neglect of the Insured to give notice
of loss of loss or deliver the required Proof of Loss under the policy, then the Mortgagee may give
the notice upon becoming aware of the loss and shall deliver as soon as practicable the Proof
of Loss.
Termination 5. The term of this mortgage clause coincides with the term of the policy;
PROVIDED ALWAYS that the Insurer reserves the right to cancel the policy as provided by
Statutory provision but agrees that the Insurer will neither terminate nor alter the policy to
the prejudice of the Mortgagee without the notice stipulated in such Statutory provision.
Foreclosure 6. Should title or ownership to said property become vested in the Mortgagee and/or assigns
as owner or purchaser under foreclosure or otherwise, this insurance shall continue until
expiry or cancellation for the benefit of the said Mortgagee and/or assigns.

SUBJECT TO THE TERMS OF THIS MORTGAGE CLAUSE (and these shall supersede any policy provisions in
conflict therewith BUT ONLY AS TO THE INTEREST OF THE MORTGAGEE), loss under this policy is made
payable to the Mortgagee.
Attached to and forming part of policy number .................................... of the .....................................................
Dated at ...................................................................... this ...................... day of .................................... , ...................
Signed ...............................................................................
Agent for the Insurer

708 LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION

THE STANDARD LOAN TRANSACTION CHAPTER 54

Appendix I
Special Clauses for Charge of Condominium

1. Compliance with Condominium Act, 1998, etc.

The Chargor covenants and agrees with the Chargee to comply with and observe all the covenants, provisions, terms,
conditions, stipulations, specifications, rules, and regulations of the Condominium Act, 1998 and of the Declaration and
of the By-law and of any future By-laws of the condominium corporation and of any of the rules and regulations of the
owners of the units.

2. Covenant to pay common expenses, etc.

The Chargor covenants and agrees that the Chargor will pay promptly when due any contributions to common expenses
and any other moneys required of the Chargor as an owner of the parcel, and in the event of the Chargor’s default in doing
so the Chargee, at its option, may pay the same and exercise all or any of its rights under this charge whether or not any
payment in default has priority to this or any part of the moneys secured hereby.

3. Assignment of right to vote

The Chargor hereby agrees to and by these presents does irrevocably nominate, appoint, and authorize the Chargee to
exercise from time to time and at any time the right of the Chargor, to vote at all times and for all purposes, wherever and
whenever the Chargor would have such right to vote, at any meeting of the members of the condominium corporation.
The Chargor hereby further agrees to and by these presents does hereby irrevocably authorize the Chargee to exercise
from time to time and at any time the right of the Chargor, in the name of the Chargor and on behalf of the Chargor, to
consent at any time or times and for all purposes, wherever and whenever the Chargor would have such right of consent,
to any matter relevant to the management or sale of or any dealings with the property of the condominium corporation
or its assets or the termination of the application of the Condominium Act, 1998 to the condominium corporation.
The Chargee may from time to time waive its right to vote or consent by giving notice of its intention to do so to the
condominium corporation, and such waiver may be for an indeterminate period of time until withdrawn or for a limited
period of time or for a specific meeting or matter, and while such waiver is in effect the Chargor may exercise the right to
vote or to consent.
The parties hereto hereby acknowledge that notwithstanding the exercise by the Chargee of the right of the Chargor to
either vote or consent, such exercise shall not render the Chargee a mortgagee in possession.
The parties further acknowledge that the right to vote assigned herein to the Chargee does not entail any representation,
express or implied, that the Chargee shall be in any way responsible to protect the interest of the Chargor, and the Chargee
shall not be responsible for any exercise of the right to vote or any failure to exercise the right to vote.

4. Notice re notices, etc.

The Chargor covenants and agrees with the Chargee to deliver by mailing to the Chargee by prepaid registered mail a copy
of each and every
(a) claim or demand for payment by the Chargor to the condominium corporation or to any person, firm, or
corporation duly authorized to receive moneys otherwise payable to the condominium corporation at least five
clear days prior to the date upon which such claim or demand becomes due and payable as provided by the terms
of such claim or demand;
(b) notice of any breach of any of the provisions of the Condominium Act, 1998 or of the Declaration or of any By-law
or By-laws of the condominium corporation, copies of which are or are hereafter duly registered in the Office of
Land Titles or of any rule of the condominium corporation made pursuant to the provisions of s. 58 of the
Condominium Act, 1998 within five days of the date upon which such notice is received by the Chargor; and
(c) request or demand for the consent of the Chargor to any matter affecting the unit herein or the common elements
of the condominium corporation (as to which the Chargee shall be the sole judge) within five days of the date upon
which such request or demand is received by or made of the Chargor.

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CHAPTER 54 REAL ESTATE

Appendix J
Transfer of Charge by Chargee
LRO # 80 Transfer of Charge
In preparation on at
This document has not been submitted and may be incomplete yyyy mm dd Page 1 of 1

Properties

PIN 21103-0073 LT �Redescription

Description PT PARK LT 9 CON 1 FTB TWP OF YORK AS IN EP138577; CITY OF TORONTO
Address 360 YONGE STREET
TORONTO

Source Instruments
Registration No. Date Type of Instrument

AT556322 2006 01 16 Charge/Mortgage

Transferor(s)
Name ACME LENDING COMPANY LIMITED
Acting as a company

Address for Service 100 Bay Street

Toronto, Ontario

I, TOM LOANS, President, have the authority to bind the corporation

This document is not authorized under Power of Attorney by this party.

Transferee(s)
Name BROWN, WILLIAM
Acting as an individual

Address for Service 254 Wright Avenue

Toronto, Ontario

Statements
The chargee transfers the selected charge for NINETY-NINE THOUSAND, NINE HUNDRED & FORTY-THREE DOLLARS NINETY-EIGHT
CENTS (99,943.98)

File Number
Transferor Client File Number : 83510 P. MORASSUTTI

710 LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION

THE STANDARD LOAN TRANSACTION CHAPTER 54

Appendix K
Notice to Chargor of Transfer of Charge by Chargee

NOTICE AND DIRECTION

TO: MARY IRENE SMITH

RE: Charge of Part of Park Lot 9, Concession 1, Township of York, City of Toronto, Ontario
by Mary Irene Smith to Acme Lending Company Limited
360 Yonge Street, Toronto, Ontario

THIS WILL SERVE AS NOTICE to you of the transfer of the above-mentioned charge from Acme Lending Company
Limited to William Brown.

THIS WILL THEREFORE AUTHORIZE AND DIRECT you to make all future payments commencing with that due April
1, 2006, to William Brown at 254 Wright Avenue, Toronto, Ontario.

DATED at Toronto, this 12th day of March, 2006.

ACME LENDING COMPANY LIMITED

PER: _________________________
A.S.O. c/s
PER: _________________________
A.S.O.
We have authority to bind the corporation.

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CHAPTER 54 REAL ESTATE

Appendix L
Acknowledgement by Chargor to Assignee

ACKNOWLEDGEMENT

TO: WILLIAM BROWN

AND TO: His Solicitors, Osler, Hoskin & Harcourt LLP

RE: Acme Lending Company Limited transfer to William Brown of Charge

from Mary Irene Smith to Acme Lending Company Limited
covering Part of Park Lot 9, Concession 1, Township of York, City of Toronto.
360 Yonge Street, Toronto, Ontario

This is to confirm that, in connection with my charge in favour of Acme Lending Company Limited, covering the above-
mentioned property, there is now outstanding on the charge the sum of $99,943.98. The interest rate chargeable under
the charge is 12% per annum. The maturity date is February 1, 2011. I have paid all loan payments up to and including the
payment on March 1, 2006. I have not prepaid any amounts under the charge. The charge has not been amended.

I have no right of set-off against Acme Lending Company Limited, the Chargee.

I hereby covenant to pay all future payments beginning with the payment on April 1, 2006, to William Brown at 254
Wright Avenue, Toronto, Ontario.

DATED at Toronto, this 13th day of March, 2006.

___________________________________
Mary Irene Smith

712 LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION

THE STANDARD LOAN TRANSACTION CHAPTER 54

Appendix M
Assumption Statement

STATEMENT OF MORTGAGE ACCOUNT FOR ASSUMPTION PURPOSES ONLY

NAME OF MORTGAGOR
Mary Irene Smith
PROPERTY ADDRESS
360 Yonge Street, Toronto, Ontario
MORTGAGE NO. DATE PREPARED
April 3, 2006
MATURITY DATE INTEREST RATE
February 1, 2011 12%
BALANCE PARTICULARS MONTHLY PAYMENT DETAILS
PRINCIPAL BALANCE
OUTSTANDING April 16, 2006 $ 99,887.41 PRINCIPAL & INTEREST $1,031.90

INTEREST FROM Apr. 1/06 TO Apr. 16/06 $ 492.60 TAX PORTION (SUBJECT TO ANNUAL
ADJUSTMENT) $ NIL

CREDIT (DEBIT) BALANCE IN TAX ACCOUNT $ NIL TOTAL (DUE 1ST DAY OF EACH MONTH)
$1,031.90
OTHER CHARGES $

$ NIL PAYMENT OF REALTY TAXES IS

X
THE RESPONSIBILITY OF THE
MORTGAGOR
E. & O.E. TOTAL * $100,380.01

DAILY RATE $ 32.84

* THE FOLLOWING MUST BE PAID AND DEDUCTED FROM THE ABOVE TOTAL
1. ARREARS OUTSTANDING $ nil
2. MONTHLY PAYMENTS DUE $ 1,031.90

TOTAL $ 1,031.90
CONDITIONS AND REMARKS
1. BALANCE PARTICULARS ASSUME THAT ALL INSTALMENTS ARE PAID AND HONOURED AND THAT
THERE ARE NO FURTHER CHARGES. PAYMENTS SUBSEQUENTLY DISHONOURED WILL BECOME
THE RESPONSIBILITY OF THE PERSON ASSUMING THE MORTGAGE WHETHER THE PAYMENT IS
DISHONOURED PRIOR TO OR AFTER THE PROPOSED SALE CLOSING DATE.
2. UNTIL SUCH TIME AS THIS OFFICE RECEIVES CONFIRMATION OF THE SALE PARTICULARS ON
THE TEAR-OFF PORTION OF THIS STATEMENT. MONTHLY INSTALMENTS WILL CONTINUE TO BE
PROCESSED IN THE NAME OF THE ABOVE-MENTIONED MORTGAGOR.
3. THIS STATEMENT MAY NOT BE USED FOR DISCHARGE PURPOSES.
4. This statement is based on all payments up to and including April 1, 2006,
payment $1,031.90 being honoured by the bank.
5. Purchaser will be responsible for May 1, 2006 payment.

PREPARED BY APPROVED BY
FORM

REPRODUCED WITHOUT PERMISSION

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CHAPTER 54 REAL ESTATE

Appendix N
Assumption Agreement

THIS ASSUMPTION AGREEMENT made the 16th day of April, 2006

B E T W E E N:
DAVID WOOD, of the City of Toronto, in the Municipality of Metropolitan Toronto,
(the “Purchaser”)
– and –
WILLIAM BROWN, of the City of Toronto, in the Municipality of Metropolitan Toronto,
(the “Lender”)

WHEREAS by Charge registered on January 16, 2006, in the Land Registry Office for the Land Titles Division of
Toronto as No. AT556322 (the “Charge”) Mary Irene Smith charged Part of Park Lot 9, Concession 1, Township of York
in the City of Toronto in the Municipality of Metropolitan Toronto (the “Lands”) to Acme Lending Company Limited;
AND WHEREAS by Transfer of Charge registered on March 12, 2006, in the Land Registry Office for the Land Titles
Division of Toronto as No. AT653218 Acme Lending Company Limited transferred the Charge to William Brown;
AND WHEREAS the Purchaser has purchased the lands from Mary Irene Smith and has assumed payment of the
moneys secured by the Charge and performance of the covenants, provisos, and conditions therein contained;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of $10.00 now paid by the Lender to
the Purchaser, the Purchaser covenants, promises, and agrees to and with the Lender to pay to him, his successors, or
assigns, the moneys due upon the Charge amounting to $99,887.41 with interest at 12% per annum from April 16, 2006,
on the days and times therein provided for payment and to observe and perform all the covenants, provisos, and
conditions therein contained.
Nothing herein shall release or affect any party to the Charge or any security held by the Lender against whom and
which all remedies are reserved.
IN WITNESS WHEREOF the Purchaser has hereunto set his hand and seal.
SIGNED, SEALED AND DELIVERED )
IN THE PRESENCE OF )
)
)
)
)
DAVID WOOD

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THE STANDARD LOAN TRANSACTION CHAPTER 54

Appendix O
Discharge

LRO # 80 Discharge of Charge

In preparation on at
This document has not been submitted and may be incomplete yyyy mm dd Page 1 of 1

Properties

PIN 21103-0073 LT �Redescription

Description PT PARK LT 9 CON 1 FTB TWP OF YORK AS IN EP138577; CITY OF TORONTO
Address 360 YONGE STREET
TORONTO

Source Instruments
Registration No. Date Type of Instrument

AT556322 2006 01 16 Charge/Mortgage

Transferor(s)
This discharge complies with the Planning Act. This discharge discharges the charge.

Name BROWN, WILLIAM

Acting as an individual

Address for Service 254 Wright Avenue

Toronto, Ontario

This document is not authorized under Power of Attorney by this party.

The party giving the discharge is not the original chargee or is the original chargee and has changed its name but is the party entitled to give an
effective discharge.

File Number
Discharging Party Client File Number : 83510 P. MORASSUTTI

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 CHAPTER 54 REAL ESTATE

Appendix P
Discharge Statement

STATEMENT
FOR MORTGAGE PAYMENT IN FULL ONLY
DATE: June 2, 2006
BRANCH 111 Yonge Street, Toronto
MAIL TO: NAME AND ADDRESS OF MORTGAGORS
BANK REFERENCE NO.
DAVID WOOD

CIVIC ADDRESS OF NUMBER STREET CITY OR TOWN PROVINCE

SECURITY 360 Yonge Street
TYPE OF MORTGAGE FIXED INTEREST RATE X CONVENTIONAL HIGH RATIO ROYFARM
VARIABLE INTEREST NHA
RATE

DATE OF PROPOSED PAYMENT JUNE 18, 2006

BALANCES ARE ESTIMATED ON THE ASSUMPTION THAT ALL REGULAR MONTHLY PAYMENTS
BALANCE INCLUDING LIFE INSURANCE PREMIUMS IF ANY TO DATE OF PROPOSED PAYMENT ARE
PARTICULARS MADE. BALANCES OF VARIABLE RATE RESIDENTIAL MORTGAGES ARE BASED ON CURRENT
RESIDENTIAL LOAN BASE RATE AND ARE APPROXIMATE
COMPLETE WORKSHEET
ON REVERSE
MORTGAGE ACCOUNT $99,772.66

INCLUDING INTEREST 12% TO DATE OF PROPOSED PAYMENT 590.40

BONUS INTEREST IF ANY $ NIL

TAX ACCOUNT See note below Credit $ NIL

Debit

DISCHARGE FEE IF ANY To be paid by client

Direct to Solicitor $ NIL

Amount $ 100,363.06

PLEASE NOTE: If funds are not received on date of proposed payment a per diem rate of
$ 32.80 is to be added to amount due for each additional day until
June 30, 2006
If payment is not received by the bank on or before the latter date, a new
mortgage statement should be obtained. In particular please note that there
may be bonus interest or additional bonus interest should payment not be
received on or before the latter date.
Taxes: Tax notices received from this date to the date of receipt of funds
will be forwarded direct to mortgagor for payment.

CHECKED BY

BRANCH ADMINISTRATION OFFICER MANAGER

716 LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION


Enforcement of mortgage security
1. Potential remedies
When a mortgagor has defaulted under a mortgage, the
mortgagee has a number of remedies to choose from.
The mortgagee may
ƒ sell the mortgaged property
— under the private power of sale provisions
contained in the mortgage; or
— pursuant to a court order made in a judicial
sale action;
ƒ obtain title to the mortgaged property by means of
— a foreclosure action; or
— acceptance of a quit claim deed to the
mortgaged property;
ƒ take possession of the mortgaged property privately,
by court order, or by a receiver; or
ƒ obtain a judgment against
— the mortgagor and/or any guarantor; or
— the current owner of the mortgaged property,
if there has been a change of ownership for
payment of the debt secured by the mortgage
either
y before sale under power of sale; or
y after sale under power of sale for the
amount then due on the mortgage debt
(after application of the net proceeds of
sale).
2. Information to be obtained
A full understanding of the relevant facts is necessary
before properly advising a mortgagee as to which remedy
to pursue. Information that should be obtained from the
mortgagee prior to invoking a remedy includes
ƒ a copy of the mortgage, any appraisals obtained by
the mortgagee at the time of making the loan, a
survey of the mortgaged property, and a solicitor’s
report on the closing of the mortgage loan;
ƒ the address and a brief legal description of the
mortgaged property;
ƒ information as to whether the mortgaged property
is vacant or occupied and, if occupied, the names
and status of the occupant as owner or tenant;
ƒ confirmation that fire insurance coverage is in
place;
ƒ a copy of any notices of any lien or interest in the
mortgaged property received by the mortgagee;
Chapter 55
ƒ the name and address of the present owner and
other known addresses of the mortgagor and any
guarantors;
ƒ the name of the spouse of the owner if the property
could potentially be a matrimonial home;
ƒ credit reports, if any, on the original mortgagor, any
guarantors, and the current owner;
ƒ the date of default under the mortgage;
ƒ a copy of any demand made on subsequent
encumbrancers or guarantors and details of any
payments made in response to such demands;
ƒ the amount owing on the mortgage for principal and
interest, the amount of disbursements made by the
mortgagee for realty taxes, insurance premiums,
and any other items; and
ƒ details of any assignment of the mortgage to the
current holder of the mortgage, where applicable,
and a copy of any notice to the mortgagor of such
assignment.
3. Selecting the appropriate remedy:
power of sale, judicial sale, or
foreclosure
When a mortgagee exercises the power of sale, which is
generally contained in a mortgage, the mortgagee conveys
the mortgaged property to a purchaser free and clear of
the interest of the mortgagor and any other person having
an interest in the mortgaged property subsequent in
priority to the mortgagee. A judicial sale has essentially
the same result. Alternatively, by exercising a foreclosure
action, the mortgagee will become the owner of the
mortgaged property, and those interests subsequent to the
mortgagee in priority will lose their interest in the
mortgaged property.
3.1 Advantages of power of sale
There are several advantages to the exercise of a power of
sale as compared to a judicial sale or foreclosure:
ƒ Time: The mortgagor is generally required to pay
the money due under the mortgage within 35–45
days after the issuance of a notice of sale as
compared to 60 days after the taking of accounts in
a judicial sale or foreclosure action (with the
possibility of further extensions of the redemption
period and other delays caused by motions and
other court proceedings).
ƒ Cost: The power of sale procedure is fairly standard
and is conducted from a solicitor’s office. In a
717
CHAPTER 55
judicial sale or foreclosure action, there may be
several attendances and motions before the courts.
ƒ Service: A notice of sale may be served by
registered mail, whereas a judicial sale or
foreclosure action is commenced by a statement of
claim, which must be personally served upon the
defendants (or by an alternative to personal service,
if applicable).
ƒ Deficiency after sale: If the mortgage debt has
not been fully repaid by selling the mortgaged
property under the power of sale, the mortgagee is
entitled to sue the mortgagor and others to recover
the shortfall. The same right exists in favour of the
mortgagee after a judicial sale (Rules of Civil
Procedure, r. 64.04(14)). By obtaining a final order
of foreclosure, the mortgagee is deemed to have
accepted the property in satisfaction of the debt and
is precluded from proceeding with an action against
the mortgagor for any deficiency.
ƒ Land transfer tax: Land transfer tax is not
payable by the mortgagee in exercising a power of
sale or when selling in a judicial sale but is payable
by a mortgagee when registering a final order of
foreclosure in the mortgagee’s favour.
ƒ Flexibility: A mortgagee is generally entitled to
abandon a power of sale proceeding at any time,
subject only to s. 42 of the Mortgages Act. Once a
mortgagee has commenced a foreclosure action or
judicial sale action, the mortgagee is not at liberty to
abandon the action and then commence power of
sale proceedings without the leave of the court being
granted, which will likely be denied.
3.2 Advantages of judicial sale or
foreclosure
The major advantages of a judicial sale or a foreclosure
action as compared to the exercise of power of sale are
ƒ Propriety of sale: Judicial sale or foreclosure
proceedings are court supervised. After the granting
of a final order of foreclosure, the mortgagee does
not have to account to the mortgagor or to
subsequent encumbrancers for any surplus realized
on a subsequent sale of the mortgaged property. By
contrast, under a power of sale, the mortgagee has
the responsibility to conduct the sale properly, sell
the property for a fair value, and account to the
mortgagor and to subsequent encumbrancers for
any surplus.
ƒ Resolution of problems: In a judicial sale or
foreclosure action, the court is an available forum
for the disposition of complex issues. This forum is
not available in a power of sale procedure.
ƒ Combined action: Claims for possession and
recovery of the mortgage debt may be combined
with judicial sale or foreclosure proceedings,
whereas a separate action must be commenced for
possession and/or payment of the mortgage debt in
power of sale proceedings.
718
REAL ESTATE
ƒ Ownership: Foreclosure may appeal to a
mortgagee in a depressed market where a sale of the
property in the short term will not generate
sufficient proceeds to repay the mortgage debt. In
the long term, real estate values may improve to
such an extent that, after foreclosure, the mortgagee
may be able to sell the property for an amount in
excess of the mortgage debt without having to
account to the mortgagor for any surplus. This is
especially important in circumstances where the
mortgagee intends to expend considerable moneys
in improving the property for resale.
4. Demand letters
Before commencing enforcement proceedings, it is
generally prudent for a solicitor to send a demand letter to
the mortgagor. In order to do so, a solicitor will need to
ascertain the name and address of the mortgagor and, if
possible, any known names or addresses of subsequent
mortgagees. The letter should specify
ƒ the amount required to bring the mortgage account
into good standing, including monthly payments,
late interest payments, disbursements, and legal
fees;
ƒ a deadline for payment;
ƒ the method of payment; and
ƒ that if the mortgage account is not brought into
good standing, legal proceedings will be commenced
a certain number of days after the date of the letter.
Section 42 of the Mortgages Act precludes the mortgagee
from commencing further enforcement proceedings
during the demand period specified for payment. The
mortgagee should retain a copy of the demand letter for
the mortgagee’s file.
Contacting subsequent encumbrancers at this preliminary
stage is advisable, since this will increase the possibility of
payment. This may be done in conjunction with the
sending of the demand letter to the mortgagor.
Furthermore, a subsequent encumbrancer will be less
likely to attack the amount due and the legal costs incurred
in the enforcement of the mortgage if the subsequent
encumbrancer has been given adequate notice at an early
stage of the proceedings. In some instances, the second
mortgagee will pay the arrears on the first mortgage to
protect the second mortgagee’s position. Conversely,
when acting for the second mortgagee, if the second
mortgage is in default, the lawyer should obtain
information from the first mortgagee to ascertain if that
mortgage is in good standing. Consideration should be
given to keeping the first mortgage in good standing to
prevent the first mortgagee from exercising a power of
sale, which will ultimately extinguish the second
mortgagee’s interest in the mortgaged property.
LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
ENFORCEMENT OF MORTGAGE SECURITY
5. Sale by a mortgagee under power of
sale
After considering the relative merits of power of sale,
judicial sale, and foreclosure, mortgagees most often
select the power of sale procedure as the appropriate
realization remedy.
5.1 When may the power of sale be
exercised?
In each case, the power of sale provisions contained in the
mortgage should be studied. Section 32 of the Mortgages
Act provides that notice of the exercise of the power of sale
shall not be given until the default has continued for at
least 15 days and the sale shall not be made for at least
35 days after the notice has been given. If the default in
question is not a default of payment of principal and/or
interest, but rather the failure to pay taxes or insurance
premiums or breach of other mortgage covenants, the
mortgage should be carefully reviewed to determine if the
default or breach is a proper basis for commencing power
of sale proceedings. A mortgagee is required to give the
mortgagor notice of any breach of covenant that
constitutes a default (other than default in payment of
principal or interest) together with a reasonable time for
the mortgagor to remedy the breach prior to issuing a
notice of sale.
Subsection 244(1) of the Bankruptcy and Insolvency Act
(BIA) requires a secured creditor that intends to enforce
its security on all or substantially all of the inventory,
accounts receivable, or other property of an insolvent
person to send notice of intention to enforce security to
that person if the assets being enforced upon have been
acquired for, or used in relation to, a business carried on
by that insolvent person. Subject to certain exceptions,
s. 244(2) of the BIA provides that enforcement of that
security shall not proceed until 10 days after the notice of
intention to enforce security has been sent, unless the
insolvent person consents to an earlier enforcement of the
security.
Section 21 of the federal Farm Debt Mediation Act
requires a mortgagee to give at least 15 business days’
written notice of intent, in the form established by the
Minister, to realize on security that constitutes the
property of a farmer. The notice should advise the farmer
of the farmer’s right to apply to an administrator for relief
pursuant to s. 5 of that Act, which may result in a 30-day
stay of proceedings, as outlined in s. 7(1)(b) of that Act.
5.2 Statutory power of sale
If the mortgage does not contain power of sale provisions,
the mortgagee may look to the statutory power of sale
provisions set out in Parts II–IV of the Mortgages Act.
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Some of the time periods in Part II differ from those set
forth in usual standard form power of sale provisions. For
example, s. 24 states that a sale cannot take place until
after at least a three-month default in payment of money
due under the mortgage or after omission to pay any
premium of insurance that by the terms of the mortgage
ought to have been paid by the mortgagor. Additionally,
no sale under the power conferred by s. 24 may be made
until after 45 days’ notice in writing in the form under the
Act has been given to the persons and in the manner
provided by Part III of the Mortgages Act (see s. 26(1)).
The statutory power of sale provisions of Part II do not
apply in the case of a mortgage that contains a power of
sale.
5.3 Procedure in issuing the notice of sale
A subsearch of title to the mortgaged premises should be
conducted prior to issuing a notice of sale to determine the
names of all persons having an interest in the mortgaged
property subsequent in priority to the mortgagee. After
the subsearch has been reviewed, a draft notice of sale
should be prepared.
All of the addresses of the recipients of the notice should
be set out in a schedule to the notice of sale. These
addresses should be obtained from the subsearch of title
and from the mortgagee.
A registration receipt form from the post office should be
prepared. All addresses to which the notice of sale is to be
sent should be set out in the registration receipt.
Additionally, envelopes marked “registered mail” should
be prepared and addressed to each recipient.
The subsearch of title should be updated as of 5:00 p.m.
on the day prior to issuance of the notice of sale.
Additionally, the mortgagee’s solicitor should, on the day
the notice is being issued, verify that no other instruments
were registered against title to the mortgaged property
prior to 5:00 p.m. the previous day and also recheck
executions. If there are any additional parties entitled to
receive the notice of sale, these should be added to the
schedule to the notice, and the registration receipt and a
new envelope should be prepared.
The notice of sale should be completed after confirming all
amounts with the mortgagee. After the notice of sale has
been finalized, each copy of the notice should be signed by
the solicitor for the mortgagee and then placed in a
separate envelope and taken to the post office where the
registration receipt will be stamped. A copy of the notice
should be sent to the mortgagee together with a warning
that the mortgagee should take no further proceedings to
enforce the mortgage until the expiration of the time for
payment in the notice, since such proceedings would be a
contravention of s. 42 of the Mortgages Act.
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On the day of mailing the notice of sale, a statutory
declaration as to service of the notice of sale should be
prepared and sworn.
5.4 Recipients of the notice of sale
Part III of the Mortgages Act requires that a statutory
form of notice be given in accordance with the Act and
stipulates the persons upon whom the notice must be
served, as set out below, and the manner of service.
Prior encumbrancers need not be served with a copy of the
notice of sale, since a power of sale does not extinguish the
rights of prior encumbrancers in the mortgaged property.
5.4.1 The original mortgagor
If the mortgaged property has been sold, the original
mortgagor is not a necessary party to whom the notice of
sale must be forwarded, but if the mortgagee intends to
proceed against the original mortgagor on the covenant to
pay or otherwise, a notice of sale should be served on the
mortgagor to provide the original mortgagor with an
opportunity to “redeem” the mortgaged property. Service
of the notice of sale on the original mortgagor is essential
if the mortgagee intends to later sue the original
mortgagor on the covenant for payment, since failure to
do so may relieve the original mortgagor from any liability
for any deficiency.
5.4.2 The owner
The current owner of the equity of redemption is entitled
to notice.
5.4.3 Spouses
The mortgagor’s spouse is given statutory rights of
possession and redemption paralleling those of the title-
holding mortgagor under ss. 19(1) and 22(1)–(2) of the
Family Law Act.
5.4.4 Subsequent mortgagees
The notice should be served on all subsequent mortgagees.
5.4.5 Assignees of subsequent
mortgagees
If a subsequent mortgage has been assigned, service of the
notice of sale upon the assignee is sufficient for the
purposes of the Mortgages Act.
5.4.6 Execution creditors
Execution creditors of the mortgagor or, where applicable,
of the owner of the equity of redemption whose writs of
search and seizure are subsequent to the mortgage but in
the hands of the sheriff at the time of giving the notice of
sale (or if the property is in the land titles system, filed in
the land titles office at the time of giving the notice of sale)
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are entitled to receive a copy of the notice of sale pursuant
to ss. 31(1)1 and 2 of the Mortgages Act.
Subsection 33(2) of the Mortgages Act provides special
rules for service of a notice of sale on an execution
creditor.
5.4.7 Construction liens
Subsection 33(3) of the Mortgages Act provides that
where a mortgagee is claiming priority over a construction
lien claimant, notice of the exercise of the power of sale
may be given by addressing the notice to the solicitor who
filed the claim for lien.
A solicitor for a purchaser should be reluctant to accept
title from a mortgagee who sells under a power of sale if
there has been a claim for priority made by one or more
lien claimants.
If the mortgagee wishes to realize on the security but is not
able to provide clear title to the purchaser because of
claims made by construction lien claimants, a mortgagee
may rely upon s. 44 of the Construction Act and pay the
amount of the lien claim and costs into court or post
security for the lien claim, pursuant to an order under
s. 44(1)(a) or (2) of the Construction Act, whereby the
liens cease to attach to the mortgaged premises and the
holdbacks and become instead a charge upon the amounts
paid into court. The liens are vacated from title to the
property, and the mortgagee is able to sell the property
free of the liens. Subsequently, if the court finds the liens
do not attach to the mortgaged premises, the court may
order the amount paid into court be returned to the
mortgagee pursuant to ss. 45(2)–(3) of the Construction
Act.
5.4.8 Guarantors
Strictly speaking, a guarantor of a mortgage who has not
paid any part of the mortgage debt has no charge on the
mortgaged property and is therefore not entitled to receive
a notice of sale. Nevertheless, it is good practice when
reviewing the mortgage security documentation to make a
note of the guarantors and to serve the guarantors with a
copy of any notice of sale.
5.4.9 Tenants
When preparing a notice of sale, consideration should be
given to serving any tenants of the mortgaged property
subsequent in interest to the mortgage, especially in light
of Goodyear Canada Inc. v. Burnhamthorpe Square Inc.
Before issuing the notice of sale, the mortgagee should
consider whether the tenancy in question is
disadvantageous and, if so, whether the mortgagee wishes
to force the tenant to vacate the mortgaged property. The
mortgagee may then take possession and re-let the
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mortgaged premises on more advantageous terms. The
first question to be determined in making the decision of
whether to force a tenant to vacate is whether the lease
agreement came into existence prior or subsequent to the
mortgage.
ƒ Prior lease: Where a lease is executed and
registered prior to the execution and registration of
a mortgage and the mortgagee took the mortgagee’s
security with actual notice of the lease, or where the
tenant has actual possession of the premises and the
term of the lease is such as to not require
registration pursuant to the provisions of the
Registry Act or the Land Titles Act, the tenant will
have priority over the mortgagee. Therefore, it is not
necessary for the mortgagee to serve the tenant with
notice of the exercise of the power of sale because
the tenant has priority over the mortgagee. In these
cases, all the owner-mortgagor has at the time the
owner-mortgagor mortgages the property is a
reversionary interest in the property, which is then
charged by the mortgage. In such a scenario, neither
the mortgagee nor the tenant will be able to
terminate the tenancy following default by the
mortgagor under the mortgage. After default, the
mortgagee may still elect to serve a notice of
attornment on the tenant requiring the tenant to
pay all future rent to the mortgagee. The mortgagee
is thus able to enforce the tenant’s obligation to pay
rent and to perform the tenant’s other obligations
under the lease, but conversely, the tenant is
entitled to performance by the mortgagee of the
landlord’s covenant under the lease. The notice of
the attornment is effective upon receipt by the
tenant. Prior to receipt of this notice, the tenant is
free to continue to pay rent to the landlord or,
indeed, to a subsequent encumbrancer who has
previously elected to collect rent. In any disputes
between a prior and subsequent mortgagee with
respect to the rents of the tenant, the mortgagee
having a prior right to possession is entitled to the
rents in question from and after the delivery of its
notice to the tenant.
ƒ Subsequent lease: Where a lease is entered into
by a mortgagor without the mortgagee’s consent
and the tenant lacks priority over the mortgagee,
the tenant has only a leasehold interest in the equity
of redemption. As a consequence, the mortgagee’s
right to possession of the mortgaged property is
paramount to that of the tenant. Such a tenant still
has a right to redeem the mortgage and therefore
should be served with a copy of the notice of sale. If
the mortgagee has in some way consented to the
mortgagor’s granting of the lease subsequent to the
mortgaging of the mortgaged property, the
mortgagee may be bound by the terms of the lease
and may be in the same position as a mortgagee
holding a mortgage subsequent to the lease of the
mortgaged property.
ƒ Non-disturbance, postponement, and
subordination agreements: It is common for
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mortgagees to enter into a “non-disturbance”
agreement with tenants whereby the mortgagee
agrees that after default by the mortgagor, the
mortgagee will not disturb the tenant’s possession
of the mortgaged property so long as the tenant is in
good standing under the lease. By virtue of this
agreement, a mortgagee may be precluded from
dispossessing the tenant if the mortgagor defaults
under the mortgage. In certain circumstances, if key
tenants do not have non-disturbance agreements, a
mortgagee who wishes to recognize the priority of a
tenant may agree to postpone the mortgage to the
tenant’s lease so as not to extinguish the interest of
the tenant in the mortgaged property as a result of
the power of sale. On the other hand, some tenants
initially having priority over a mortgagee are
obliged by the terms of their leases to agree to
subordinate their interests in the property to
facilitate mortgage financing. A notice of sale should
be sent to these tenants.
ƒ New relationship: As an alternative to evicting
the tenant, the mortgagee may attempt to create a
new tenancy arrangement with a subsequent tenant
who does not have the benefit of a non-disturbance
agreement. This new relationship may be created by
an express agreement between the parties or may be
implied by the court from the conduct of the parties.
The new relationship will not be established by
simply giving notice requiring the tenants thereafter
to pay all rent due under a lease to the mortgagee.
The fact that the tenant remains in possession of the
mortgaged property after the notice to quit has been
given is not necessarily evidence of an agreement to
create a new tenancy. In the absence of any clear
agreement of the parties establishing the terms of
the new relationship and where the tenant does
agree to pay rent to the mortgagee pursuant to a
notice from the mortgagee, a new tenancy from
year-to-year has been held to be created in some
cases. The mortgagee who has accepted rent from
the tenant in accordance with the terms of the
original lease may, however, be precluded from
forcing new terms on the tenant.
ƒ Assignments of rents and leases: A mortgagee
becomes a “mortgagee in possession” of the
premises when the mortgagee deprives the
mortgagor of the control and management of the
mortgaged property. Sometimes a mortgagee may
hold an assignment of leases or assignment of rents
as collateral security to the mortgage. The simple
receipt of rents under an assignment of rents is not
sufficient to constitute possession by the mortgagee.
When the mortgagee takes an absolute assignment
of the lease prior to or upon default of the
mortgagor, the mortgagee is bound by the terms of
such lease. Therefore, if the mortgagee wishes to
alter the terms of an existing lease entered into
subsequent to the mortgage, the mortgagee should
not execute a non-disturbance agreement nor
should the mortgagee take an absolute assignment
of the lease from the mortgagor, but rather the
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mortgagee should request an assignment of rents
exercisable at the option of the mortgagee only after
default by the mortgagor.
ƒ Service of notice of sale: If the mortgagee has
notice of the interest of the tenant, the tenant
should be served with a copy of the notice of sale in
accordance with s. 33(1) of the Mortgages Act,
presumably at the premises of the tenant or any
other address constituting the last known place of
address of the tenant. The notice of sale should also
be sent to the address for service of notices set out
in the lease and to the address for service in any
notice of lease registered on the title to the
mortgaged property.
5.4.10 Secured parties under the Personal
Property Security Act
When acting for a mortgagee, a notice of sale should be
served upon (a) the secured party at the address set out in
the notice of security interest registered on title and the
most recent address of the secured party as shown in the
financing statement or financing change statement, and
(b) the debtor at any other address constituting the most
recent address of the debtor known to the secured party
(Personal Property Security Act, s. 68(1)).
When acting for a purchaser buying land from a
mortgagee exercising a power of sale, it would be prudent
to requisition a discharge of any notice of a security
interest, since priority of registration by the mortgagee
does not necessarily determine the respective priorities. In
the alternative, the purchaser’s solicitor may adopt the
procedures set out in the Ontario Land Titles Procedural
Guide.
5.4.11 The bankrupt mortgagor
When the mortgagee has notice of the bankruptcy of the
debtor, the trustee-in-bankruptcy is a proper person to be
served with a notice of sale in the following manner, for
example: “XYZ Limited, the trustee of the estate of ABC
Corporation, a bankrupt.”
5.4.12 Court-appointed receivers
The notice should be addressed to the receiver as, for
example: “XYZ Limited, receiver of ABC Corporation.”
5.4.13 Persons under a disability and
deceased persons
Subsections 33(4)–(5) of the Mortgages Act provide
special rules with respect to service of a notice of sale on
persons under disability and deceased persons.
5.4.14 Statutory liens
Subsection 31(1) of the Mortgages Act also provides that
where there is a statutory lien against the mortgaged
property in favour of the Crown or any other public
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authority and the mortgagee exercising a power of sale has
written notice of the lien, the notice of sale should be sent
to the Crown or other public authority claiming the lien,
provided, however, that the mortgage has priority over the
lien.
5.4.15 Dissolved corporations
Subsection 31(1) of the Mortgages Act also provides that
where the last registered owner of the mortgaged property
is a dissolved corporation, the notice of sale should be sent
to the Minister responsible for the administration of the
Forfeited Corporate Property Act, 2015.
5.4.16 Other interests
Subsection 31(1) of the Mortgages Act also refers to liens
or claims when a mortgagee has received written notice of
a lien or claim or actual notice in writing of any other
interest in the mortgaged property. In these cases, a copy
of the notice of sale should be given to such parties.
5.5 Manner of service
Subsection 33(1) of the Mortgages Act provides that,
subject to specific provisions to the contrary contained in
the mortgage, there are a number of alternative methods
of giving the notice of sale:
ƒ by registered mail addressed to the person to whom
it is to be given
— at the person’s usual or last known place of
address (or where the last known place of
address is that shown on the registered
instrument under which the person acquired
the person’s interest, to such address); or
— where the mortgage provides for a specific
address, to that specific address;
ƒ by leaving it at such above-noted places of address;
or
ƒ where the mortgage provides for personal service
only, by personal service.
If in doubt as to the correct address for a recipient, the
notice of sale should be sent to all readily available
addresses for the recipient. Documents submitted for
electronic registration pursuant to the Land Titles Act
must contain a complete postal address for service for
either the person claiming or obtaining an interest under
the document or the person’s solicitor. Documents
submitted for registration in a non-electronic format must
be in the forms prescribed by the Land Registration
Reform Act, which contain spaces in which addresses for
service are to be listed. If there is no address provided in
the document for service but the document does contain a
notice provision, the notice of sale should be sent to the
address in the notice provision. Otherwise, the notice of
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sale should be sent to the address on the document under
which the party acquired the party’s interest.
Inquiries should always be made by the mortgagee to
determine what is “the usual or last known place of
address” of the mortgagor or any subsequent
encumbrancers.
Section 34 of the Mortgages Act provides that a notice
exercising a power of sale shall, if given by registered mail,
be mailed in Ontario and such a notice shall be deemed to
have been given on the day on which it was mailed. There
are special rules under the Family Law Act as to where the
notice should be served.
5.6 Form of the notice of sale
Subsection 31(1) of the Mortgages Act provides that “[a]
mortgagee shall not exercise a power of sale unless a
notice of exercising the power of sale in the Form to this
Act has been given ….”
The following matters should be considered in preparing
the notice of sale:
ƒ The notice of sale should be entitled “Notice of Sale
Under Mortgage” at the top of the first page of the
document.
Generally speaking, the notice is addressed to the
recipient of the notice in the following manner:
“TO: [Name and address of the mortgagor]
AND TO: the parties shown on Schedule ‘A’
attached hereto.”
If there is more than one mortgagor, select the first
mortgagor named in the mortgage to be the party
appearing on the first page and all other mortgagors
and other parties should be shown on Schedule A.
Postal addresses and postal codes should be
included. It is good practice for the notice to be
addressed to the person served, but the fact that it is
not so addressed is not fatal if it was in fact served
on such person.
ƒ After the phrase “Take notice that default has been
made in payment of the money due under a certain
mortgage,” the exact details of the mortgage should
be carefully reviewed and repeated, since the next
portion of the notice of sale is virtually a recital.
Regardless of whether the mortgage is in fact a
mortgage registered in the registry system, a charge
registered under the Land Titles Act, or a
debenture, the mortgage document could be defined
as the “Mortgage” since all of these documents are
“mortgages” for the purposes of the Mortgages Act.
The date of the mortgage and the parties thereto
should be described exactly as they appear on the
mortgage. Further, if guarantors, additional
covenantors, or spouses have joined in the
mortgage, they should also be recited in this
reference to the mortgage.
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ƒ Next, after the words “on the security of,” the legal
description of the mortgaged property should be set
out exactly as in the mortgage.
ƒ Following the legal description, the details of
registration of the mortgage should be recorded.
ƒ If the mortgagee named at the end of the notice of
sale is not an original party to the mortgage, details
of the manner in which the mortgagee acquired the
mortgagee’s interest should be specified in the
notice of sale, including details of registration of any
assignment of mortgage, change of name, or
amalgamation.
ƒ The next paragraph of the notice of sale includes the
amounts due on the mortgage. This information
should be obtained in writing from the mortgagee, if
possible. The notice should set out separately the
amounts claimed for principal, interest, and costs,
and if the notice fails to do this, it is a nullity.
ƒ The full accelerated principal amount should be set
out together with interest as of the date of the
issuance of the notice, so long as the mortgagee is
entitled to claim the full accelerated principal
amount following default.
ƒ If municipal taxes or insurance premiums have been
paid by the mortgagee, these items may be included
in the claim set forth in the notice; the mortgagee is
not, however, entitled to claim for outstanding taxes
or insurance premiums it has not yet paid.
ƒ Common area expense payments made by the
mortgagee to a condominium corporation must be
set out separately in the notice.
ƒ A separate item for solicitor-client fees already paid
by the mortgagee in connection with enforcement of
the mortgage may be included.
ƒ The costs of the power of sale proceedings should
then be listed separately in the notice.
Subsections 43(2) and (4) of the Mortgages Act
permit the mortgagor to have assessed the
mortgagee’s solicitor’s costs by an assessment
officer.
ƒ Note that minor, insignificant errors in the amounts
set out in the notice of sale will not invalidate the
notice.
ƒ Solicitors generally add after the words “and unless
the said sums,” the following phrase, “together with
interest thereon at the rate of ____% per annum
calculated half-yearly, not in advance,” as the case
may be, followed by “and any further costs and
disbursements incurred in these proceedings” so as
to take into consideration the daily accrual of
interest and other costs after the date of the notice
of sale.
ƒ A notice of sale must specify a date for payment
more than the statutory minimum of 35 days after
the notice is given. This means 35 clear days,
exclusive of the first and last day. It would therefore
be prudent to give at least 37 days’ notice in the
notice of sale.
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ƒ If the mortgage does not contain power of sale
provisions and therefore the mortgaged property
would not be sold “under the provisions contained
in the ... mortgage,” these words should be deleted
and reference should instead be made to “under
Part II of the Mortgages Act.” In some forms, these
two phrases are both set forth in the alternative, and
the mortgagee’s solicitor should be careful to delete
the inapplicable provision so as to avoid any
confusion as to which procedure the mortgagee
intends to follow.
ƒ The notice must be dated and signed, and in all
cases, the full name of the mortgagee must appear
on the notice of sale identified as the “mortgagee.”
The notice may be signed by the mortgagee, or as is
more usual, a mortgagee’s solicitor may sign the
notice of sale with the mortgagees’ express
authority. If a mortgagee’s solicitor signs the notice
of sale, the mortgagee’s solicitor should be properly
identified in the notice as the solicitor for the
mortgagee. The mere typewritten name of the
solicitor’s firm without the signature of the solicitor
lacks the necessary “personal authentication” of a
valid notice. The proper way of executing the notice
of sale would be, for example, “Big Bank by its
solicitors and authorized agents, Messrs. Red &
Blue LLP, Barristers & Solicitors, Box 50, First
Canadian Place, Toronto, Ontario, M5X 1B8 per:
I.M. Blue.”
5.7 Section 42
Section 42 of the Mortgages Act prevents a mortgagee
from taking proceedings to enforce the mortgage during
the currency of a demand for payment or the time
specified for payment in a notice of sale without first
obtaining an order from a judge of the Superior Court of
Justice. There are two basic concerns that this provision
seeks to address. First, the legislature wished to prevent
the mortgagee from incurring unnecessary costs that
would be passed on to the mortgagor, and second, it
wanted to ensure that the mortgagor would have the
benefit of the notice period without being subjected to a
multiplicity of other actions or proceedings. The result of
a contravention of s. 42 is that the notice or demand will
remain valid, but further proceedings commenced during
the currency of the notice or demand will be set aside as
invalid. Once a notice exercising power of sale has been
given, it cannot be abandoned in order to circumvent
s. 42.
Section 42 does not preclude informal discussions with a
real estate agent about selling the property in general
terms where no listing is promised and does not interfere
with the mortgagor’s right to redeem. Also, a mortgagee
who continues to collect rents after giving notice of
intention to exercise power of sale would not contravene
s. 42.
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Subsection 42(3) creates exceptions for proceedings to
stay waste or other injury to the mortgaged property. The
problems raised by s. 42 of the Mortgages Act may be
readily dealt with by an application for a court order
pursuant to s. 42(2). Alternatively, the notice period may
be by-passed altogether with an application under s. 39 of
the Mortgages Act to a judge of the Superior Court of
Justice.
5.7.1 The rights of the mortgagor or
subsequent encumbrancer upon
receiving a notice of sale
Although a mortgage is a legal document, equity has
always played a large role in mortgage transactions. The
fundamental term that equity has incorporated into a
mortgage is the right in favour of the mortgagor to
“redeem” or to pay off the mortgage debt in exchange for
the return of the security after there has been a legal or
technical forfeiture under the mortgage. In addition, there
are certain statutory and other rights that may be
exercised by the mortgagor in the event of legal or
technical default.
(a) Statutory rights
The term “mortgagor” is defined in s. 1 of the Mortgages
Act as including “any person deriving title under the
original mortgagor or entitled to redeem a mortgage,
according to the person’s estate, interest or right in the
mortgaged property.” Thus, a “mortgagor” includes the
original mortgagor, a purchaser of the mortgaged
property, a second mortgagee, and any other person to
whom the notice of sale has or should have been
addressed, since those persons are subsequent in interest
to the mortgagee. The comments that follow with respect
to the statutory rights of the mortgagor are also rights in
favour of the other parties receiving the notice of sale, such
as the second mortgagee:
ƒ Section 42: The mortgagor should first consider
whether a notice or demand was given by the
mortgagee and whether such notice had expired at
the time the notice of sale was issued. If the time
has not expired, s. 42 of the Mortgages Act may be
of some assistance to permit the mortgagor to apply
for a declaration that the notice of sale, being a
“further proceeding,” is a nullity.
ƒ Subsection 22(1): If the mortgagee under a notice
of sale accelerates all of the principal due under the
mortgage, the provisions of s. 22(1) of the
Mortgages Act will “negate” the “acceleration
clause,” and the mortgagor may pay the amount due
under the mortgage (exclusive of the accelerated
sum) and any expenses incurred by the mortgagee,
and thereupon, the mortgagor is relieved from the
consequences of the default. Subsection 22(1) does
not confer any discretion upon the court. The right
to relief before sale is unqualified. As a result, after
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receipt of payment in accordance with the section,
the mortgagee’s right to sell the mortgaged property
under the notice of sale would be at an end until
further default, at which time a fresh notice must be
issued prior to sale.
There are two conditions to relief under s. 22(1).
The payment must be made before “sale under the
mortgage” has taken place or before “the
commencement of an action for the enforcement of
the rights of the mortgagee.” In Re Mission
Construction Ltd. and Seel Investments Ltd., the
court held that the acceptance of an offer to
purchase by the mortgagee is effective to terminate
the rights of the mortgagor under s. 22 (previously
s. 21) of the Mortgages Act, even though the
agreement of purchase and sale was specifically
made subject to the right of the mortgagor to
redeem.
The court has also held that where the agreement of
purchase and sale entered into by the mortgagee
was conditional upon the mortgage not being
redeemed by any parties having an interest in the
property up to the date of closing, the owner’s right
to redeem under s. 22 (previously s. 21) of the
Mortgages Act was not terminated by the execution
and delivery of the agreement, since the agreement
clearly intended that the mortgagor would have the
right to redeem the mortgage up until the closing of
the transaction.
ƒ Subsection 23(1): If an action has been
commenced to enforce the mortgage, s. 23(1) of the
Mortgages Act is applicable. Upon payment into
court of the sum of $100 to the credit of the action
as security for costs, the mortgagor may apply to the
court for relief conditional upon payment of the
money due under the mortgage, exclusive of the
acceleration clause. If judgment has not been
recovered, the action will be dismissed, and if
judgment has been recovered, the proceedings in
the action will be stayed, provided that “no sale or
recovery of possession of the land or final
foreclosure of the equity of redemption has taken
place.” The right of redemption under this section is
terminated when the mortgagee or the mortgagee’s
agent, a receiver appointed pursuant to the terms of
the mortgage, takes possession of the mortgaged
property. The mere giving of a notice to attorn
would not be recovery of possession within the
meaning of the section, but notice to attorn after
judgment for possession constitutes possession for
the purposes of the section. The mortgagor must
strictly comply with provisions of s. 23(1) of the
Mortgages Act to be entitled to relief.
ƒ Subsection 22(2): To enable the mortgagor to pay
up the arrears only in accordance with s. 22(1) or
23(1), the mortgagor may need further information,
such as the unaccelerated amount due under the
mortgage. Subsection 22(2) of the Mortgages Act
specifies that the mortgagor may require the
mortgagee to provide a statement in writing of the
amount of the principal or interest with respect to
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which the mortgage is in default and the amount of
the expenses necessarily incurred by the mortgagee.
Under s. 22(3), the mortgagee is required to answer
such a request within 15 days after receipt of the
request, and if, without reasonable excuse, the
mortgagee fails to do so or if the answer is
incomplete or incorrect, any rights that the
mortgagee may have to enforce the mortgage shall
be suspended until the mortgagee has complied
with s. 22(2).
ƒ Subsection 12(3): Subsection 12(3) of the
Mortgages Act provides that when a mortgagor or
any person entitled to pay off a mortgage desires to
do so and the mortgagee cannot be found or where
from any other cause a proper discharge cannot be
obtained, the court has discretion to permit
payment into court of the amount due on the
mortgage and may make an order discharging the
mortgage. In circumstances where the mortgagee
has taken steps to enforce the mortgage, thus
opening up the right to redeem in favour of the
mortgagor, the mortgagor may use s. 12(3) as a
means of paying off a high-interest-rate mortgage.
Taking possession, suing for the accelerated
principal sum, or issuing a notice of sale will all
trigger the mortgagor’s equitable right to redeem,
which will permit the mortgagor to utilize the
provisions of s. 12(3) of the Mortgages Act.
A subsequent encumbrancer, as a successor in title
to the mortgagor, is entitled to enforce a partial
discharge provision and to bring an application
under s. 12(3). Subsection 12(3) has also been used
in conjunction with s. 8(1) of the Interest Act for an
application to determine if the interest alleged to be
due pursuant to the provisions of the mortgage was
in contravention of the Interest Act.
ƒ Subsection 43(1): The mortgagor may pay the
moneys claimed under the notice of sale and
thereby prevent a sale. Payment may be made by
the mortgagor or a subsequent encumbrancer after
the time set forth in the notice of sale. The right to
redeem continues up to the time the sale is actually
made, and the time set out in the notice of sale is to
comply with the provisions of the mortgage and the
Mortgages Act prohibiting a sale prior to that time.
In a case that went before the courts, the first
mortgagee had commenced power of sale
proceedings under the mortgage, and the second
mortgagee tendered the full amount required to
discharge the first mortgage after the expiration of
the notice period, whereupon the first mortgagee
returned the tendered cheque on the grounds that
the redemption period had expired. In dismissing
the application of the second mortgagee, the court
held that there is no obligation on the mortgagee to
accept payment once the date set out in the notice of
sale under the mortgage had passed. The second
mortgagee was then confined to its rights under
s. 22(1) of the Mortgages Act.
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ƒ Section 2: Pursuant to s. 2(1), where a mortgagor
is entitled to redeem, the mortgagor may require the
mortgagee, instead of giving a discharge of
mortgage, to assign the mortgage debt and convey
the mortgaged property to any third person as the
mortgagor directs. Subsection 2(2) of the
Mortgages Act goes on to state that the right of the
mortgagor to require an assignment belongs to and
is capable of being enforced by each encumbrancer
or the mortgagor, notwithstanding any intermediate
encumbrance. A requisition of an encumbrancer,
prevails over that of the mortgagor, and as between
encumbrancers, a requisition of a prior
encumbrancer prevails over that of a subsequent
encumbrancer. Section 2 does not apply if the
mortgagee is or has been in possession. Accordingly,
assuming the mortgagee has not taken possession of
the mortgaged property, in certain circumstances, a
second mortgagee may decide to require an
assignment of the first mortgage so as to keep the
first mortgagee from exercising a power of sale.
(b) Technical attacks
In addition to statutory rights, the mortgagor may raise
several technical grounds to invalidate a notice of sale. The
courts will be receptive to technical arguments, perhaps at
the penalty of costs, especially if there is good evidence to
the effect that the parties receiving the notice of sale could
have been confused or misled by the technical defect.
When acting for a mortgagor who has received a notice of
sale, the notice should be reviewed carefully to determine
whether the notice has been properly prepared and
executed. If technical grounds are to be raised, they should
be raised as soon as possible, for if the mortgagee is
permitted to close a transaction under power of sale, then
pursuant to s. 36 of the Mortgages Act, so long as the
notice was given in “professed compliance” with the
Mortgages Act, the purchaser will obtain good title to the
mortgaged property, leaving the mortgagor with a remedy
solely against the person exercising the power of sale.
(c) Injunction
A mortgagee acting in good faith and without fraud will
not be restrained from a proper exercise of the
mortgagee’s power of sale, except upon tender by the
mortgagor of the principal moneys due, interests, and
costs. An application by a mortgagor for the
postponement of a sale on a mortgagor’s vague and
indefinite hope of finding new financial backing would be
an unwarranted interference with the contractual rights of
the mortgagee, even if the mortgaged property is ample
security for the loan.
Where a triable issue is raised by the mortgagor, the court
will grant an injunction restraining the mortgagee from
selling the mortgaged property on the condition that the
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mortgagor keep the mortgage in good standing until trial
or other final disposition of the action.
A caution under s. 71 of the Land Titles Act may be
approved by the Director of Titles if a claim is made by the
registered owner that the power of sale proceedings are
improper because the owner has redeemed the charge
prior to the sale of the mortgaged property (see Land
Registration Bulletin No. 2000-2, July 21, 2000).
(d) Costs
The form for the notice of sale under mortgage requires a
mortgagee to set out the mortgagee’s costs being claimed
in the power of sale proceedings. The costs recoverable by
a mortgagee are those on a substantial indemnity basis if
the mortgage so provides, as long as the costs are not
unreasonable. If there is a dispute as to costs payable by
the person who is tendering the moneys due, such costs
may be assessed by an assessment officer pursuant to
s. 43(2) of the Mortgages Act. Pursuant to s. 43(4), the
costs of and incidental to the exercise of a power of sale
may be assessed by an assessment officer at the instance
of any interested person. The costs of the assessment are
at the discretion of the assessment officer.
(e) Renegotiating the mortgage
A mortgagor may attempt to enter into negotiations with
a mortgagee to adjust the repayment schedule or make
some other agreement that will permit the mortgagor to
have further time to pay the mortgage debt. Any such
agreement, if complied with by the mortgagor, will be
enforced by the courts, thus precluding the mortgagee
from relying upon the notice of sale that prompted the
renegotiation.
(f) Partial payments
If the mortgagee merely accepts a partial payment and
applies the payment to outstanding arrears, the mortgagee
is not precluded from relying on the notice of sale so long
as the partial payment does not put the mortgage into
good standing. A mortgagee can best protect himself or
herself when receiving a partial payment by ensuring that
the mortgagor is made aware at the time the payment is
accepted that strict compliance with the notice of sale is
still insisted upon, notwithstanding the acceptance of the
partial payment, and the mortgagee should confirm that
no agreement nor any accommodation has been made
with the mortgagor.
5.8 The standard of care
The broad enforcement rights in favour of a mortgagee
contained in the standard form of mortgage used by most
lenders must be considered in view of the obligations of
the mortgagee set out in the case law.
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The following summarizes the obligations of the
mortgagee when selling under private power of sale:
ƒ A mortgagee is not a trustee of a power of sale for
the mortgagor; the mortgagee’s right is to look after
himself or herself first, but the mortgagee is not at
liberty to look after the mortgagee’s own interests
alone nor to sacrifice the property of the mortgagor.
ƒ The mortgagee, in exercising a power of sale, must
act bona fide and take reasonable precautions to
obtain a proper price. A price just sufficient to cover
the outstanding debt may be seen as disregarding
the mortgagor’s interests.
ƒ The mortgagee need not delay the sale in the hope
of an improvement in market conditions.
ƒ It is the duty of a mortgagee to behave as a
reasonable person would behave in the realization
of the person’s own property.
ƒ Consideration should be given to the best means of
publicizing the sale of the property, whether it be
through newspapers, trade journals, or multiple
listing services.
ƒ A “for sale” sign should be put on the property.
ƒ After having obtained appraisals, the mortgagee
must keep the market value set forth in the
appraisals in mind as a benchmark and should not
accept an offer well below the appraised value.
ƒ If the sale yields a surplus over the amount owed
under the mortgage, the mortgagee must hold the
surplus in trust for the mortgagor or subsequent
encumbrancers.
A solicitor should indicate to the mortgagee that although
the mortgagee is not a trustee, the mortgagee has
obligations imposed upon the mortgagee approaching
those of a fiduciary, and what may appear to be an
advantageous sale to the mortgagee may not stand up to
court scrutiny at a later date.
5.9 Appraisals
Appraisals are very useful in establishing the market value
of the mortgaged property. If the price at which the
property is sold is contested, the mortgagee’s position can
be defended on the basis of the appraisals.
When retained, the appraiser should be fully informed as
to the nature of the mortgaged property, including the
legal description, available financing, zoning, particulars
of rents, easements, and legal restrictions.
The appraisal obtained should include a reference to the
uses to which a property may be put in order to determine
its highest and best use.
It is also useful to have the appraiser comment on the
appearance of the property and the approximate costs of
putting the property into a marketable condition, where
appropriate.
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In the case of Bank of Nova Scotia v. Barnard, the court
held that a mortgagee must take reasonable precautions to
obtain the “true market value,” and in the case where the
appraisal was made on the assumption that a sale would
take place as a fast sale, the appraisal was held not to be
appropriate. The term “fast sale” meant a sale occurring
within 60 to 90 days. The mortgagee could not rely on the
appraisal as a defence in the circumstances, since the
mortgagee was liable for the actions of the mortgagee’s
agent in making a deficient appraisal.
In general, two appraisals would be satisfactory, as long as
they both independently come to approximately the same
market value. After the appraisals have been received, it
may be prudent to advise the mortgagor and subsequent
encumbrancers of the market value set forth in the
valuations and indicate the mortgagee’s intention to
proceed to list the mortgaged property through a multiple
listing service asking a price of approximately five to ten
percent in excess of the higher or the average of the two
valuations obtained.
5.10 Separate parcels
Most standard form power of sale provisions permit the
mortgagee to sell the mortgaged property or any part
thereof “in whole or in part.” If it is more advantageous to
sell the mortgaged property as separate parcels rather
than together in one transaction, provided sale as separate
parcels is otherwise permitted at law, the mortgagee may
be liable for the difference between the amount realized in
the sale en bloc and what could have been realized if the
lots had been sold as separate parcels. There is an
obligation on the mortgagee to make inquiries as to the
most beneficial way of disposing of the property. The
foregoing principles are qualified by the provisions of
s. 50(18) of the Planning Act, which states:
No ... exercise of a power of sale in a mortgage or
charge shall have any effect in law without the
approval of the Minister ... unless all of the land
subject to such mortgage or charge is included in
the ... exercise of the power of sale ....
There are, of course, exceptions for the sale of the whole of
lots on plans of subdivision or parcels that do not abut
other lands forming part of the mortgage security. A
mortgagee selling one lot under power of sale and holding
a separate mortgage given by a different mortgagor on an
abutting lot does not require consent under the Planning
Act to complete a sale of the first lot.
5.11 Listing agreements and offers
Unless specifically permitted to do so in the mortgage, the
mortgagee should not list the property for sale with an
affiliate.
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Solicitors should advise mortgagees to specify to the
listing real estate brokers that, wherever possible, all
offers should provide for a reasonable period of
acceptance by the mortgagee. The listing should make
reference to the property being sold under a power of sale.
The agreement of purchase and sale should include an
acknowledgment by the purchaser that the mortgagee is
selling the property pursuant to a mortgage registered in
its favour.
Pursuant to s. 32 of the Mortgages Act, the mortgagee is
not entitled to enter into an agreement of purchase and
sale for at least 35 days after the notice has been given.
The purchase agreement should not include the usual
phrase “the vendor agrees to discharge any existing
mortgages, liens, or other encumbrances now registered
against the property on or before the closing date at his
own expense.” The clause should be confined to prior
encumbrances only, if not assumed by the purchaser as a
part of the transaction. Since subsequent encumbrances
are extinguished by operation of law, the inclusion of the
foregoing clause would create a positive obligation to
discharge subsequent encumbrances. Furthermore, the
mortgage under which the property is being sold is not
discharged.
Special thought should be given to adjustments for arrears
such as realty taxes, condominium expenses, utilities, and
arrears under prior mortgages. From the mortgagee’s
point of view, it would be preferable not to advance any
further funds and to have these items adjusted on closing
or, alternatively, paid out of the proceeds due on closing.
If prior opinions are available, they should be reviewed
carefully so as to include in the purchase agreement as
permitted encumbrances those items such as prior
mortgages, restrictive covenants, and easements that the
mortgagee is unable to extinguish as a result of power of
sale.
Unless the mortgagee has additional security charging the
chattels or the mortgaged property, the usual chattels
clause and any references to chattels should be deleted
from the purchase agreement.
If the mortgagee has possession of the property, the
mortgagee will be in a position to promise vacant
possession on closing. If not, since the purchaser will
generally require vacant possession prior to closing, the
agreement should contain provisions in favour of the
mortgagee for appropriate extensions of the closing date if
the mortgagee is unable to obtain possession of the
mortgaged property by the closing date.
If the property is being sold at a price less than the amount
owed on the mortgage, it would be advantageous for the
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mortgagee to leave open the right of the mortgagor to
redeem until the closing.
5.12 Closing the sale transaction
The purchaser’s solicitor should ascertain whether s. 35 of
the Mortgages Act has been complied with, since it is
pursuant to that section that the purchaser obtains good
title to the mortgaged property. In the registry system, the
practice has developed whereby three declarations are
delivered and deposited on title to the property at the time
of closing:
ƒ a statutory declaration proving service of the notice
of sale, usually by registered mail;
ƒ a statutory declaration of the mortgagee or the
mortgagee’s solicitors or agents as to default under
the mortgage; and
ƒ a statutory declaration of the mortgagee or the
mortgagee’s solicitors or agent that the sale
complies with Part III and, if applicable, Part II of
the Mortgages Act.
Section 99 of the Land Titles Act provides that the
registered owner of a registered charge containing a power
of sale, upon registering the “evidence specified by the
Director,” may sell and transfer the interest in the land
subject to the charge in accordance with the terms of the
power of sale in the same manner as if the registered
owner of the registered charge were the registered owner
of the land. The specified evidence, once registered, is
conclusive evidence of compliance with Part III of the
Mortgages Act and, where applicable, with Part II of the
Mortgages Act and, upon registration of a transfer under
s. 99(1) of the Land Titles Act, is sufficient to give a good
title to the purchaser of the land.
Outside the electronic registration system, the required
evidentiary declarations take the same basic format as in
the registry system but are referred to as the “sale papers”
and are attached to the transfer at closing rather than
being deposited on title as is done in the registry system.
The sale papers should be approved by the land registrar
prior to closing.
A transfer under power of sale submitted for electronic
registration under the land titles system must do all of the
following:
ƒ Either
— comply with the Land Titles Act by ensuring
that the usual paper affidavit evidence is filed
separately from the electronically registered
document (if no compliance with law
statements are included);
or
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— include all of the following compliance with
law statements in the document that is
electronically registered:
y The sale is authorized under both the
charge and the Mortgages Act.
y The charge was in default at the time
notice of sale was given and continues to
be in default, and moneys have been
advanced under the charge.
y The sale proceedings and transfer comply
with the charge, the Mortgages Act, and
where applicable, the BIA, the
Condominium Act, 1998, the
Construction Act, and the Farm Debt
Mediation Act.
ƒ Identify the following:
— instruments subsequent to the charge, by
instrument number and date of registration;
and
— writs of execution subsequent to the charge, by
name and writ number.
ƒ Provide the spousal status under the Family Law
Act for each person whose spouse was not served
with a notice under the Mortgages Act and whose
interest may be deleted upon registration for the
transfer.
In the registry system deeds, the recitals should include
reference to the mortgage and its registration, the power
of sale and the length of notice required under the
mortgage, specifics of the notice given to those required,
and the continued default by the mortgagor.
The transfer/deed of land for both the registry and land
titles systems is prescribed by Form 1 to the Land
Registration Reform Act.
A solicitor acting for the purchaser should do all of the
following:
ƒ Review the draft sale documentation to confirm that
the mortgage contains a power of sale provision and
that the relevant time periods have expired.
ƒ Verify the dates and details of registration of the
mortgage and see if they are accurately set forth in
the notice of sale.
ƒ Check if there are any specific addresses for service
and the places where the mortgagor and subsequent
encumbrancers were served.
ƒ Review the notice of sale for any typographical
errors in the legal description, statement of
accounts, or names of the parties.
ƒ Confirm that the notice of sale properly identifies
the mortgagee, the notice has been signed, and the
proper number of days have passed with respect to
redemption.
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ƒ Check the post office receipts to see if they
correspond with the affidavit of service.
ƒ Subsearch for executions, construction liens, notices
of security interests, notices of condominium
arrears, or notices of corporations tax arrears
registered subsequent to the mortgage.
Sections 35–36 of the Mortgages Act will protect the title
of a purchaser who buys from a mortgagee under power of
sale so long as the notice of sale was given in “professed
compliance” with the Mortgages Act. The purchaser must,
however, be bona fide without notice of any invalidity or
non-compliance of the notice or related sale proceeding.
The Court of Appeal for Ontario has interpreted the phrase
“professed compliance,” as meaning a notice “must be
such as to enable the parties to whom the notice is
required to be given to protect their interests. It must, in
other words, identify the mortgage, stipulate the amount
due thereon for principal, interest and costs and state that
unless the sum is paid by the specified date the property
will be sold.”
5.13 Sale proceeds
The sale does not affect the interest of any prior
encumbrancers. Accordingly, if any prior mortgagees are
in existence, their mortgages should be assumed by the
purchaser (if assumable) or discharged out of the sale
proceeds.
Since the sale of the mortgaged property extinguishes the
interest of the mortgagor or subsequent encumbrancers in
the property, such persons may look only to the proceeds
of the sale to satisfy claims on the property. The mortgagee
is the trustee for any surplus of the sale proceeds beyond
that required to satisfy the mortgagee’s mortgage and the
costs of the sale.
If there is a question as to priority of subsequent
encumbrances or other uncertainties, the mortgagee may
obtain an order for payment of the surplus proceeds into
court under the provisions of s. 36 of the Trustee Act.
5.14 The results of a power of sale
After the mortgagee has completed the exercise of a power
of sale, the mortgagee no longer has any further interest in
the mortgaged property. The mortgagee may, however,
sue the mortgagor or any guarantors of the mortgage debt
for any deficiency between the net sale proceeds and the
amount owed on the mortgage.
Any prior encumbrancers are not affected by the power of
sale.
The new owner of the purchased property who bought the
property under the power of sale acquires good title to the
property subject only to prior encumbrances so long as the
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mortgage sale was completed “in professed compliance”
with the Mortgages Act and all proper parties were served
with the notice of sale.
The mortgagor and all subsequent encumbrancers lose
their interest in the mortgaged property as a result of the
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exercise of the power of sale. Their only claim is against
the mortgagee for an improper or improvident sale of the
mortgaged property and an accounting for any surplus
sale proceeds.
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Preparation for closing, closing, and post-closing
1. Introduction
Lawyers can begin preparing for the completion of a
transaction, or “closing,” as soon as the agreement of
purchase and sale is signed.
The solicitor for the purchaser should conduct a title
search, make the required off-title inquiries regarding the
property, and submit requisitions in a timely fashion. As
solicitor for the vendor, you can retrieve the vendor’s
report from the purchase of the property to assist you in
answering the purchaser’s requisitions and in preparing
the necessary sale documentation.
The introduction of electronic registration (e-reg™), an all
electronic, paperless system where documents are
created, submitted, and maintained in electronic form,
has significantly altered closing procedures. As a result of
a statutory amendment to the Land Registration Reform
Act (LRRA), electronic documents do not have to be
produced or printed on paper to have legal effect.
Electronic documents are created and modified online on
behalf of the vendor and purchaser, and registration
occurs electronically, which eliminates the need for
personal attendance at a land registry office.
E-reg is only available for properties that are registered
under the Land Titles Act. With the exception of “non­
converts,” which have remained registry properties
pending resolution of certain title issues, all land in
Ontario that was not already in a land titles jurisdiction
have been converted to land titles.
Teraview®, which is designed and maintained by
Teranet®, is a gateway web-based application for viewing
data in the Government of Ontario’s land records
database, performing related searches, and creating and
submitting title documents for e-reg. In order to gain
access to Teraview, one must have a licence. There are a
number of different levels of access available.
First, the law office would typically apply to become a
Teraview account holder authorized to register electronic
documents. Teranet will assign an account name to the
office, and all transactions will be billed to that account. A
Teraview account holder must ensure that all individual
users of the account are doing so in accordance with
relevant laws.
The second level of access is through a personal security
licence granted by Teranet to individual users of Teraview.
These users may be staff members in lawyers’ offices or
other members of the public who require access to
Teraview.
A third level of access is granted exclusively to lawyers who
have obtained a personal security licence. Only lawyers are
entitled to make law statements in a document.
Throughout 2018, Teraview was converted, on a rolling
basis, to a web-based application, and licensees were
provided with an RSA token, either in the form of a key fob
(hard token) or a smartphone application (soft token).
Teraview is currently encouraging licensees with expiring
hard tokens to transition to soft tokens for their greater
convenience and longevity. RSA tokens, token numbers,
and personalized pass phrases must be kept confidential
by the licensee and not shared with or disclosed to others.
The previous system, whereby licensees inserted a disk in
a licensed computer to access Teraview, was retired in
Ontario as of May 14, 2018.
The lawyer will have the ability to designate persons in the
lawyer’s office who are to have “blanket authority” to
access all of the documents. This includes documents
created by third parties and sent to the lawyer’s office. A
person can be granted access to a particular document
instead of blanket authority by using the message function
in Teraview. The lawyer will also have the ability to
“message” a document to another person, granting release
authority only. In this latter case, the person will not have
the ability to revise the document.
On December 10, 2018, Teranet in partnership with
ServiceOntario officially launched the OnLand web-based
application that acts as a virtual land registry office.
OnLand allows its users to search or browse Ontario’s land
registry records for historical books, documents, and
property title records. The application also acts as a portal
for submission of change corrections, document pre­
approvals, and overrides by land registration
professionals.
2. Timeline and closing agenda
The first step in processing a file for closing, whether
acting for a vendor or a purchaser, is to review the
agreement of purchase and sale. While reviewing the
agreement, it is a good idea to make a list of critical dates,
including the dates by which any conditions are to be
waived or satisfied, any deliveries that are to be made, the
requisition date, the closing date, etc. Prepare a closing
agenda or checklist for the transaction, which is a list of
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the various matters that must be attended to by your
vendor or purchaser client, the documentation that must
be prepared and delivered, the documents to be received,
the documents to be registered on closing, the payment or
receipt of the balance due on closing, and any matters to
be attended to after closing. Any issues revealed by the
title search, off-title enquiries, or other due diligence can
be noted on the closing agenda, which can act as a
checklist for completing the transaction.
3. Teraview
As one of the initial steps of processing the file, open a
Teraview docket for the transaction.
At this stage, it is a good idea to conduct a subsearch of
title. Obtain and print a parcel register for the subject
lands and abutting lands if acting for the purchaser.
Performing the abutting owners searches while this parcel
is open will reduce the cost of obtaining the abutting
parcel register.
While the docket is still open, start preparing the Transfer
and search executions against the vendors using the “writ
search” feature in the Transfer itself. If there are
executions against the vendor or a person with a similar
name, the particulars will attach to the document and be
available to the vendor’s solicitor to satisfy without the
need to do a separate execution search. Executions against
the purchaser need not be searched while the Transfer is
open.
Identify the Transfer adequately with the name of both
vendor and purchaser and the solicitor for the “party to.”
Also identify “party to” as the person responsible for
payment of the fees. Immediately advise the vendor’s
lawyer that the Transfer is being drafted and request the
exact name of the person in that lawyer’s office to whom
access should be granted in e-reg. When the vendor’s
solicitor responds, send the message in e-reg granting
access to the Transfer.
When acting for a purchaser, complete the full title search
in Teraview by imaging the documents to view from the
parcel register and obtaining plans and documents that
are not available in this manner by email or fax, through
OnLand, or directly from the land registry office.
4. Requisitions
As lawyer for a purchaser, prepare and submit a
requisition letter. The requisition letter will contain a list
of all title defects that you require the vendor’s counsel to
address and all contractual matters that require
satisfaction on closing. The contents of the requisition
letter may require some modification if the parties intend
to close the transaction electronically. For example, the
purchaser’s solicitor may want to indicate in the
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requisition letter the intention to rely on a specific escrow
closing protocol, which in most cases will be evidenced by
a document registration agreement (DRA). The DRA sets
out the procedure by which closing documents, funds, and
keys are held under escrow prior to closing until the
computerized title documents are electronically
registered. The client must issue a statement authorizing
the lawyer to enter into a DRA, and the statement should
be included in an acknowledgement and direction
document. See “Closing electronically,” below, for a
detailed discussion on the DRA.
The requisition letter should ask for the vendor’s
solicitor’s confirmation that he or she will participate in
this manner.
If any executions were revealed in the relevant searches,
advise vendor’s counsel of these executions in the
requisition letter and ask for them to be dealt with
appropriately. If the lawyer does not do the initial search
of executions “in the transfer,” it will be necessary for a
later search to be done “in the transfer” so that the proper
statements may be made removing the executions from
the parcel register without a separate application.
Request that the vendor review the documents in the draft
electronic file and ask that the vendor carry out any
modification and amendments that may be required. The
purchaser’s solicitor may also want to confirm that access
to the draft electronic file has been provided to the correct
party acting for the vendor.
From the vendor’s solicitor’s perspective, part of the
process of dealing with the purchaser’s solicitor’s
requisitions will be approving the electronic Transfer for
completeness and registration.
Whether or not the purchaser’s solicitor will have signed
the electronic Transfer for completeness and registration
at this early stage will depend on the level of completeness
of the document itself. If additional information,
compliance with law statements, or modifications are
required to be entered into the document by the vendor’s
solicitor, any prior electronic signatures will be
invalidated, thereby necessitating the re-signing of the
document. In addition, if the land transfer tax statement
has not been completed, the document will not accept a
completeness signature from either party.
A solicitor should take extra precaution when dealing with
entities or persons governed by legislation. For instance,
when dealing with a religious organization, a solicitor
should review the Religious Organizations’ Lands Act to
determine the steps required to complete the transaction
and to make any special requisitions that may be
necessary as a result of the legislation. In addition, when
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dealing with persons who have capacity issues, the
solicitor should review the Substitute Decisions Act, 1992.
It is wise to deal with matters that require the assistance
of third parties as soon as possible. Do not count on third
parties to respond to last-minute requests. The usual
request made of a third party is in connection with
obtaining advice regarding a mortgage assumption or a
mortgage discharge. If the purchaser is assuming a
mortgage, the purchaser’s solicitor will write to the
mortgage company to obtain a mortgage statement for
assumption purposes. The purchaser’s solicitor will be
interested in confirming the basic terms of the mortgage,
i.e., the principal amount outstanding on closing, the
interest rate, the term, whether there are any prepayment
privileges, whether there are any outstanding defaults,
and whether the mortgagee has the right to consent to the
purchaser’s assumption of the mortgage.
Many mortgages provide that, at the mortgagee’s option,
a mortgage will become due if the property is sold. This
would prevent a purchaser from assuming a mortgage
without the mortgagee’s consent. If the purchaser intends
to assume a mortgage with such a clause in it, it is
important to obtain the mortgagee’s consent to the
purchaser’s assumption of the mortgage very early in the
transaction.
The mortgage assumption statement should set out the
principal amount outstanding as of the closing date, the
interest rate, the term of the mortgage, and whether the
mortgagee has approved the new purchaser to assume the
mortgage. If the mortgagee pays the taxes for the
mortgagor, the mortgage statement should also show the
status of the tax account so that it can be properly adjusted
for in the statement of adjustments. The mortgage
statement will also show what date the mortgage has been
paid up to. It will be the purchaser’s responsibility prior to
closing to ensure that the vendor has made all of its
payments under the mortgage due on or before the date of
closing.
If there is a mortgage registered on title that is not being
assumed by the purchaser on closing, it must be
discharged. Typically, the vendor’s solicitor will write to
the mortgage company for a mortgage statement for
discharge purposes so that the vendor’s solicitor knows
how much has to be paid on closing to obtain a discharge
of the mortgage. When acting for a vendor, take care to
ensure that the discharge statement properly takes into
account any available prepayment privileges. If the
agreement of purchase and sale requires that the vendor
produce a registrable discharge for closing, the vendor’s
solicitor must immediately determine from the mortgage
company whether it will provide the discharge for the
closing. If the mortgage company is agreeable to doing so,
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the vendor’s solicitor will typically undertake to the
mortgage company not to release the signed discharge
until the vendor’s solicitor has received sufficient funds to
pay out the outstanding balance of the mortgage and to
deliver these funds, with interest, to the mortgage
company immediately after closing. Institutional lenders
rarely provide a discharge until they have first received the
discharge payment in full and booked it through their
head office. The discharge normally follows in 30 to 60
days.
If it becomes apparent that there is not going to be a
discharge for closing, determine if the agreement of
purchase and sale permits delivery of the lawyer’s
undertaking on closing that the lawyer will obtain and
register a discharge after the closing date rather than
having a discharge for closing. If the agreement does not
provide for a solicitor’s undertaking to be delivered
instead of a discharge, ask the purchaser’s solicitor to
obtain the purchaser’s instructions to accept such an
undertaking instead of the discharge for closing. If the
purchaser insists upon a discharge for closing, a mortgage
company may be convinced to provide a discharge for
closing rather than having a transaction abort. Confirm
with the financial institution whether it intends to register
the discharge or it will provide the discharge to register.
If the lender is a private individual or a company, obtain a
discharge for closing and do not proceed with the
“undertaking” route.
With respect to a mortgage discharge, also consider if
there are related filings in favour of the mortgagee under
the Personal Property Security Act, which may have to be
discharged on or after closing.
If acting for the vendor, obtain the title report from the
time the vendor purchased the property. This report will
be very helpful in determining whether there are any title
difficulties or other problems with the property that will
have to be dealt with in some fashion. The vendor should
also supply a copy of the vendor’s existing Transfer/Deed
of Land for the property, since it will be useful in the
preparation of the Transfer/Deed of Land required for
closing. Ask the vendor for the survey for the property, as
well as the tax bill, utility accounts, and copies of any
mortgages that are going to be assumed by the purchaser
or discharged on closing. The survey of the property is
useful in confirming the property’s boundaries. If a
boundary dispute arises, the solicitor should review the
Line Fences Act in conjunction with the survey.
Remember to advise the vendor of the vendor’s obligation
to have utility meters read on closing and to advise the
utility departments where final bills should be sent.
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If acting for the purchaser, ensure that answers to your
requisitions and inquiries are satisfactory. If not, take
immediate action to ensure that these matters are resolved
prior to closing. If there are arrears in payment of taxes or
utilities, advise the vendor’s solicitor of this so that the
arrears can be paid or adjusted for and paid out of the
closing proceeds.
As the purchaser’s solicitor, you should find out from the
purchaser how the client wishes to take title. Ascertain the
legal name and birth date of the purchaser, and if there is
more than one purchaser, whether they wish to take title
as “joint tenants” or as “tenants in common.” If they take
title as joint tenants, then if one party should die, the
property will automatically devolve to the survivor. If they
take title as tenants in common, then on the death of one
party, the property becomes part of that party’s estate and
does not pass by survivorship to the other tenant in
common. This information must be communicated to the
vendor’s solicitor so that the vendor’s solicitor can
incorporate it in the Transfer/Deed of Land.
If also acting for a mortgagee, prepare a separate checklist
based on the mortgagee’s instructions for completion of
the mortgage transaction.
Problems will arise from time to time, for example, when
requisitions cannot be satisfactorily answered. In such
cases, as the purchaser’s solicitor, advise the purchaser, in
writing, of the problem and the alternatives available to
deal with the problem. The purchaser’s instructions to
complete the transaction or to terminate it should be
documented in writing and, if possible, signed by the
purchaser. At the very least, record the client’s
instructions carefully and confirm these instructions in
writing as soon as possible.
5. Preparation of documents
Closing documents should be drafted and circulated for
review sufficiently in advance of closing to allow the other
side a reasonable opportunity to review and comment.
If preparing documents that are to be registered and are
unusual, take advantage of the pre-approval procedures
with OnLand, where there is an official procedure to have
documents pre-approved.
The LRRA provides that five basic categories of
documents can be registered on title. They are as follows:
ƒ Transfer/Deed of Land;
ƒ Charge/Mortgage of Land;
ƒ Discharge of Charge/Mortgage;
ƒ Document General; and
ƒ Schedule (if such schedule is required to be attached
to any of the aforementioned documents).
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The Document General is the cover page to every other
document that is not a Transfer, Charge, or Discharge.
The Electronic Registration Procedures Guide for e-reg
issued by ServiceOntario and the land registrar’s bulletins
are valuable resources to assist in the preparation of
closing documents. LexisNexis Canada has also published
a reference entitled Document Registration Guide, which
although more up to date, is not officially authorized by
the Ministry of Public and Business Service Delivery.
E-reg allows conveyancing and numerous other
documents to be prepared, saved, and accessed online
using the web-based application.
In the paper system, some title documents must be
accompanied by supporting evidence before they will be
accepted for registration. For example, to register a
Transfer in land titles under a power of sale, file the
appropriate evidence to show the legislative requirements
for carrying out such a sale have been satisfied.
In e-reg, supporting evidence is replaced by compliance
with law statements. These compliance statements call for
a legal judgment to be made upon certain facts. For
example, to register a Transfer under a power of sale, a
statement confirming that all of the appropriate
requirements have been satisfied for the power of sale to
be completed and the Transfer registered must be made.
A law statement will be necessary when any document is
provided under a power of attorney given by an individual.
The power of attorney should be scanned and registered
as a PDF in the e-reg system.
Since supporting evidence will not be filed with the
registry office when using compliance statements, obtain
and keep the evidence upon which the compliance
statements are based or, alternatively, ensure that publicly
available information to support the statements is and
remains available. If litigation later arises, the material
kept in the files may be the only evidence supporting the
compliance statements. Keep this in mind when deciding
if real estate files can be safely destroyed. The majority of
claims against lawyers involving real estate matters tend
to arise within a period of 15 years after the lawyer has
completed the work. Based on this, it is recommended that
lawyers retain most real estate files for a period of 15 years.
As real estate files tend to be paper intensive, consider
implementing procedures to store the files and evidence
electronically.
The Joint Committee on Registration of Electronic Title
Documents struck by the Law Society of Ontario and the
Canadian Bar Association-Ontario is of the view that
lawyers may rely on compliance statements made by other
lawyers in good standing without having to look behind
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the statement and review the supporting evidence. This
view is endorsed by the Lawyers’ Professional Indemnity
Company (LAWPRO) because the entire e-reg and land
titles system is based on the sufficiency of the register to
establish title to real property. The lawyer is entitled to
rely on the register. It is important to recognize that
documents are not certified immediately upon
registration and may not be certified until several weeks
after registration. Therefore, there is some risk that a
document will be rejected before certification if it comes
to light that some aspect of a compliance statement is
found to be false.
When a document contains a compliance with law
statement, the completeness signature will only be
accepted from a registered user who is authorized to
practise law in Ontario. Teranet records will show whether
a registered user is so authorized. The Law Society will
provide Teranet with timely updates on lawyers’ statuses
so that it can register new lawyers and deny access to
retired, suspended, or disbarred lawyers.
Even if a document does not contain compliance with law
statements, the approval of documents should be
completed by a solicitor who understands the meaning of
the document being reviewed.
Before a document is registered, the lawyers involved
must show their approval of the document by
electronically signing for completeness. If the document
contains compliance with law statements, the e-reg
system will only accept a completeness signature from a
user who is authorized to practise law in Ontario.
According to r. 6.1-1 of the Rules of Professional Conduct,
even if the complete function is delegated to a non-lawyer,
the responsibility for any document ultimately rests with
the lawyer handling the file.
When preparing a document in the e-reg system, certain
fields of information (for example, the municipal address,
the current owner’s name, and the legal description) are
automatically filled in from data stored in the title
database, and that information can be confirmed or
changed.
Having prepared the document, the lawyer makes it
available electronically to the lawyer representing the
other party (Lawyer 2). At the same time, the lawyer
grants Lawyer 2 an update capability so that Lawyer 2 can
change the document as required.
When both lawyers are satisfied with the document, each
signals approval by logging on to e-reg and indicating that
the document is complete. These signals are referred to as
electronic signatures. The completeness signature must be
attached before the transaction can proceed any further.
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When ready to release the document for registration, sign
for release. This signature can be added by the lawyer, a
conveyancer, or another authorized user. Both the
completeness and release signatures must be attached to
a document before it will be accepted by e-reg for
registration.
5.1 Vendor’s documents
5.1.1 Transfer/deed of land
This document transfers ownership in the real property to
the purchaser. Section 5 of the LRRA deems a transfer to
include certain covenants and a release by the vendor to
the purchaser and persons deriving title under the
purchaser. Parties can exclude or vary any of the statutory
covenants in a schedule to the Transfer.
There are two aspects of the Transfer/Deed of Land that
should be noted: (i) the Family Law Act (FLA)
requirement; and (ii) the Planning Act optional
statements.
(a) The Family Law Act
If any of the vendors are individuals, then the Transfer
must contain an FLA statement. The possible statements
are attached as Appendix A to this chapter. This section of
the Transfer is designed to protect the rights of married
spouses with respect to the matrimonial home under the
FLA. If both spouses actually hold title to the property, the
FLA statement should state “we are spouses of one
another.” If selling the matrimonial home and one of the
spouses is on title and the other is not, the non-titled
spouse’s written consent to the Transfer should be
obtained, and the titled spouse should make the FLA
statement that “[Name] is my spouse and has consented
to this transaction.” If the vendor is not a spouse, the FLA
statement should be “I am not a spouse.” It is also possible
that the person is a spouse but that the property
transferred is not a matrimonial home. In this case, the
wording “The property transferred is not ordinarily
occupied by me and my spouse, who is not separated from
me, as our family residence” is inserted. There is a process
under the FLA whereby if both spouses designate a
property as their matrimonial home, every other property
that they hold but do not designate ceases to be a
matrimonial home. In this case, the FLA statement should
be “The property is not designated under the Family Law
Act as a matrimonial home by me and my spouse, but
there is such a designation of another property as our
matrimonial home which has been registered and which
has not been cancelled.” This shows the purchaser that
this property is not the matrimonial home. There are other
statements that are inserted when the spouses have
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separated or when the transaction has been authorized by
court order.
(b) The Planning Act
One of the most important amendments introduced by
s. 50(22) of the Planning Act was the inclusion in the
Transfer of optional statements by the vendor and his or
her solicitor (Box 13) (statements 21 and 22 in e-reg) and
by the purchaser’s solicitor (Box 14) (statement 23 in e-
reg) with respect to compliance with the Planning Act. The
effect of completing these statements in the Transfer is
that any prior contraventions of the subdivision control
provisions of the Planning Act, which otherwise would
have the effect of voiding the interest in land, are deemed
no longer and never to have had this effect. Previous
violations of the Planning Act subdivision control
provisions will be legitimized.
For the purchaser to enjoy this feature, three basic
requirements must be met:
ƒ The vendor must state, “The Transferor(s) verifies
that to the best of the transferor’s knowledge and
belief, this transfer does not contravene the
Planning Act.”
ƒ The vendor’s solicitor must sign the following
statement: “I have explained the effect of the
Planning Act to the transferor(s) and I have made
inquiries of the transferor(s) to determine that this
transfer does not contravene that Act and based on
the information supplied by the transferor(s), to the
best of my knowledge and belief, this transfer does
not contravene that Act. I am an Ontario solicitor in
good standing.”
ƒ The purchaser’s solicitor must state, “I have
investigated the title to this land and to abutting
lands where relevant and I am satisfied that the title
records reveal no contravention as set out in the
Planning Act and to the best of my knowledge and
belief this transfer does not contravene the
Planning Act. I act independently of the solicitor for
the transferor(s) and I am an Ontario solicitor in
good standing.”
The solicitor for the purchaser must act independently
from the vendor’s solicitor so that this feature is not
available if one lawyer is acting for both parties.
With the three statements all signed, any Planning Act
contravention for the purpose of subsequent transfers can
be cleared. There is a logistical problem in the paper
system of having the purchaser’s solicitor sign the third
statement when the purchaser’s solicitor does not have the
Transfer/Deed of Land (since it is being prepared by the
vendor’s solicitor). The usual way of dealing with this is to
have the purchaser’s solicitor sign a sticker, which is
available and contains the statement, deliver the sticker
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on closing, and affix it to the Transfer/Deed of Land at
closing.
It is important to note that the Planning Act statements
are entirely optional. The lawyer cannot force the vendor
or the vendor’s solicitor to sign them. Therefore, their
signatures should be required as a term of agreements of
purchase and sale.
5.1.2 Statement of adjustments
The vendor’s solicitor will prepare the statement of
adjustments. This document is essentially a balance sheet
that lists all of the adjustments to the agreed purchase
price necessary to determine what the purchaser will
ultimately pay to the vendor on closing. The vendor will
obtain credit for such things as the sale price and any
expenses that the vendor has prepaid and that are
attributable to the time that the purchaser will own the
property. For example, if the vendor has paid more than
its share of realty taxes for the year, the vendor will be
credited for this overpayment in the statement of
adjustments.
The purchaser will be credited with having paid a deposit,
having possibly assumed some mortgage financing (which
amount will be obtained from the mortgage statement for
assumption purposes), and for any underpayments that
the vendor has made of expenses relating to the property
that are attributable to the time that the vendor was the
owner of the property.
The statement of adjustments will typically adjust for
realty taxes, flat-rate utilities, and accounts between the
vendor and any tenants of the property. Typically, the day
of closing is paid for by the purchaser. With respect to
realty taxes if the municipality has not issued the final
realty tax bill for the year, realty taxes for the year will be
estimated in the statement of adjustment, and the parties
will agree to readjust the realty taxes when the final tax bill
is issued. On closing the parties will undertake to readjust
the realty taxes at that time.
5.1.3 Direction regarding funds
It is rare to see the entire balance due on closing actually
being paid to the vendor. More often what occurs is that
closing proceeds are paid by way of a variety of cheques
and/or wire transfers to pay out mortgages, real estate
commission, tax and utility arrears (or in the case of a
condominium, common expenses arrears), if any, with the
balance often being paid to the vendor’s law firm in trust
so that other accounts, including sometimes the law firm’s
fees and disbursements, may be paid. For this reason and
for convenience, the vendor will often sign a direction
authorizing payment to be directed to parties other than
himself or herself. For the purpose of flexibility, there are
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usually two directions signed by the vendor. First, a
direction will be signed authorizing the purchaser to make
the balance due on closing payable to the vendor’s solicitor
or to whomever that solicitor may direct. The benefit of
doing this is that the client can sign documents in advance,
without having to re-attend at his or her solicitor’s office
once the exact funds owing to various payees are
determined. The vendor’s solicitor then signs the second
direction (or redirection of funds), which specifically
authorizes the purchaser to pay the closing funds in a
manner that will see the funds paid to the various desired
payees (for example, the condominium corporation in
payment of common expense arrears).
5.1.4 Declaration of possession
A declaration of possession is the vendor’s declaration
with respect to various matters relating to the use and
occupation of the property during the vendor’s ownership,
including the location of fences and boundaries and the
absence of any third-party claims to adverse possession or
prescription. Although there are a number of issues other
than possessory title dealt with in a declaration of
possession, it normally is not requested or given in a land
titles transaction since possessory title is not an issue. The
vendor’s solicitor should review this declaration carefully
and amend the form so that the vendor’s liability is not
unduly expanded.
5.1.5 Income tax affidavit or statutory
declaration
The Income Tax Act (ITA) requires a non-resident vendor
disposing of certain taxable Canadian property to notify
the Canada Revenue Agency (CRA) either prior to the
disposition or within 10 days after the disposition. The
CRA will issue a certificate of compliance to the vendor
once it receives either an amount to cover the tax on any
gain the vendor may realize on the property or appropriate
security for said tax. A copy of the certificate will also be
sent to the purchaser.
If a non-resident vendor does not comply with the above
requirements and the CRA does not issue a certificate of
compliance, the purchaser may become liable to pay the
requisite amount of tax on behalf of the vendor. The
purchaser is then entitled to deduct that amount from the
purchase price. See Chapter 47 (Agreement of purchase
and sale) for more details.
The purchaser will not incur liability to pay tax on behalf
of the vendor if, after reasonable inquiry, there was no
reason for the purchaser to believe the vendor was a non­
resident. “Reasonable inquiry” requires that the purchaser
take prudent measures to confirm the vendor’s residence
status. The purchaser will become liable if, for any reason,
the CRA believes the purchaser could have or should have
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known the vendor was a non-resident or failed to take
reasonable steps to confirm the vendor’s residence status.
The standard procedure for satisfying the “reasonable
inquiry” test is the delivery by the vendor to the purchaser
of the vendor’s affidavit or statutory declaration stating
that the vendor is not a non-resident of Canada within the
meaning of the ITA.
An affidavit or statutory declaration provides sworn
evidence and is equivalent to a witness being sworn in
court and giving live evidence before a judge. In order to
swear or commission an affidavit or statutory declaration,
the individual must be in the lawyer’s presence, and the
lawyer must ask the individual for identification. The
lawyer must confirm that the individual has read the
affidavit or statutory declaration (and exhibits, if
applicable) and ask the individual whether the individual
swears, affirms, or solemnly declares the contents of the
affidavit or statutory declaration to be true. The individual
then signs the affidavit or statutory declaration in the
lawyer’s presence, and the lawyer must complete, sign,
and stamp the affidavit or statutory declaration and any
attached exhibits.
As previously discussed, as a result of the COVID-19
pandemic, the Commissioners for Taking Affidavits Act
and O. Reg. 431/20, made under that Act, now permits the
commissioning of affidavits by videoconference. See
Chapter 53 (Requisitions) of these Study Materials.
5.1.6 Bill of sale
A bill of sale is delivered when chattels are being
transferred to the purchaser along with the land and
buildings. Although it is no longer a necessary document
as a result of the repeal of the Bills of Sale Act in 1989, it
is a good idea, from the purchaser’s point of view, to have
a separate piece of paper evidencing what chattels are
being transferred and that they are free from
encumbrances. If possible, a purchaser should require its
delivery as a closing document in the agreement of
purchase and sale, failing which a purchaser could not
insist upon its delivery on closing. A bill of sale is
particularly important in an apartment building purchase
where evidence may be needed as to which chattels do not
belong to the tenants.
5.1.7 Insulation warranty
Due to the concern that a structure may be insulated with
urea formaldehyde foam insulation (UFFI), most
agreements of purchase and sale contain a warranty by the
vendor to the purchaser that there is no UFFI in the
structure. The vendor’s solicitor should ensure that the
warranty given does not expand the vendor’s obligations
beyond what the vendor must deliver pursuant to the
agreement of purchase and sale. There has been a similar
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concern about asbestos located in a structure, and one
may see a similar warranty required with respect to this
substance.
5.1.8 Affidavit or statutory declaration
regarding executions
If acting for a purchaser, the lawyer will have searched
executions historically against the owners of the property
(in the registry system) and the current vendor (in the
registry system and land titles system) as part of the title
search. If you are acting for the vendor and the purchaser
is giving a vendor take-back mortgage, search executions
against the purchaser. From the purchaser’s point of view,
this search should, for expediency, be done at the same
time as the title search so that any executions that the land
may be subject to can be submitted as requisitions. The
execution search should be updated a few days prior to
closing to ensure that no new executions have been filed
and to avoid surprises on the date of closing.
If there is an execution and it is against the person whom
you are dealing with or against an owner who had an
interest in the land at the time of the execution, arrange to
have it paid and lifted for closing. Be wary of holding back
funds on closing to pay out an execution since, depending
on the nature of the execution, it is possible that more
money will be owed to lift the lien than is held back.
Examples of situations where this may be a danger are in
executions filed in connection with construction liens and
family support orders.
There is a procedure for producing affidavits or statutory
declarations regarding executions against a party who is
not the party the lawyer is dealing with but who has a
similar name. First, the party with the similar name to the
execution debtor should sign an affidavit or statutory
declaration stating that the party is not one and the same
person as the execution debtor noted in the execution.
This affidavit or statutory declaration should be supported
by a letter from the execution creditor’s solicitor verifying
that the client is not one and the same person as the
execution debtor. To obtain this letter, the lawyer will
typically write to the execution creditor’s solicitor with
sufficient details regarding the client(s) so that the
execution creditor’s solicitor can distinguish the client(s)
from the execution debtor. The problem with producing
the affidavit or statutory declaration alone is that it is
obviously self-serving.
If the property is in land titles, the indebtedness under the
execution is less than $50,000, and the document being
tendered for registration is a Transfer/Deed of Land, then
the Transfer/Deed of Land must be accompanied by an
affidavit in the form shown in the “Writs of Seizure and
Sale” chapter of the Document Registration Guide. This
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affidavit is made by the registered owner or the registered
owner’s solicitor deposing that the registered owner is not
the person named in the writ. If the amount of the writ of
execution is over $50,000, the Transfer/Deed of Land
being tendered for registration must be accompanied by
one of the following:
ƒ a statutory declaration of the solicitor for the
registered owner (in the form shown in “Writs of
Seizure and Sale” chapter of the Document
Registration Guide) or a letter on the solicitor’s
letterhead unequivocally declaring that the
solicitor’s client is not the same person as the
judgment debtor in the writ.
ƒ a written acknowledgement by the judgment
creditor or the judgment creditor’s solicitor
indicating that the registered owner is not the same
person as the judgment debtor named in the writ.
The statement is acceptable in lieu of an affidavit or
statutory declaration, provided the statement
contains exactly the same information.
If you are trying to clear executions in land titles in
connection with any document other than a
Transfer/Deed of Land, the procedure to be followed is the
same as with respect to a property registered under the
registry system. Executions against a transferor in e-reg
are cleared by a party’s statement or a solicitor’s
statement, as the case requires, in the Transfer itself.
5.1.9 Documentation relating to leases
When there are leases that affect the property, the closing
documents will include either a general assignment of all
of the leases in the building or specific assignments of each
particular lease. Section 5 of the Commercial Tenancies
Act provides that the benefit of every covenant contained
in a lease touching and concerning the land passes to the
purchaser of the property even without a written
assignment. The written assignment will transfer the
benefit of covenants regardless of whether they come
within this provision of the Commercial Tenancies Act. If
acting for the purchaser, request an indemnity by the
vendor for any defaults on the part of the vendor arising
prior to the closing date. The vendor may request a similar
indemnity from the purchaser for default by the purchaser
occurring after the closing date.
In addition, the vendor will deliver to the purchaser on
closing a “notice and direction to tenants,” which the
purchaser will deliver to the tenants after closing,
notifying the tenants of the sale and directing them to pay
future rents to the purchaser. This notice is necessary in
order to advise the tenant to pay rent to the purchaser.
Sometimes, if the agreement of purchase and sale calls for
it, the vendor will deliver to the purchaser
acknowledgements or estoppel certificates from each
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tenant that verify various terms of the lease and confirm
that neither the tenant nor the landlord are in default of
their obligations under the lease. If the vendor is not able
or not willing to obtain tenant acknowledgements, the
vendor may be prepared to deliver its own
acknowledgement or statutory declaration to the same
effect.
5.1.10 Undertakings
An undertaking is given by one party to another to
complete a matter after closing that cannot be attended to
by the closing date. The giving of undertakings should not
replace the completion of matters that could have been
attended to prior to closing. Rule 7.2-11 of the Rules of
Professional Conduct discusses undertakings and what
the lawyer can and cannot undertake to do. There are four
types of undertakings that might be delivered or received
on closing.
(a) Client’s undertaking on own behalf
The most usual example of this undertaking is the
vendor’s standard undertaking to readjust the statement
of adjustments. It is normally prepared by the purchaser’s
solicitor for the vendor’s signature. The vendor’s solicitor
must be careful in reviewing the undertaking to ensure
that the undertakings are no more than the usual
obligations of a vendor and do not expand the client’s
liability. This undertaking usually includes covenants to
deliver vacant possession and all keys on closing, to pay all
utility and realty accounts to the date of closing, to supply
and pay for fuel oil in accordance with the statement of
adjustments, to readjust any items on the statement of
adjustments due to error or omission, to make all
mortgage payments to the date of closing, and to attend to
all other matters required pursuant to the particular
transaction.
(b) A solicitor’s undertaking on behalf of
client
Occasionally, the client’s absence necessitates signing an
undertaking on the client’s behalf. Be very careful to
observe the following rules if forced to give this sort of an
undertaking:
ƒ Neither give nor accept such an undertaking
without the client’s instructions (if unable to obtain
written instructions, then confirm the client’s
instructions in writing).
ƒ If giving an undertaking on the client’s behalf,
expressly state that it is given “without personal
liability.” In the body of the undertaking, use
wording like “the undersigned undertakes on behalf
of his or her client and without personal liability.”
Sign the undertaking by using the name of the client
and adding the words “by its solicitor and without
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personal liability.” Without these words, the lawyer
(and the firm employing the lawyer) could be held
personally liable to perform the undertaking.
ƒ If the undertaking is not a customary one to be
given in connection with a real estate transaction,
be aware that it may not be covered by errors and
omissions insurance and avoid these undertakings.
The party giving this undertaking is personally
liable for its performance.
(c) Solicitor’s personal undertaking
Before giving or accepting a solicitor’s personal
undertaking, make sure that it is fully within the lawyer’s
power, or the power of the person giving the undertaking,
to fulfill the undertaking. Whether giving or accepting this
kind of an undertaking, make sure that the client provides
instructions to give it or accept it and that the client is fully
apprised of what giving or accepting the undertaking
means. If accepting such an undertaking, follow up with
the other solicitor to ensure that it is performed promptly.
If giving the undertaking, ensure it is completed promptly.
These matters should be diarized so that they are attended
to after closing.
The most common example of a solicitor’s undertaking is
with respect to the discharge of institutional mortgages.
The Law Society has established guidelines for solicitor’s
accepting undertakings to discharge institutional
mortgages. The following is the most commonly used
procedure, with minor variations:
First, as the vendor’s solicitor, obtain a mortgage
statement for discharge purposes. The mortgage company
will often wish to include in its statement the words
“errors and omissions excepted” or “E. & O.E.” This
presents a risk for the solicitor about to give a personal
undertaking to discharge a mortgage, since it allows the
mortgage company to argue that it is entitled to more
money if there is an error. The solicitor may not, by the
time the error is discovered, have enough money to cover
the balance owing. The solicitor will therefore wish to
argue that the mortgage company is estopped from
charging the excess claimed, and it will be more difficult
for the solicitor to make this point if the statement says
that it is subject to errors and omissions.
Secondly, the vendor shall direct the purchaser in the
“direction re: funds” to make part of the closing funds
payable to the mortgage company in a sufficient amount
to pay out the mortgage on closing. The vendor’s solicitor
then gives the purchaser’s solicitor an undertaking that
the vendor’s solicitor will deliver the funds forthwith to the
mortgagee after closing and will be responsible for any
additional money owing to pay out the mortgage that is
payable as a result of a delay in delivering the money to the
mortgagee. This undertaking will also provide that the
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solicitor will make every reasonable effort to obtain and
register a proper form of discharge as soon as possible
after closing. As the vendor’s solicitor, argue against
setting out a specific number of days in which you will
register a discharge, unless the agreement of the mortgage
company to provide you with a discharge by this date is
obtained. If forced to give such an undertaking, then be
aware that the lawyer may have to bring a court
application to have the court order a discharge of the
mortgage within the required time period.
When acting for a purchaser, ensure that sufficient closing
proceeds are made payable and will be delivered to the
mortgagee in order to discharge any secured debt that is
not being assumed.
In e-reg, a vendor’s solicitor should confirm with the
financial institution whether the solicitor or the financial
institution will prepare and register any discharges of
mortgages and should request that the financial
institution confirm its decision in writing. If the financial
institution authorizes the vendor’s solicitor to prepare and
register the discharge, then such written authorization
should include any applicable terms to be fulfilled before
the solicitor is entitled to exercise the authority to register
the discharge.
Once the vendor’s solicitor knows who will be registering
the discharge, the scope of the vendor’s solicitor’s
undertaking with respect to the discharge can then be
drafted. If the financial institution authorizes the vendor’s
solicitor to prepare and register a discharge, then the
vendor’s solicitor can give the conventional undertaking to
obtain and register a discharge. However, if the financial
institution is going to register its own discharge, it may be
appropriate to change the wording of the undertaking to
read, for example, “to cause a discharge of the mortgage to
be registered.”
Even if the financial institution registers the discharge, the
vendor’s solicitor must still ensure all of the following:
ƒ The necessary funds (including any additional
interest accrued and any discharge registration fee)
are forwarded to the financial institution.
ƒ The electronic discharge is prepared and registered
by the institution in a timely manner.
ƒ Registration particulars of the discharge are
forwarded to the purchaser’s solicitor to comply
with the solicitor’s undertaking with respect to
discharging a mortgage.
As stated above, do not give or accept personal
undertakings to discharge private mortgages. As the
vendor’s lawyer, obtain an acknowledgement and
direction from the private lender (being a person or
corporation not regarded as one of the regular
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institutional mortgage lenders (banks, trust companies,
insurance companies, credit unions, or finance
companies)) authorizing registration of the discharge on
closing. If the lender’s acknowledgement is obtained,
include a Discharge of Mortgage in the DRA as one of the
documents to be registered on closing, subject to
compliance with the escrow terms of that agreement.
Confirm to the lender that a DRA is being used as part of
the closing procedure and that the Discharge of Mortgage
will be shown as a document for registration under the
agreement, subject to the terms of the escrow.
(d) Best efforts solicitor’s undertaking
The fourth type of undertaking is usually given with
respect to matters beyond the immediate control of the
solicitor, when the other side is looking for the solicitor to
do the solicitor’s best to complete the undertaking.
Exercise caution in giving such an undertaking because
the case law is not clear about what efforts will be
sufficient to satisfy a “best efforts” threshold. It may be
that it will require more of an effort or more money spent
than anticipated in fulfilling the undertaking.
5.2 Purchaser’s documents
The following are the most common purchaser’s
documents:
5.2.1 Direction regarding title
If the purchaser wishes title to the property to be taken in
any name other than the purchaser’s name as set out in
the agreement of purchase and sale, it is necessary for the
purchaser to direct the vendor accordingly. The purchaser
should also indicate how title will be held in the case of
multiple purchasers, i.e., joint tenants or tenants in
common. If this designation is missing, the multiple
purchasers will be deemed to be tenants in common in
accordance with s. 13(1) of the Conveyancing and Law of
Property Act.
5.2.2 Land transfer tax affidavit
The Province of Ontario requires a purchaser to pay a land
transfer tax on the registration of any Transfer/Deed of
Land. For commercial properties, the tax is currently
calculated at the following rates: one-half of 1% on the first
$55,000 of the purchase price; 1% on the balance of the
purchase price up to and including $250,000; 1.5% on the
balance of the purchase price up to and including
$400,000; and 2% on the balance of the purchase price at
$400,001 and above. For residential properties, the tax is
calculated at the same rates as for commercial properties,
except where the land contains one or two single-family
dwellings and the property is valued at more than
$2,000,000. For such transactions, the 2% tax rate only
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applies from $400,001 up to and including $2,000,000,
and a 2.5% tax rate applies to the balance of the purchase
price for the property.
First-time homebuyers of an “eligible home” may be
eligible for a refund of all or part of the tax. To claim such
refund, a purchaser must be at least 18 years of age and
cannot have owned a home or an interest in a home
anywhere in the world, and the purchaser’s spouse cannot
have owned a home or interest in a home anywhere in the
world while being the purchaser’s spouse. Beginning
January 1, 2017, the maximum amount of the refund is
$4,000. The refund will be reduced if one (or more) of the
purchasers is not a first-time homebuyer. The refund will
be proportionate to the interest acquired by the
individuals who qualify for the refund
In addition, Harmonized Sales Tax (HST) of 13% is paid
on the value of goods and chattels transferred.
The purchaser must provide a statement that contains,
among other things, a statement of the value of
consideration paid for the property.
The cheque for land transfer tax and HST is payable to the
Minister of Finance. This cheque does not have to be
certified if it is drawn on the firm trust account, but must
be certified if it is drawn on the client’s account. This
cheque is most often tendered to the land registrar on
registration. Sometimes, for specific purposes, it can be
tendered directly to the Ministry of Finance prior to
closing.
Since February 1, 2008, purchasers of real property in the
City of Toronto have had to pay both provincial and
municipal taxes for transfers of real property in Toronto.
This taxation measure known as the Municipal Land
Transfer Tax (MLTT) was granted under the City of
Toronto Act, 2006. The MLTT mostly mirrors the general
Ontario land transfer tax regime under the Land Transfer
Tax Act and provides broad tax exemptions to Crown-
owned properties and certain publicly funded institutions.
The MLTT also provides a rebate to first-time homebuyers
of newly constructed and resale residential properties.
Currently the MLTT is calculated at the following rates:
ƒ for properties containing at least one but no more
than two single-family residences, one-half of 1% on
the first $55,000 of the purchase price, 1% on the
balance of the purchase price up to and including
$250,000, 1.5% on the balance of the purchase price
up to and including $400,000, 2% on the balance of
the purchase price up to and including $2,000,000,
and 2.5% on the balance of the purchase price at
$2,000,001 and above; and
ƒ for all other properties, one-half of 1% on the first
$55,000 of the purchase price, 1% of the balance of
the purchase price up to and including $250,000,
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1.5% of the purchase price up to and including
$400,000, and 2% on the balance of the purchase
price at $400,001 and above.
5.2.3 Vendor take-back mortgage
The purchaser may give the vendor a mortgage back as
part of the closing proceeds. In the paper system, it is
prepared on Form 2B, Charge/Mortgage of Land. Often
the mortgage will incorporate Standard Charge Terms
No. 9320 (paper) or 200033 (e-reg) (Dye & Durham), but
the mortgagee can require that other standard charge
terms be used.
In order to reduce the quantity of paper being filed with
the land registration office, s. 7(1) of the LRRA provides
that a charge in the prescribed form shall be deemed to
include certain implied covenants. To exclude or vary any
of the implied covenants, do so in a schedule to the charge.
In the schedule, it is also possible to vary the terms of the
standard charge terms that are incorporated by reference.
If the purchaser is giving back a mortgage, the vendor will
require the production on closing of a certificate of
insurance or binder letter evidencing coverage in
accordance with the terms of the mortgage and showing
the vendor as a loss payee.
5.2.4 HST
Both the vendor’s and purchaser’s solicitors will have to
address the HST ramifications of the real estate
transaction. The provisions of the Excise Tax Act relating
to real estate transactions are very complicated, so review
the legislation in detail.
In general, HST applies to all supplies of real property
unless there is a specific exemption. Part I of Schedule V
to the Excise Tax Act lists various supplies relating to real
property that are exempt from HST. These include sales of
used residential property, condominium common
element expenses, certain sales of farmland, and sales of
personal use real property. For other exempt supplies,
refer to Schedule V to determine whether the transaction
involves such a supply.
On a sale of real property, the vendor has the obligation of
remitting the tax on behalf of the purchaser. Pursuant to
s. 221(2)(c) of the Excise Tax Act, a supplier does not have
to collect HST on the sale in certain circumstances
including when the purchaser is a registrant under the
Excise Tax Act. On the sale of a used residential property,
the vendor usually confirms the nature of the property as
being exempt from HST, and therefore none should be
collected on closing in compliance with the Excise Tax Act.
The vendor will provide the purchaser with the vendor’s
affidavit confirming that the vendor is in compliance with
the Excise Tax Act.
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5.2.5 Non-resident speculation tax
Effective April 21, 2017, the Province of Ontario imposed
a non-resident speculation tax (NRST) on the purchase or
acquisition of an interest in residential property located in
the Greater Golden Horseshoe Region by an individual
who is not a citizen or permanent resident of Canada or by
foreign corporations and taxable trustees. Effective
March 30, 2022, the NRST expanded to cover applicable
conveyances of all land in Ontario. The NRST increased
from 20% to 25% for all eligible conveyances that occurred
on or after October 25, 2022. The NRST is owed in
addition to the general land transfer tax in Ontario and
applies to the value of the consideration for a transfer of
residential property.
Effective December 16, 2017, licensees must make an
express statement in Teraview identifying whether a
transfer is subject to the NRST and provide an
explanation.
6. Closing funds
As early as possible prior to closing, as the purchaser’s
solicitor, determine and communicate to the purchaser
the exact amount the purchaser will need for closing. In
order to calculate this, the statement of adjustments is
required to determine the balance due on closing. Add
applicable transfer taxes (general and land transfer tax in
Ontario, MLTT, and NRST) and, possibly, registration
costs to this amount. Legal fees and estimated
disbursements may also be included. Ask the purchaser to
deliver these moneys in immediately available funds so
that they can be dealt with through the trust account
without waiting for the funds to clear.
If also acting for the lender, review your client’s
instructions and develop a checklist, then forward an
interim report to the lender and requisition mortgage
funds. Make a final review of the checklist prior to closing
to verify that all funds for closing have been received from
all sources.
7. Pre-closing
It is wise to regularly review and update the closing agenda
as the transaction progresses.
It will be necessary to obtain oral updates of utility and tax
accounts and to communicate any arrears to the vendor’s
solicitor.
A day or two prior to closing, executions should be
checked against the vendor to ensure that no further
executions have arisen since the original check.
Executions should also be searched against the purchaser
if the purchaser will be granting a mortgage on closing,
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whether it is a vendor take-back mortgage or from a third-
party lender.
Arrange to meet with the client as close to closing as
possible so that any last-minute changes to
documentation will have already been incorporated. If the
client is going to be out of the country for closing, consider
preparing a limited power of attorney for the client to give
to someone who will be in the country to facilitate closing.
In any event, ensure that there is a phone number where
the client can be reached for closing.
Review with the client any problems, including title
requisitions, that have been raised and thoroughly discuss
how these have been resolved. It is helpful to summarize
these issues in writing to the client before closing. This is
extra work before closing, but it is an extremely good
defensive tool and makes reporting the transaction after
closing much easier.
If acting for the purchaser or vendor of a home, ask the
client when the client plans to move out or in and how the
client wishes to retrieve the key. Have a phone number
where the client can be reached for instructions should
problems arise on the day of closing. If acting for the
vendor who needs money to purchase another property
the same day, review the potential problems that can arise
if closing does not actually take place that day for
unforeseen reasons. Canvass the possibility with the client
of the client’s obtaining bridge financing to avoid the panic
that can occur if the sale is not completed.
When meeting with the client, review all documentation
explaining at least the substance of each document before
the client signs. Also review the statement of adjustments
and funding in detail.
At the meeting with the client, it is prudent to provide the
client with a folder containing a copy of all relevant
information. If acting for the purchaser, this would
typically include
ƒ the statement of adjustments;
ƒ draft transfer and draft charge;
ƒ the survey;
ƒ draft title insurance policy; and
ƒ draft trust statement and account.
If acting for the vendor, this would typically include
ƒ the statement of adjustments;
ƒ the mortgage discharge statement;
ƒ the real estate commission statement; and
ƒ draft trust statement and account.
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The folder would also include any acknowledgements or
consents relating to any special issues that arose in the
transaction.
If closing is to be completed by electronic registration,
then e-reg documents are completed and electronically
signed by solicitors or their designates and not by a
solicitor’s client. In e-reg, supporting evidence is replaced
by compliance with law statements. These compliance
statements require a legal judgment to be made upon
certain facts. Since lawyers do not file supporting evidence
with the registry office when they use compliance
statements, they must obtain and keep the evidence upon
which they base their compliance statements. Lawyers
may rely on compliance statements made by lawyers in
good standing without having to look behind the
statement and review the supporting evidence. It is
important to recognize that documents are not certified
immediately upon registration and may not be certified
until several weeks after registration. There is some risk
that a document will be rejected before certification if it
comes to light that some aspect of a compliance statement
is found to be false.
Only a lawyer may sign for completeness any document
that contains a compliance with law statement. In
addition, a lawyer is prohibited from permitting others,
including non-lawyer employees, to use the lawyer’s
personal security package (e.g., RSA token, token number,
or e-reg pass phrase) to access the electronic registration
system (Rules of Professional Conduct, r. 6.1-5).
Have the client sign an acknowledgement and direction
authorizing you to complete the transaction and register
applicable instruments electronically. On a typical
purchase and sale transaction, both the vendor and the
purchaser will need to sign such acknowledgements and
directions confirming their respective consents to register
the Transfer. If a charge is being registered at the same
time, a mortgagor will also need to provide its consent
with respect to such additional registration. Finally, an
acknowledgement and direction either from a transaction
party or a third party may also be required to cover
additional registrations, specific to a particular
transaction. The acknowledgement and direction should
further authorize the lawyer to enter into the DRA, and a
copy should be attached to the acknowledgement and
direction. All off-title documents should be executed by
the appropriate party.
The e-reg system produces the acknowledgement and
direction for the solicitor to have the client sign. Many
lawyers who have experience with the system choose to
use their own form of acknowledgement and direction and
attach a “Document in Preparation,” rather than using the
system-generated document. The acknowledgement and
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direction is designed to summarize the basic terms of the
Transfer, Charge, and other documents and to provide a
written record of specific instructions from the client to
the lawyer concerning delivery and registration of
documents. The system-generated acknowledgement and
direction contains the same five basic points:
ƒ acknowledgements of accuracy of information;
ƒ authorization to electronically register documents;
ƒ authorization to enter into the DRA;
ƒ acknowledgements of understanding of content and
effect of electronically registered documents; and
ƒ warranty as to identity.
With respect to guarantors, although a guarantor may be
identified in the electronic form of Charge, the guarantor
should sign a separate paper guarantee to bind the
guarantor to the covenants. Make sure that this document
is consistent with any guarantee provisions found in the
Charge and the standard charge terms.
Keep a signed copy of the acknowledgement and direction
in the file as written verification of the client’s (or, if
applicable, a third party’s) instructions.
The purchaser’s solicitor should then sign the DRA, or an
agreement to use the DRA as a protocol, and provide a
signed copy to the vendor’s solicitor.
8. Closing the transaction
8.1 Personal attendance at registry office
With electronic registration being mandatory for all land
titles properties, personal attendance at the registry office
for closings was most commonly only required for
transactions involving properties that remained in the
registry system.
Effective October 13, 2020, as part of the continuing shift
toward a more digital-focused service model, the Province
of Ontario has discontinued land registration counter
services in all 54 land registry offices. As a result of these
closures and following implementation of enhanced
online tools in Teraview and OnLand, it will no longer be
necessary (or possible) to personally attend the local
registry office for closing. Effective January 1, 2022, all
paper registrations must be submitted through Teraview
or OnLand. Other than a limited number of documents
that remain excluded from the electronic portals process,
paper documents received via courier to the land registry
offices are no longer accepted.
8.2 Closing electronically
In order to be able to use the remote capability afforded by
e-reg, an escrow closing procedure is required.
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In an attempt to establish a province-wide escrow closing
process for use with e-reg, the Joint Committee on
Electronic Registration of Title Documents developed the
model DRA to govern the relationship between the parties
until all documents and funds have been exchanged and
registration effected. The most recent forms of the model
DRA (for two-party and multi-party transactions),
published on June 10, 2021, can be found on the Law
Society website.
The model DRA for two-party transactions includes the
following basic provision:
1. The Vendor’s Solicitor and the Purchaser’s Solicitor
shall hold all funds, keys and closing documentation
exchanged between them (the “Requisite Deliveries”) in
escrow, and shall not release or otherwise deal with
same except in accordance with the terms of this
Agreement. Both the Vendor’s Solicitor and the
Purchaser’s Solicitor have been authorized by their
respective clients to enter into this Agreement. Once the
Requisite Deliveries can be released in accordance with
the terms of this Agreement, any moneys representing
payout funds for mortgages to be discharged shall be
forwarded promptly to the appropriate mortgage
lender.
This clause sets out the fundamental purpose and core
obligation under the DRA, namely, that all funds and
documentation are to be held in escrow in accordance with
the terms and provisions of the agreement itself.
2. Each of the parties hereto shall notify the other as
soon as reasonably possible following their respective
receipt of the Requisite Deliveries (as applicable) of any
defect(s) with respect to same.
This provision is designed to ensure that problems with
documents and other items exchanged between solicitors
are promptly identified and, to the extent possible,
rectified.
3. The Purchaser’s Solicitor shall be responsible for the
registration of the Electronic Documents as defined in
Schedule A (the “Electronic Documents”) unless the box
set out below indicating that the Vendor’s Solicitor will
be responsible for such registration has been checked.
For the purposes of this Agreement, the solicitor
responsible for such registration shall be referred to as
the “Registering Solicitor” and the other solicitor shall
be referred to as the “Non-Registering Solicitor”:
Vendor’s Solicitor will be registering the Electronic
Documents. Ŀ
The DRA allows the parties to the agreement to select who
should be responsible for registration. For example, in
cases involving bulk closings, such as the sale of new
condominium units, the vendor’s solicitor may be the best
party to handle registrations. In its present format, the
DRA accommodates both perspectives since it defaults
automatically to the purchaser’s solicitor registering,
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unless a contrary intention is indicated on the face of the
agreement (i.e., the vendor registration box is checked).
4. The Non-Registering Solicitor shall, upon his/her
receipt and approval of the Requisite Deliveries (as
applicable), electronically release for registration the
Electronic Documents and shall thereafter be entitled to
release the Requisite Deliveries from escrow forthwith
following the earlier of:
a) the registration of the Electronic Documents;
b) the closing time specified in the Purchase
Agreement unless a specific time has been inserted as
follows [___ a.m./p.m. on the Closing Date] (the
“Release Deadline”), and provided that notice under
paragraph 7 below has not been received; or
c) receipt of notification from the Registering Solicitor
of the registration of the Electronic Documents.
If the Purchase Agreement does not specify a closing
time and a Release Deadline has not been specifically
inserted the Release Deadline shall be 6.00 p.m. on the
Closing Date.
This provision governs when the non-registering solicitor
can release documents and funds. In the absence of either
a closing time in the agreement of purchase and sale or the
DRA, the Release Deadline is set at 6:00 p.m. on the
closing day.
5. The Registering Solicitor shall, subject to paragraph 7
below, on the Closing Date, following his/her receipt
and approval of the Requisite Deliveries (as applicable),
register the Electronic Documents in the stated order of
priority therein set out, as soon as reasonably possible
once same have been released for registration by the
Non-Registering Solicitor, and immediately thereafter
notify the Non-Registering Solicitor of the registration
particulars thereof by telephone or telefax (or other
method as agreed between the parties).
6. Upon registration of the Electronic Documents and
notification of the Non-Registering Solicitor in
accordance with paragraph 5 above, the Registering
Solicitor shall be entitled to forthwith release the
Requisite Deliveries from escrow.
7. Any of the parties hereto may notify the other party
that he/she does not wish to proceed with the
registration [for the purpose of the DRA, “registration”
shall mean the issuance of registration number(s) in
respect of the Electronic Documents by the appropriate
land registry office] of the Electronic Documents, and
provided that such notice is received by the other party
before the release of the Requisite Deliveries pursuant
to this Agreement and before the registration of the
Electronic Documents, then each of the parties hereto
shall forthwith return to the other party their respective
Requisite Deliveries.
The effect of paras. 5–7 of the DRA is to provide the
solicitor with two specific courses of action after receipt
and approval of all Requisite Deliveries. The first is to
proceed with registration of the electronic documents and
notify the other solicitor of the registration. The second
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PREPARATION FOR CLOSING, CLOSING, AND POST-CLOSING
possible course of action is for either solicitor to notify the
other solicitor that he or she will not be proceeding with
the registration of the electronic documents, in which case
so long as this notice is received before registration of the
electronic documents, then each of the parties will give
back the items each holds in escrow under the agreement.
8. This Agreement may be signed in counterparts, and
shall be read with all changes of gender and/or number
as may be required by the context.
9. Nothing contained in this Agreement shall be read or
construed as altering the respective rights and
obligations of the Purchaser and the Vendor as more
particularly set out in the Purchase Agreement, and in
the event of any conflict or inconsistency between the
provisions of this Agreement and the Purchase
Agreement, then the latter shall prevail.
Paragraph 9 was inserted because of concerns expressed
by user groups that the DRA should not change the
substantive rights of the parties to the agreement of
purchase and sale.
10. This Agreement (or any counterpart hereof), and any
of the closing documents hereinbefore contemplated,
may be exchanged by email, fax or similar system
reproducing the original, provided that all such
documents have been properly executed by the
appropriate parties. The party transmitting any such
document(s) shall, upon written request of the
recipient, at the time the DRA is invoked and not later
than the Closing Date, also provide the original executed
version(s) of same within 10 business days after the
Closing Date.
The DRA currently requires that documents may be
exchanged by email or fax but must be followed by
originally executed copies within 10 business days after
the closing date if the recipient has indicated that the
recipient requires such original copies.
The DRA is signed by the parties’ lawyers who in turn
obtain authorization to enter into the DRA through the
client’s execution of the acknowledgement and direction.
When a solicitor signs a DRA, the solicitor is undertaking
professional obligations as to the handling of the client’s
documents and funds. The client’s execution of the
acknowledgement and direction gives the solicitor the
written authority to make those undertakings.
It is recognized that the standard DRA will not apply to all
situations. Lawyers will still need the ability to customize
their arrangements in circumstances that do not fit within
the typical model. The DRA applies only to closing
procedures and does not, for example, provide for giving
or acceptance of possession of the real property in advance
of registration of title documents or address any of the
issues relating to interim possession, readjustments,
amendment, or preservation of contractual
rights/obligations normally associated with closing that
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CHAPTER 56
cannot be completed on the scheduled closing date. The
model DRA described above is best suited for where there
are only two parties to the transaction and minimal
deliveries. For more complex transactions, the lawyer
should be using (as a starting point) the multi-party form
and could also consider other alternatives. For example,
the closing procedure could be agreed upon prior to
closing and documented in a written form, such as
through an email or a formal letter, or set out in the closing
agenda. Generally, the parties would agree that once
registration is completed, and all parties have provided
confirmation of same, all closing documents and
deliveries would be released from escrow.
In the initial retainer letter, request the client’s approval
to use a DRA and to close in escrow.
The following is a brief description of the process that may
be followed on the day of closing in e-reg.
The purchaser’s solicitor would receive the closing funds,
deposit the funds into the trust account, and draw closing
cheques according to the vendor’s direction regarding
funds.
The vendor’s solicitor would deliver to the purchaser’s
solicitor the vendor’s deliveries, which could include off-
title documentation and keys.
The purchaser’s solicitor would deliver the purchaser’s
off-title deliveries and closing cheques to the vendor’s
solicitor and ask for immediate confirmation by
telephone, email, or facsimile transmission that the funds
and documents have been received and that the Transfer
has been released for registration.
Once confirmation has been received that the Transfer has
been released, the registering party will log onto Teraview,
open the appropriate docket, select “register,” and select
the documents to be registered and the order of
registration. The registering solicitor will confirm that the
registering solicitor wishes to conduct a subsearch. The
system completes the subsearch and advises of the last
registered instrument. The registering solicitor will
confirm that the last registered instrument is that shown
in the registering solicitor’s title search.
Teraview will search executions. If acting on the purchase
of a condominium, it is prudent for the purchaser’ solicitor
to also obtain an execution certificate against the
condominium corporation, since any judgment against
the condominium corporation is also a judgment against
each unit owner at the time of the judgment. Execution
certificates are good until 5:00 p.m. on the day they are
obtained.
If the execution certificate reveals a name similar to the
name searched, then unless the lawyer is satisfied by
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virtue of inquiries that the execution debtor is not the
same party as the party the lawyer is dealing with, it is wise
to postpone the closing in order to have the execution
lifted or proven not to affect the property. If a
postponement is not possible, consider withholding part
of the closing proceeds to satisfy the indebtedness to the
execution creditor so long as this can be ascertained
without qualification. Be wary of accepting a solicitor’s
undertaking to obtain a statutory declaration to the effect
that the party is not one and the same person as the
judgment debtor, since the solicitor offering this
undertaking may not be able to fulfill this sort of an
undertaking. Make inquiries of the judgment creditor’s
solicitor to assist in distinguishing the judgment debtor
from the party that the lawyer is dealing with.
The vendor’s representative, in the meantime, should have
obtained an execution certificate against the purchaser if
the purchaser is giving back a mortgage to the vendor.
Following a search of executions, a certificate will be
printed at this time, and a copy of each registered
instrument is printed immediately following registration.
The registration process described above is usually
completed in a matter of minutes. Then the registering
solicitor will log out of the document and open the
administration docket. The solicitor will print a “Tax and
Fee Summary” so that it may be posted to the correct file
and the appropriate amount may be deposited to the
solicitor’s Teraview transition account for payment of land
transfer tax and registration fees.
There are no charges for online time, and therefore the
need to move from the docket relating to the transaction
to an administration docket is not necessary. Immediately
telephone or fax the non-registering solicitor confirming
completion of the transaction and providing particulars.
The registering solicitor should draw a cheque to cover
land transfer taxes and registration costs for deposit to the
Teranet transition account at the end of the day. Teranet
will clear accounts at the end of each day, taking all
registration fees and land transfer taxes incurred that day.
The purchaser’s solicitor should then send signed original
copies of the DRA, if requested, and the purchaser’s
deliveries not previously forwarded to the other solicitor.
8.3 Electronic funds transfer
Increasingly, closing funds are delivered by way of wire
transfer to a solicitor’s trust account or financial
institution, or the parties might use remote deposit at
another branch of the vendor’s solicitor’s bank.
Every person who wishes to use e-reg must become a
subscriber with Teranet. Each subscribing lawyer or law
firm will need to establish an account with Teranet for
payment of user fees, access charges, and online charges.
746
REAL ESTATE
Registration fees and land transfer taxes can be paid from
lawyers’ special trust accounts or general accounts.
9. Escrow closings
Electronic registration necessitates closing in escrow
pursuant to a DRA. However, there are also other types of
escrow closings. The term “escrow” means the conditional
delivery of documents pending a certain event happening.
Often an escrow closing will be necessary when the
registry office is about to close (5 p.m. on business days)
and the purchaser’s and vendor’s representatives have run
out of time to close the transaction and electronically
register the documentation requiring registration.
The safest thing to do with the client’s instructions is to
extend the date of closing, rather than closing the
transaction in escrow. Any change to the closing date
requires an amendment to the agreement of purchase and
sale and must be confirmed by the client. However, this
solution is not always available if the purchaser is sitting
outside with the moving truck, waiting to move into the
property or if, for some other reason, possession is
necessary. In these circumstances, the ability to possess
the property passes on escrow closing, but registration of
the documentation has not yet taken place.
It is dangerous to enter into an escrow arrangement
without a written agreement of the terms of the escrow.
While an escrow can be implied, there is always the risk
that the parties will later disagree about what the terms of
the escrow were. Therefore, if entering into an escrow
closing, try to incorporate the following terms into an
agreement:
ƒ All documents, funds, and keys are exchanged and
are to be held in escrow pending fulfilling certain
conditions.
ƒ The purchaser’s solicitor undertakes to attend to the
registration of the Transfer/Deed of Land on a
specified future date, subject only to a subsearch
indicating no further registrations from the escrow
closing date, no Planning Act impediment having
arisen, and no executions having been filed since
the escrow closing date that would affect the
property and acceptance of the documents by the
registry office (if the vendor’s solicitor is to register
documentation that matters, this should also be
specified).
ƒ All of the deliveries must be held in escrow by the
respective solicitors to be released only once the
purchaser’s solicitor has advised the vendor’s
solicitor regarding registration.
ƒ If registration does not occur by a given time, all
deliveries are to be returned to the solicitor that
delivered them. From the vendor’s point of view, the
solicitor will want to provide that the purchaser
must register and advise of registration or inability
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PREPARATION FOR CLOSING, CLOSING, AND POST-CLOSING
to register by a certain time, failing which the
vendor’s solicitor is free to release funds and
documents to the vendor.
ƒ If the purchaser is to take possession, then the
escrow agreement should provide for permission of
the vendor to do so. Usually the vendor’s solicitor
will want to address the purchaser’s responsibility
for damages caused to the property from the time
the purchaser moves in.
ƒ If acting for the vendor, request a waiver of the
purchaser to object to the transaction on any other
basis but the escrow conditions. The lawyer does
not want to have a new requisition raised as part of
the final closing.
ƒ If the purchaser is being allowed to possess the
property, it should be provided that if the
transaction does not close when scheduled because
of a failure of a condition of the escrow, the
purchaser will give up possession forthwith and
shall deliver up the property in the same condition
as it was when the purchaser took possession.
ƒ Remember, if acting for a mortgagee as well as a
purchaser, obtain the mortgagee’s express
instructions to permit funds to be held by anyone.
Therefore, if your escrow necessitates delivering the
mortgage funds to the vendor’s solicitor, obtain the
mortgagee’s consent to the escrow arrangement.
ƒ If the transaction must be unwound as a result of
failing to fulfill one of the escrow conditions, it is
wise to have the escrow agreement contain an
acknowledgement that a relationship of landlord
and tenant will not have been created.
The insurance company for each of the vendor and the
purchaser should be made aware of the escrow situation,
and its concurrence in continuing to extend insurance
coverage should be obtained.
If it appears that a transaction is not going to be fully
completed, you must obtain your client’s instructions
regarding whether to simply extend the time for closing or
to close the transaction in escrow. If it is determined to
simply extend the time for closing, you should confirm
with the other party in writing, at least the following:
ƒ the new date for closing;
ƒ that all other terms of the agreement of purchase
and sale are to remain the same (unless otherwise
noted);
ƒ that adjustments shall be as of the old date of
closing (or whatever date is agreed upon); and
ƒ that time shall remain of the essence.
If the lawyer fails to extend a transaction properly, it can
raise a question as to whether the date of closing has been
extended and whether time has continued to be of the
essence.
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10. Post-closing
Immediately after closing, call the clients and advise them
that the deal has closed. If acting for the purchaser, deliver
the keys (if keys were delivered pre-closing and held in
escrow). If acting for the vendor, immediately disburse the
closing funds and follow up with the vendor’s mortgagee
to confirm receipt to stop interest from accruing on the
mortgage.
The purchaser’s solicitor should forward payment to the
title insurance company for a title insurance policy (if title
insurance was obtained) and write to the municipal tax
department and utilities department to advise them of the
change of ownership so that future bills will be sent to the
purchaser.
The solicitor should then follow up the telephone call with
a brief letter to the client confirming the closing of the
transaction and advising of any details that the client
needs to know about right away, for example, upcoming
mortgage, tax, or utility payments. This letter can further
provide that a full report will follow in due course.
It is very important for the solicitor to diarize the file in
order to ensure completion of the following:
ƒ receipt of confirmation of registration of all
discharges, together with a copy of the registered
discharge for the solicitor’s file;
ƒ compliance with all undertakings; and
ƒ reporting to the client and sending out the
statement of account.
If the lawyer has obtained moneys for the lawyer’s fees and
disbursements, in trust, these moneys can be transferred
to the general account upon, in case of the lawyer’s fees,
delivery of a billing to the client or, with respect to
disbursements, the client’s instruction or consent. Often,
however, these moneys will not be transferred to the
general account until a report regarding the transaction is
also delivered to the client.
Do the report on the transaction as soon as possible. The
reporting letter will serve several important functions.
First, if acting for the purchaser, it is your legal opinion to
your client on the transaction. Second, it should be a good
record of what took place:
ƒ what your client’s instructions were;
ƒ what you did in response to the instructions; and
ƒ other material matters with respect to the property.
It will form an excellent defensive tool, as well as a good
starting point if the client decides to sell the property.
When you are reporting to a purchaser, your report will
include the following:
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ƒ The opinion on title: The opinion will usually say
“that the purchasers have a good and marketable
title in fee simple, subject to the following
exceptions.” Then recite all of the exceptions. Any
qualifications to good title should be items that have
been discussed with the client before closing and on
which the client’s instructions have been obtained.
Any waivers by the client should be detailed—for
example, instructions on not obtaining an up-to­
date survey of the property, waiver of a condition,
and any other material instructions.
ƒ Details regarding the statement of adjustments and
how funds were dealt with on closing.
ƒ Full particulars of any mortgages: Be sure to let the
purchaser know when mortgage instalments are
payable and the manner of making such payments.
It is wise to put this in a preliminary report so that if
the report is delayed at all, the purchaser still has
this information in a timely fashion.
ƒ Responses to search letters, including the status of
zoning and building searches, tax account and
utility status, and all other non-title searches.
ƒ Factual information such as the date of closing, how
title was taken, and a short description of the
various closing documentation.
748
REAL ESTATE
ƒ Insurance arrangements, including a reminder to
the purchaser to obtain insurance coverage and the
type of coverage required (e.g., contents and liability
coverage for a resale condominium purchaser).
ƒ Any unusual aspects of the transaction: These
should also be set out.
The report on a sale tends to be somewhat shorter. This
letter is largely focused on the statement of adjustments
and the disbursement of funds. If mortgages have been
discharged, the details of the discharges should be set out.
If there has been a mortgage back, the details of the
mortgage back should be fully set out, as well as any
waivers obtained from the client and instructions on any
unusual matters. Helpful factual information, such as the
date of closing and confirmation of payment of realty taxes
and other payments, is useful. A short description of the
closing documentation should also be included.
Keep a copy of the reporting letter with all documents
together, either in a bound form or in one subfolder. This
will avoid sifting through the file at a later date and will
save a great deal of time and frustration if the file has to be
recalled for any reason.
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PREPARATION FOR CLOSING, CLOSING, AND POST-CLOSING
Appendix A
Family Law Act Statements
Ontario Ministry of Consumer and Commercial Relations 1
Property Rights Division
Legal and Survey Standards Branch
BULLETIN NO. 86001
The Family Law Act, 1986
DATE: February 10, 1986
TO: ALL LAND REGISTRARS
NEW PROCEDURES
The Family Law Act, 1986, which replaces the Family Law
Reform Act, comes into force March 1, 1986. The following
changes in procedures should be noted by Land Registrars ­
1. Part II of the Family Law Act, 1986 which concerns
itself with the “MATRIMONIAL HOME” provisions
has been amended somewhat so that the statements of
compliance regarding spousal status as noted on the
back of the forms prescribed under the Land
Registration Reform Act, 1984 will no longer be
applicable. A disposition or encumbrance pursuant to
the Family Law Act, 1986 will require one of the
following statements.
1. We are spouses of one another.
2. The person consenting below is my spouse.
3. I am/I am not a spouse.
4. The property transferred (charged, etc.) is not
ordinarily occupied by me and my spouse, who is
not separated from me, as a family residence.
5. I am separated from my spouse and the property
transferred (charged, etc.) was not ordinarily
occupied by us at the time of our separation as
our family residence.
6. The property is not designated under section 20
of the Family Law Act, 1986 as a matrimonial
home by me and my spouse, but there is such a
designation of another property as our
matrimonial home which has been registered and
which has not been cancelled.
7. My spouse has released all rights under Part II of
the Family Law Act, 1986 by a separation
agreement.
8. This transaction is authorized by court order
under section 23 of the Family Law Act, 1986
registered as Instrument No.______ which has
not been stayed.
9. The property transferred (charged, etc.) is
released from the application of Part II of the
Family Law Act, 1986 by court order registered
1 Bulletin 86001 continues to apply, except with respect to the last sentence in paragraph 2 on single designations,
which was revoked and replaced by Bulletin 90003, Cautions Designation of Matrimonial Home, December 14, 1990, by the
Ministry of Consumer and Commercial Relations, Registration Division, Real Property Registration Branch.
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CHAPTER 56
as Instrument No.______ which has not been
stayed.
An instrument requiring a statement regarding spousal
status presented for registration on or after March 1,
1986, must have one of the following ­
(a) one of the above new statements as per the
Family Law Act, 1986; or
(b) an old statement as per the Family Law Reform
Act provided ­
(i) the instrument is submitted for registration
prior to May 1, 1986; or
(ii) the instrument is executed before March 1,
1986 and a statement accompanies the
instrument indicating that it was
irrevocably and unconditionally delivered
before March 1, 1986.
An instrument presented for registration before March
1, 1986 must use a statement in accordance with the
Family Law Reform Act, as set out on the back of the
existing forms prescribed under the Land Registration
Reform Act, 1984.
2. Section 20 of the Family Law Act, 1986, in addition
to the joint designation of a matrimonial home by both
spouses, now authorizes one spouse to designate
property as a matrimonial home. A single designation
does not, as in the joint designation, release other
properties from being the matrimonial home. The
single designation only gives notice of a potential
spousal interest. In the land titles system, land
registrars may accept registration notwithstanding that
a statement in an instrument may conflict with the
statement in the single designation. The single
designation, however, will continue to be shown on the
parcel register until it is removed by the spouse who
registered it.
3. Subsection 21(4) of the Family Law Act, 1986
provides that a statement made in accordance with
subsection 21(3) by an attorney on the basis of the
attorney’s personal knowledge is sufficient proof that
the property is not the matrimonial home.
The statement by the attorney must still be
unequivocal (not based on knowledge and belief), but
the attorney need not indicate that he/she is making
the statement in his/her personal capacity as presently
required under Bulletin 85001. The land titles system
will continue to guarantee unequivocal statements
made by any person having knowledge of the facts. It
should be noted that statements based upon
knowledge and belief are still allowed in restricted
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circumstances. In this regard, see page 5201 of the
Land Titles Procedural Guide and Bulletin 86007.
4. Subsection 26(1) of the Family Law Act, 1986
provides as follows -
“If a spouse dies owning an interest in a matrimonial
home as a joint tenant with a third person and not with
the other spouse, the joint tenancy shall be deemed to
have been severed immediately before the time of
death.”
As a result of the above noted subsection, the affidavit
in support of a survivorship application in the land
titles system must have one of the following additional
statements by the surviving joint tenant or one of the
surviving joint tenants, provided the death occurred on
or after March 1, 1986 ­
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REAL ESTATE
(a) (Deceased) and (one of surviving joint tenants)
were spouses of each other when (deceased) died;
(b) (Deceased) was not a spouse at the time
(deceased) died;
(c) The property was not a matrimonial home within
the meaning of Part II of the Family Law Act,
1986 of (deceased) at the time when (deceased)
died.
Bulletin 85001 is superseded.
© Queen’s Printer for Ontario, 1986. Reproduced with
permission.
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PREPARATION FOR CLOSING, CLOSING, AND POST-CLOSING CHAPTER 56

Appendix B
The Adviser: Supplement
The Law Society of Ontario/Barreau de l’Ontario 2

September 1992 the written mortgage statement delivered to the

Undertakings to Discharge Mortgages
As part of the Law Society’s ongoing review of current
issues aimed at risk management and loss prevention in
the professional practice of law, the Practice Advisory
Service [now the Practice Management Helpline] has
reviewed the February 1981 recommendations respecting
the procedure for dealing with the discharge of an existing
mortgage at the time of closing a real estate transaction.
purchaser’s solicitor) and the balance to be paid to the
vendor, or to the vendor’s solicitor, all in accordance with
a written direction signed by the vendor. The purchaser’s
solicitor issues and certifies cheques in accordance with
this arrangement and delivers them to the vendor’s
solicitor on closing in return for the vendor’s solicitor’s
undertaking to deliver the mortgage pay-out cheque
forthwith to the mortgagee and to obtain and register the
required discharge of mortgage without delay.

The 1981 recommendations stated that when a mortgage
to be discharged by the vendor is held by a private lender
(being a person or corporation not regarded as one of the
regular institutional mortgage lenders), the discharge
should be made available for delivery and registration at
the time of closing. However, when the mortgage is held
by a regular recognized mortgage lending institution,
either the vendor’s solicitor or the purchaser’s solicitor
might accept the other solicitor’s undertaking to obtain
and register the discharge of mortgage after closing,
providing funds required to pay off the mortgage can be
paid by certified cheque drawn by the purchaser (or the
purchaser’s solicitor) out of the balance of the purchase
price payable on closing, and certain other safeguards are
followed.
These revised guidelines contain new recommendations
respecting the discharge of mortgages held as collateral
security for revolving credit, as well as additional
commentary on the mortgage discharge provisions in sale
agreements. The Professional Standards Committee of
Convocation has also approved a new definition of the
term institutional mortgage as used in the guidelines.
Discharge of Mortgage after Closing
Most institutional lenders are still unable or unwilling to
make the mortgage discharge available at the time of the
closing of a real estate sale. It therefore requires co­
operation between the solicitors involved in order to
complete the transaction. The common practice is for the
vendors statement of adjustments to divide the balance on
closing to show the amount payable to the lending
institution to discharge the mortgage (in accordance with
This procedure continues to be appropriate only in the
case of a discharge of a mortgage held by one of the
conventional mortgage lending institutions. If the vendor
has contracted to deliver clear title on closing, the
purchaser’s solicitor should insist that the required
discharge of a mortgage held by a private mortgagee be
produced and registered on or before closing. As a general
rule, an undertaking to obtain and register the discharge
of a private mortgage at a later date should not be given or
accepted.
Contractual Obligations
Many printed forms of Agreement of Purchase and Sale
now specifically provide for the giving and receiving at the
time of closing of the vendor’s solicitor’s undertaking to
obtain and register a discharge of an existing registered
mortgage. Usually this clause is restricted to the discharge
of institutional mortgages.
The Practice Advisory Service has become aware of a
number of situations in which the Agreement of Purchase
and Sale stipulates that the purchaser will accept an
undertaking to obtain and register the discharge of a
private mortgage after closing. In some cases the
agreement stipulates that the purchaser will accept the
vendor’s undertaking rather than the undertaking of the
vendor’s solicitor. Lawyers representing vendors should
recognize that they may not be acting in the best interests
of their clients by inserting such clauses in Agreements of
Purchase and Sale. They may, in fact, create a situation in
which the purchaser is unable to obtain new mortgage
funds required to complete the transaction because the
purchaser’s lawyer, or the lawyer acting for the proposed

2 The Law Society’s 1992 practice guideline regarding Undertakings to Discharge Mortgages contained in The Adviser
Supplement continues to apply to mortgage transactions other than transactions where the electronic real time cleared
funds transfer capability is utilized. Refer to Practice Guideline 5 of the Law Society’s Practice Guidelines for Electronic
Registration of Title Documents for guidance on the electronic discharge of mortgages.

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CHAPTER 56
new mortgagee, cannot give the unqualified certificate of
title required to permit mortgage funds to be made
available.
If the purchaser’s solicitor has the opportunity of
reviewing the proposed agreement before the client signs,
any such inappropriate provision respecting an
undertaking to be given on closing should be corrected or
deleted. If the provision respecting an undertaking for the
discharge of a mortgage is an enforceable term of a
contract already entered into by a client, the lawyer who
agrees to act for that client may have no alternative but to
complete the transaction in accordance with that term.
As with all other terms of a contract, this provision should
be reviewed and explained to the client, and if there
appears to be any unusual risk to the purchaser in
accepting the stipulated undertaking, the purchaser’s
lawyer should attempt to protect the purchaser’s position
by all reasonable means. This may include, upon the
client’s instructions, attempting to negotiate more
suitable terms for the discharge of the mortgage while
preserving the client’s existing rights under the
Agreement of Purchase and Sale.
Revolving Credit Mortgages
Special problems arise when the property being sold is
subject to a collateral mortgage to secure a revolving line
of credit such as those offered by some banks and trust
companies which allow preferred customers to draw
against that secured credit by credit card or special
cheque. The lawyer acting for the owner of the property at
the time of sale or refinancing needs to know exactly the
amount required to discharge the collateral mortgage as at
the transaction date.
However, the mortgagee says it will only confirm,
sometimes by telephone on the transaction date, the
balance outstanding according to its records as of that
date. The mortgagee does not want to discharge the
mortgage until a later date, which may be as much as 90
days after the transaction date. If further drawings against
the line of credit show up on the customer’s account
during that period, the mortgagee wants to withhold the
discharge of mortgage until those additional charges have
been paid off. The lawyer handling the transaction could
not therefore obtain an unqualified statement from the
lending institution confirming the exact amount required
to obtain a discharge of mortgage. This would put the
lawyer in an impossible position. In order to complete the
sale of the mortgaged property, the lawyer may be
required to give a personal undertaking to obtain and
register a discharge. In the case of refinancing, funds
under the new mortgage loan will probably be required to
pay off the outstanding line of credit, but the lawyer must
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give an unqualified certificate of title to the new mortgagee
in order to be able to advance the funds. If an additional
amount were to be demanded by the original mortgagee
before the discharge of the collateral mortgage could be
obtained, and if the client should be reluctant or unable to
pay that additional amount, it would become necessary for
the lawyer to make the payment out of his or her own
personal funds to obtain the discharge of mortgage
required to honour the lawyer’s undertaking to the
purchaser or the certificate of title to the new mortgagee.
Lawyers should not accept this risk.
RECOMMENDED PROCEDURES
The Practice Advisory Service makes the following
recommendations:
A. Institutional Mortgages — Full
Discharge
For the purpose of these recommendations, the term
institutional mortgage refers to a mortgage held by a bank,
trust company, insurance company, credit union or
finance company. The term private mortgage refers to
mortgages held by other corporations or individuals.
1. Mortgage Discharge Statements: The
purchaser’s solicitor should write directly to the
mortgagee and require that a discharge statement
be addressed to him or her. It should be made clear
that
i) the purchaser’s solicitor will be relying upon
the accuracy of the statement and will be
issuing a cheque payable to the mortgagee, to
be deducted from the closing funds at the time
of completion of the purchase, for the purpose
of completely discharging the mortgage;
ii) the purchaser’s solicitor will not be bound by
any qualification of the statement whether by
use of the abbreviation E. & O. E. or otherwise.
The purchaser’s solicitor should do everything
possible to establish an estoppel against the
mortgagee claiming additional funds on the
basis of an error in the mortgage statement.
2. Closing Funds: On the statement of adjustments,
the balance due on closing should be divided to
show the amount payable to the mortgagee in
accordance with the mortgage pay-out statement
and the balance of the funds payable to the vendor
or to the vendor’s solicitor in trust. A written
direction signed by the vendor is required for
payment of funds to anyone other than the vendor.
3. Closing Procedure: On closing, the purchaser’s
solicitor delivers to the vendor’s solicitor a certified
cheque payable to the mortgagee in accordance with
the vendor’s written direction, together with a
covering letter addressed to the mortgagee
stipulating that the funds are to be applied to
payment of the mortgage debt. The purchaser’s
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PREPARATION FOR CLOSING, CLOSING, AND POST-CLOSING
solicitor will require the personal undertaking of the
vendor’s solicitor
i) To deliver the cheque and letter to the
mortgagee forthwith;
ii) To be responsible for any additional moneys
payable for the discharge of the mortgage as a
result of any delay in delivery of the discharge
of funds; and
iii) To make every reasonable effort to obtain and
register a proper form of discharge of the
mortgage as soon as possible after closing.
The purchaser’s solicitor will also require the vendor’s
personal undertaking that the vendor will be responsible
for any additional amounts payable to the mortgagee by
reason of any error, omission, or other change in the
mortgage statement.
B. Blanket Mortgages — Development
Lands and Condominiums — Partial
Discharges
It is still the practice of some land developers and
condominium developers to include in their standard
printed form of Agreement of Purchase and Sale a
provision requiring the purchaser of a lot or unit to accept
the vendor’s undertaking to register a partial discharge of
a blanket mortgage after closing of the transaction. Such
provision should be deleted from the purchase agreement
if the purchaser’s solicitor has an opportunity of
examining the agreement before it is executed.
If the purchaser does not wish to delete this provision
(e.g., for fear of losing the transaction), such instructions
should be reduced to writing immediately and
acknowledged by the client’s signature. Consideration
might be given to the right of rescission given to a
purchaser under s. 52 of the Condominium Act [s. 73 of
the current Condominium Act, 1998].
When acting in a transaction pursuant to an Agreement
that contains such a provision, the following procedures
should be carefully considered:
i) Insist on a partial discharge before closing.
ii) Pay the funds to the vendor’s solicitor in return for a
personal undertaking to obtain and register a partial
discharge.
iii) Make the cheque payable to the developer and
mortgagee jointly or to the mortgagee and obtain a
partial discharge.
iv) At the very least, find out the amount required to
obtain a partial discharge and try to obtain one
directly from the mortgagee.
v) Refuse to close and tender, though this might be
unrealistic for practical reasons.
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CHAPTER 56
It is recommended that a combination of items i) and iv)
might be the best course. In the letter of requisitions the
vendor’s solicitor should be advised that, notwithstanding
the provision in the agreement, a partial discharge will be
required to be available for registration at the time of
completion of the transaction. The purchaser’s solicitor
might advise that, as an alternative, he or she will accept a
statement addressed to him or her from the mortgagee to
confirm the amount required for the partial discharge and
that a partial discharge in registrable form will be
delivered immediately upon receipt of the funds. The
purchaser’s solicitor should then follow the procedures
outlined above in relation to full mortgage discharges on
closing.
Reference should also be made to subsections 7(9)–(10) of
the Condominium Act [ss. 14(1)–(2) of the current
Condominium Act, 1998] which give a right to discharge
any unit from an encumbrance by payment to the claimant
of a portion of the sum claimed, determined by the
proportion specified in the Declaration for sharing the
common interests.
C. Discharges of Revolving Credit
Mortgages
1. At the time a collateral mortgage is given to secure
revolving credit, the borrower client should be
informed that special arrangements to discharge the
mortgage may have to be made if the property is to
be sold or refinanced. The client should be advised
not to enter into an agreement to sell the property
until appropriate arrangements can be made to
discharge the mortgage.
2. Before a solicitor agrees to act on the sale of
property which is subject to an institutional
mortgage securing revolving credit, it must be
explained to the client that the solicitor may be
required to give his or her personal undertaking to
obtain and register a discharge of the mortgage and
a solicitor cannot give such an undertaking without
first receiving from the mortgagee a written
statement showing the exact amount required to
pay off the mortgage on the transaction date. The
client should therefore get in touch with the lending
institution immediately to make whatever
arrangements may be required to permit the
necessary mortgage pay-out statement to be
obtained by the solicitor. This will probably require
the immediate surrender to the lending institution
of all credit cards and special cheques relating to the
line of credit.
3. In the letter to the mortgagee requesting a
statement showing the amount required to
discharge the collateral mortgage as of the
transaction date, the solicitor should emphasize that
a written mortgage statement is required and that
the lawyer will have to rely on that statement as
showing the exact and only amount required to
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obtain a discharge of the mortgage because
additional funds may not be available after the
transaction date. Any attempt by the mortgagee to
qualify the written statement, whether by use of the
abbreviation E. & O.E. or otherwise, will be
unacceptable.
4. If there is any reluctance on the part of the
mortgagee to give the required unqualified
mortgage statement, it could be suggested that any
drawings against the line of credit which do not
show on the client’s account at the time the
statement is prepared might be included in the
unsecured line of credit for that client and should
not therefore prevent the issue of the required
discharge of mortgage.
5. Failing that, it may be necessary for the client to
authorize the solicitor to pay the full balance of the
proceeds of the sale (after payment of prior
encumbrances and deduction of real estate
commission, legal fees, and expenses) to the
mortgagee to be held and applied for the credit of
the client in return for an agreement by the
mortgagee to provide a discharge of the collateral
mortgage. This would, of course, mean that no
proceeds from the sale would be available to that
client on the transaction date for the purchase of
other property or for any other purpose.
6. As an alternative, the client and the solicitor may be
able to negotiate an agreement with the mortgagee
that if the proceeds of the sale are immediately
applied to the purchase of other property, the
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REAL ESTATE
existing collateral mortgage held by the mortgagee
will be replaced at the time of closing by a new
mortgage on the property purchased and that upon
receipt of the new mortgage the mortgagee will
issue a discharge of the original mortgage on the
property which has been sold.
7. The solicitor acting on the sale of property which is
subject to an institutional mortgage securing a
revolving line of credit should not give an
undertaking to discharge that mortgage unless he or
she has received the clients written direction to pay
out of the proceeds of the sale the exact amount
required to discharge the mortgage as shown by an
unqualified mortgage statement obtained by the
solicitor from the mortgagee, or arrangements have
been made, confirmed in writing, and approved by
the client that the mortgagee will provide a
discharge of the mortgage on receipt of all of the net
proceeds of the sale or a replacement mortgage on
other property.
D. Discharges of Private Mortgages
As previously mentioned, it is usually inappropriate to
give or accept an undertaking to obtain and register a
discharge of a private mortgage after closing. Subject to
any provision in the Agreement of Purchase and Sale
which may affect the purchaser’s right to demand clear
title on closing, the purchaser’s solicitor should require
the production and registration of a discharge of a private
mortgage on or before closing.
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 Chapter 57
Special concerns for residential rental properties
1. Introduction
Except as specified in the legislation, all rental residential
property in Ontario is currently subject to the Residential
Tenancies Act, 2006 (RTA), which establishes a
framework for the regulation of residential rents in
Ontario and regulates a number of other aspects of the
residential landlord and tenant relationship. The RTA was
proclaimed in force January 31, 2007, replacing the
following statutes (among others): Rent Control Act,
1992; Rental Housing Protection Act; Part IV of the
Landlord and Tenant Act; and the Tenant Protection Act,
1997.
The RTA applies with respect to rental units in residential
complexes, despite any other Act and despite any
agreement or waiver to the contrary (s. 3(1)). The only
provincial statute that takes priority in a conflict is the
Human Rights Code (Code) (RTA, s. 3(4)).
The RTA has the stated purposes of protecting residential
tenants from unlawful rent increases and evictions,
regulating residential rents, balancing the rights and
responsibilities of residential landlords and tenants,
providing for the adjudication of disputes, and for other
processes to informally resolve disputes (s. 1).
2. Occupancy and security of tenure
2.1 Setting up a new tenancy
In selecting prospective tenants, landlords must comply
with Business Practices Permissible to Landlords in
Selecting Prospective Tenants for Residential
Accommodation, O. Reg. 290/98, made under the Code
(Code, s. 48(1)(a.1)).
Beginning April 30, 2018, landlords of most private
residential rental units are required to use a new standard
form of lease for all new tenancies (RTA, s. 12.1). The new
standard form of lease will apply to single and semi­
detached houses, apartment buildings, condominiums,
and secondary units (e.g., basement apartments);
however, the standard form of lease is not required for
tenancies that have special rules or partial exemptions
under the RTA, including care homes, mobile home parks,
land lease communities, and social and supportive
housing exempt from the rent rules under the RTA. The
obligation to use the standard form of lease applies
regardless of whether the tenancy is daily, weekly, or for
some longer term.
Renters cannot ask for a standard form of lease if they are
(i) subject to an existing lease signed before April 30,
2018, unless the renter and landlord negotiate a new lease
with new terms; or (ii) subject to a fixed-term lease signed
before April 30, 2018, and the lease renewed
automatically in accordance with s. 38 of the RTA on or
after April 30, 2018 (s. 12.1(3)).
After April 30, 2018, if a landlord fails to provide a renter
with the new form of standard lease within 21 days after a
renter has made a request in writing, the renter may
(i) withhold a maximum of one month’s rent, or (ii) give
60 days’ notice to terminate a yearly or fixed-term tenancy
early (ss. 12.1(6)–(7) and 47.0.1(1)–(3)). If the landlord
fails to provide the new standard form of lease within
30 days after the renter has begun withholding rent, the
renter does not have to repay the one month’s rent that
was withheld (s. 12.1(9)).
Apart from s. 12.1, there is generally no requirement to
have a written tenancy agreement or lease, although it is
highly recommended. Regardless of whether there is a
written lease (standard form or otherwise), the landlord
must give the tenant written notice of the landlord’s legal
name and address for service within 21 days of the
commencement of the tenancy (RTA, s. 12(3)). If there is
a written lease, a copy of the lease (signed by the landlord
and the tenant), including the landlord’s contact
information for the purposes of giving notices and other
documents under the RTA, must be provided to the tenant
within 21 days of the tenant signing and giving it to the
landlord (ss. 12(1)–(2)). Failure to meet these
informational requirements will suspend the tenant’s
obligation to pay rent until they are fulfilled (ss. 12(4)–(5)
and 12.1(12)).
A tenancy agreement can be for a fixed term of one or
more years, days, weeks, or months. A “periodic tenancy”
is a tenancy where the term is determined by the
frequency of rental payments (e.g., daily, weekly, monthly,
or yearly) and where there is otherwise no written term
specified in the agreement. If the fixed term or the term of
a periodic tenancy is for more than a month and the term
expires, then the tenancy is deemed to have been renewed
as a monthly tenancy on the same terms and conditions
and subject to any increases in rent charged in accordance
with the RTA (ss. 38(1)–(3)). If a tenancy agreement is for
a term of one month or less (i.e., daily, weekly, or monthly)
and the term expires, then the tenancy is deemed to be
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renewed automatically for the same period, as the case
may be (s. 38(2)).
A provision in a tenancy agreement prohibiting pets and
any other provision in the agreement that is inconsistent
with the RTA or the regulations thereunder is void (ss. 14
and 4).
The amount of money that can be taken from the tenant
upon establishing a tenancy is strictly regulated. Basically,
the landlord is limited to requiring a rent deposit equal to
one month’s rent (ss. 105–106). Variable interest
equivalent to the annual guideline must be paid on the
deposit annually (s. 106(6)).
Any other type of payment from tenant to landlord (or an
agent or employee of the landlord) can be attacked as “key
money,” which is illegal. A landlord is prohibited from
collecting or attempting to collect “a fee, premium,
commission, bonus, penalty, key deposit or other like
amount of money whether or not the money is refundable”
(s. 134(1)(a)). Nor can a landlord require a tenant to pay
for other goods or services as a condition for granting the
tenancy (s. 134(1)(b)). Rent acceleration clauses are also
void (s. 15).
Notwithstanding the foregoing, General, O. Reg. 516/06,
made under the RTA, does exempt a number of reasonable
payments, including
ƒ payment for additional keys, remote entry devices,
or cards requested by the tenant, not greater than
the direct costs;
ƒ payment for replacement keys, remote entry
devices, or cards, not greater than the direct
replacement costs, unless the replacement keys,
remote entry devices, or cards are required because
the landlord, on the landlord’s initiative, changed
the locks;
ƒ payment of a refundable key, remote entry device,
or card deposit, not greater than the expected direct
replacement costs;
ƒ payment of NSF charges charged by a financial
institution to the landlord;
ƒ payment of an administration charge, not greater
than $20, for an NSF cheque; and
ƒ payment by a tenant or subtenant in settlement of a
court action or potential court action or an
application or potential application to the Landlord
and Tenant Board (LTB).
Since a residential tenancy may only be terminated in
accordance with the RTA (s. 37(1)), there is no need for a
tenant to register notice of its leasehold interest on title.
2.2 Access to rental unit
Once a tenant has commenced occupancy, landlords have
only limited rights to enter the rental unit without written
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REAL ESTATE
notice, such as in an emergency or where the tenant
consents at the time of entry (s. 26). Even where written
notice is given 24 hours before the time of entry,
specifying the reason, day, and time of entry (which must
be between 8 a.m. and 8 p.m.), the landlord must have an
approved reason for entry (s. 27). One example of an
approved reason for entry is to carry out an inspection to
determine whether the rental unit is in a good state of
repair and fit for habitation and complies with health,
safety, and maintenance standards (s. 27(1)4).
The landlord cannot alter the locks on the rental unit or
the complex unless the tenant is given replacement keys
(s. 24). Similarly, a tenant must have the landlord’s
consent to change the locks (s. 35).
2.3 State of the property
The landlord is responsible for the physical state of the
property and for the various services and facilities that the
landlord provides to the tenants. Specifically, the landlord
must maintain the property in a “good state of repair and
fit for habitation,” and comply with health, safety,
housing, and maintenance standards (s. 20(1)). This
applies even if the tenant was aware of any non-repair
before entering the tenancy agreement (s. 20(2)). Tenants
have many remedies if the landlord does not meet these
obligations.
The tenant, on the other hand, is generally responsible for
ordinary cleanliness and for repair of damage caused by
the wilful or negligent conduct of the tenant, another
occupant of the rental unit, or a person permitted into the
residential complex by the tenant (ss. 33–34). The tenant
is entitled to freedom from substantial interference with
the tenant’s reasonable enjoyment of the rental unit and
residential complex (s. 22).
A contentious area in landlord-tenant relations under the
RTA has been the entitlement of tenants to rent
abatements for loss of enjoyment while repairs are in
progress. Landlords argue that they are required by the
RTA to maintain their buildings and that they should not
be penalized with rent abatements for complying with
their statutory obligations to maintain and repair. Tenants
who are suffering through the noise, dust, and
inconvenience that may occur during substantial remedial
work argue that they should be compensated for the
interference with their “reasonable enjoyment” of their
rental units. Landlords contemplating major repair work
should carefully review s. 8 of General and, in particular,
the criteria in s. 8(4) in order to minimize exposure to
substantial abatement liability.
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SPECIAL CONCERNS FOR RESIDENTIAL RENTAL PROPERTIES
2.4 Remedies for non-payment of rent
Unlike commercial landlords, a residential landlord is
relatively limited in its remedies when a tenant fails to pay
rent. For example, the landlord cannot, without legal
process, seize the tenant’s goods (RTA, s. 40).
The usual course of action, pursuant to s. 59, is to bring
the matter before the LTB, seeking termination of the
tenancy and eviction of the tenant, as well as a judgment
for rent arrears (ss. 74, 87, and 88(1)–(2)). However, the
landlord may, if it prefers, choose only to pursue the
arrears and not seek termination.
Assuming the landlord wishes to terminate the tenancy as
well as obtain a judgment for arrears, the landlord must
serve the tenant with a notice to terminate a tenancy early
for non-payment of rent. The usual notice period is
14 days (s. 59(1)), after which the landlord must file an
application with the LTB. The landlord may not make an
application until the day following the termination date
specified in the notice (s. 74(1)).
A tenancy may also be terminated at the end of the term
for persistent failure to pay rent on the date it becomes due
(s. 58(1)1).
2.5 Landlord’s rights to obtain possession
of the rental unit
There are limited grounds in the RTA whereby the
landlord may seek to obtain possession of the unit from
the tenant. The tenant does not have to vacate the
premises simply because a fixed-term lease expires. If the
tenancy of a fixed term ends and has not been renewed,
the tenancy automatically converts to a month-to-month
tenancy, subject to any existing rights the landlord may
have to terminate it (s. 38(1)). Daily, weekly, or monthly
tenancies automatically renew for the same period as the
expired tenancy agreement (s. 38(2)).
There are “fault” grounds for terminating a tenancy (such
as under s. 62(1), where the tenant has damaged the
building) and “non-fault” grounds (such as under ss. 48–
49, where the landlord or a purchaser wants possession
for personal occupancy or for occupancy by a person who
will provide “care services” to the landlord or purchaser).
For certainty, personal occupancy includes occupancy of a
landlord’s or purchaser’s spouse, child, or caregiver. The
need for renovations requiring a building permit and
vacant possession of the premises is another non-fault
ground (s. 50(1)(c)).
In every case, there are many specific conditions to be met
before the landlord can rely on the selected grounds for
termination, including lengthy notice periods in some
cases (such as at least 120 days’ notice for demolition or
repairs (s. 50(2)) or at least one year in the case of a mobile
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CHAPTER 57
home tenancy on the same grounds (s. 164(1))). The most
expedited termination notice period (10 days) applies to
drug-related illegal acts and certain types of damage by
the tenant or other occupant to the unit or the residential
complex (ss. 61 and 63). Furthermore, it is not uncommon
for the tenant to have rights to atone for the tenant’s
conduct (such as by paying the rent arrears or repairing
the damage) and thus halt the termination proceedings.
Where a landlord vendor is giving notice of termination
under an agreement of purchase and sale on behalf of a
purchaser who requires the unit for personal occupancy,
the property must have three or fewer units (s. 49(1)). This
restriction on number of units does not, however, apply to
units for sale in a condominium (s. 49(2)).
A landlord may only seek possession for personal
occupancy, whether of the landlord or on behalf of a
purchaser, at the end of the term of the tenancy. In both
cases, the landlord must pay one month’s rent (or offer the
tenant another rental unit acceptable to the tenant) as
compensation to the tenant (ss. 48.1 and 49.1), and 60
days’ notice must be given (ss. 48(2) and 49(3)), in
addition to meeting the criteria outlined above.
Unless the tenant leaves voluntarily in response to a notice
of termination, the landlord must file an application with
the LTB in order to regain possession. Unless the RTA
specifies to the contrary, the application may be
commenced immediately upon service of the notice (s. 71).
At the latest, this application must be commenced within
30 days of the termination date specified in the notice
(s. 69(2)). An exception to the 30-day rule occurs when the
application is based on the tenant’s failure to pay rent
(s. 69(3)). In filing an application for an order to terminate
a tenancy under s. 48 or 49 of the RTA, a landlord is
required to file an affidavit in support of the application,
and the landlord must indicate to the LTB whether it has
filed an application to terminate the same or different
rental unit within the two previous years (s. 71.1).
However, an order granting termination of the tenancy
will not be given unless the landlord has paid the required
compensation (s. 83(4)).
An order evicting a tenant expires six months after the
date on which it takes effect if it is not yet filed with the
sheriff (s. 81).
Agreements terminating a tenancy are void if they were
signed at the time that the tenancy was created or as a
condition of entering into a tenancy (s. 37(5)). If the
tenant fails to honour an enforceable agreement to
terminate, the landlord may bring an application to regain
possession of the unit (s. 77(1)(a)).
There are specific rules governing termination of a
tenancy where a tenant dies (ss. 91–92).
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2.6 Tenant’s right to terminate tenancy
(domestic abuse)
Tenants have a right, regardless of the fixed term of a
tenancy, to terminate their tenancy or their interest in a
tenancy on only 28 days’ notice where the tenant asserts
domestic abuse perpetrated by other occupants of a rental
unit or by classes of persons who may engage in abuse at
the rental unit (ss. 47.1–47.4, 234(b.1), and 241(1)13.0.1).
A notice to terminate a tenancy before the end of the
period or term under s. 47.1 shall comply with s. 43(1) and
be accompanied by either (1) a recent restraining order or
peace bond that prohibits the alleged abuser from
contacting the tenant or the child residing with the tenant,
or from entering the rental unit; or (2) a separate form
entitled “Tenant’s Statement About Sexual or Domestic
Violence and Abuse” (s. 47.1(4)).
Under s. 47.2(4), a notice to terminate an interest in a
joint tenancy under s. 47.2 shall be in a form approved by
the LTB, identify the rental unit for which the notice is
given, state the date on which the interest in the tenancy
is to terminate, be signed by the tenant or tenants (or their
agent) giving the notice, and be accompanied by a
restraining order or peace bond or by a tenant’s statement
as described above.
Where the notice is accompanied by a tenant’s statement,
the LTB is prohibited from inquiring into or making any
determination as to the truth of allegations or assertions
made in the statement (s. 47.3(6)). In other words, a
landlord may not challenge the bona fides of the grounds
for giving the notice.
Where the notice is given by the sole tenant of the tenancy,
the notice of termination is enforceable as such if the
tenant fails to vacate in accordance with the notice. If the
notice is given by one or more tenants of a joint tenancy
agreement, either solely or jointly with some but not all of
the other joint tenants, then their interest in the joint
tenancy may be terminated if they vacate in accordance
with the notice (s. 47.2(2)); however, if they give notice
but do not vacate in accordance with the notice, then the
notice is void, and the tenancy continues in full force and
effect (s. 47.2(5)).
In cases where an interest of a tenant in a joint tenancy is
terminated under s. 47.2, the rent deposit remains with
the landlord to the credit of the remaining tenants
(s. 47.2(8)), and regardless of the term of the tenancy, the
remaining tenants may jointly terminate the balance of
the tenancy on 60 days’ notice (s. 47.2(9)).
In all cases where a s. 47.1 or 47.2 notice is given, the
landlord must maintain secrecy about the fact that the
notice has been given (s. 47.4(1)); however, during the
notice period (28 days), the landlord may advertise the
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unit as available for rent, so long as such advertisement
does not name the specific unit for rental and the unit
cannot otherwise be identified by the advertisement
(s. 47.4(4)(a)). Limited disclosure may be made by the
landlord to prescribed persons (s. 47.4(2)), including
certain employees on a “need to know” basis (s. 47.4(5)).
2.7 Special categories of properties
There are special rules in Part IX of the RTA governing
care homes and in Part X for mobile home parks and land
lease communities. Part V.1 of the RTA sets out special
rules for non-profit housing co-operatives.
Care homes in particular have rigorous disclosure
requirements vis-à-vis new and existing residents
(ss. 139–141). Under s. 142, operators of care homes have
special access rights to check on the condition of the
tenant, if required to do so by the tenancy agreement, and
may apply to the LTB for an order transferring the tenant
where the tenant no longer requires the level of care
provided by the landlord or requires a higher level of care
than the landlord is able to provide (s. 148).
Many of the special provisions regarding mobile home
parks and land lease communities relate to the fact that,
in those settings, the tenant will often own the actual
housing, with the landlord providing only the land and the
service infrastructure. There are certain personal property
issues to be mindful of when dealing with mobile homes
under the RTA. If a lease in a mobile home park is
terminated by way of a notice of termination from either
the landlord or the tenant, an agreement between the
landlord and tenant, or an order of the LTB terminating
the tenancy or evicting the tenant and the tenant leaves
behind the tenant’s mobile home, then a landlord may sell,
retain for the landlord’s own use, or dispose of the mobile
home (ss. 162(1) and (3)). In order to do so, the landlord
must wait 60 days after both sending the tenant a notice
by registered mail to the tenant’s last known mailing
address and having the notice published in a newspaper
with general circulation in the locality where the mobile
home park is located (s. 162(2)). If the tenant contacts the
landlord within six months from the date the landlord
mailed and published the above-mentioned notice, then
the landlord must return the mobile home to the tenant
or, in the event of a sale, pay the tenant the proceeds from
the sale of the mobile home. However, before the landlord
returns the mobile home or proceeds from the sale to the
tenant, the landlord may require the tenant to pay arrears
of rent, and the landlord may deduct the reasonable out-
of-pocket expenses it has incurred with respect to the
mobile home (ss. 162(4)–(6)).
The special RTA rules for “non-profit housing co­
operatives” (ss. 94.1–94.17) deal primarily with
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termination of occupancy and not with the rights of
members or the co-operative corporation during
occupancy. Generally, before an application to the LTB for
termination of occupancy can be commenced, the co­
operative and the member must exhaust the internal
procedures established by the co-operative that would
give rise to termination of membership and occupancy.
The LTB’s role is primarily restricted to giving effect to the
co-operative’s right to possession of the member’s unit
through termination of that member’s occupancy.
2.7.1 Life leases
Life leases are a relatively new form of housing tenure in
Ontario that caters primarily to the elderly. In a life-lease
arrangement, individuals purchase the right to occupy a
dwelling unit by making an up-front, lump-sum payment
and monthly maintenance fees to the life-lease sponsor
(typically an entity that may be a profit or not-for-profit
organization). Life leases are terminated upon the death
of the resident (or the resident’s last surviving spouse) or
when the resident decides to move out. Upon termination
of the contract of the life lease, the resident (or the
resident’s estate in the event of termination due to death)
may be able to recoup some of the up-front payment,
depending on the nature of the life-lease agreement
between the parties. When a property subject to a life lease
is sold to another person, the vendor may prove the
termination of the life lease by providing documentation
such as a declaration of the life tenant that they have
moved out or a death certificate.
While life-lease arrangements have been mentioned in
Ontario legislation and regulations (e.g., the Land
Transfer Tax Act), there is currently no legislation or
regulation in Ontario that specifically governs life-lease
arrangements; rather, life-lease arrangements are
governed by common law. Therefore, life-lease residents
and sponsors must rely on the terms of their contract.
There is significant variation in how life-lease projects are
managed, so it is important to review life-lease
agreements carefully to ensure that a client’s rights are
appropriately protected.
When acting for a lessee in a land lease transaction, it is
advisable to register the lease or notice of the lease on title
to the property pursuant to either s. 111(4) of the Land
Titles Act or s. 22(7) of the Registry Act. Registration
protects the tenant from the sale by the new owner to a
third-party purchaser who does not have actual notice of
the life lease. Registration of the lease ensures priority of
the lease over subsequent registrants (such as future
mortgagees) and against the registered owner and any
person deriving title through the registered owner. “Life
Estate Remainder in Fee” is one of the available
interests/estates to select when registering transfers.
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Conveying a life lease is exempt from land transfer tax
pursuant to Exemption(s)—For Certain Life Lease
Interests, O. Reg. 88/04, made under the Land Transfer
Tax Act, so long as the owner of the development is a non­
profit organization or registered charity and the tenant is
acquiring the interest to use as the tenant’s principal
residence or the principal residence of the tenant’s parent
or spouse. Similarly, the reversion of the interest to the
owner of the property is free of land transfer tax.
3. Main features of rent control
3.1 Vacancy decontrol
Rents are regulated in Ontario for many residential rental
properties (s. 110). Each time a unit is rented to a new
tenant under the RTA, a new lawful rent may be set
(s. 113). The landlord and the tenant may negotiate to
determine an amount of rent, and that amount sets the
starting lawful rent for the time the tenant lives in the unit.
There may be cases where an order prohibiting a rent
increase (OPRI) is in effect, in which case a landlord may
only collect the previous lawful rent from a new tenant
until such time as the OPRI ceases to apply.
After the initial setting of the new rent, in most cases,
future rent increases are subject to the guideline, and
requirements for annual increase notices apply. Under
vacancy decontrol, rent control effectively applies to the
tenant or the tenancy, not the unit itself. Thus, when a unit
is vacated, the rent can be “re-set.”
The ability to set a new lawful rent upon a unit “turning
over” is intended to mitigate the overall rigidity of rent
control in Ontario. In theory, it would allow rents to rise
(or fall) with market demands. However, for landlords
with long-term tenants or large complexes where turnover
is, in general, “bad for business,” rent control continues to
be a significant factor for the rental residential business
and for conveyancing lawyers.
Rents cannot be arbitrarily increased on a change in
ownership or when capital expenditures are incurred. The
legal rent runs with the building, at least until individual
units become vacant. Subject to the express statutory
exemptions, a rent increase order or tenant agreement is
required to increase rents above the annual guideline.
There are extensive provisions in the RTA addressing
ƒ assignments, to ensure a balanced process for a
tenant wanting to assign the tenant’s unit, since an
“assignment” prevents the landlord from being able
to set a new rent for a new occupant (ss. 95–96);
and
ƒ harassment, to discourage landlords from using
inappropriate strategies to obtain possession of
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units to re-rent at new, lawful rents (ss. 23 and 29–
30).
3.2 Annual increases/decreases
Although landlords are entitled to set lawful rents for new
tenancies under the RTA without regard to past rents
(subject to OPRIs), the new rents negotiated then become
subject to the normal rent control regime as set out in the
RTA (s. 113).
The Ministry of Housing sets the guideline for the annual
maximum percentage increase permitted for residential
rents, subject to some exceptions. It is inflation-driven,
based on the CPI for Ontario; however, regardless of the
CPI, the guideline can never exceed 2.5% (s. 120(2)2). The
guideline is fixed every August for the next calendar year.
Rent can be increased only once every 12 months on at
least 90 days’ written notice properly served according to
ss. 116 and 119 of the RTA on the proper form.
Despite the annual guidelines described in the paragraphs
above, the guideline for the calendar year 2021 is 0%
(s. 120(3.1)), and all rent is frozen for the calendar year
2021 (s. 136.1(3)), save and except for the exceptions set
out in the RTA (s. 136.1(2)).
For “care homes” (such as retirement homes), only the
rent portion of the fees charged is subject to the guideline
restriction on increases; increases on fees for meals and
care services are unrestricted (s. 2(1), “rent”). However, a
prescribed notice must be given before any type of
increase (s. 150).
There are two ways that the rent can increase on the
anniversary date by more than the guideline:
ƒ The landlord has brought an application for an
above-guideline increase (AGI) (s. 126).
ƒ The landlord and tenant have entered into an
above-guideline agreement in the required form,
pursuant to which the landlord will undertake a
specific capital expenditure or provide a new or
additional service and the tenant agrees to a rent
increase of up to 3% above the guideline (s. 121).
Such agreements have a “cooling off” period and are
subject to relief if the landlord does not undertake the
necessary work or provide the services under the
agreement (ss. 121(5)–122).
Rent can also increase during the tenancy year (i.e., not on
the anniversary date) if the landlord and tenant agree that
the landlord will provide a service as defined in the RTA
or the regulations (such as a parking space) (s. 123). No
rent increase notice is required, and there is no percentage
cap on the amount of the increase, but it must be related
to the cost of the service, as prescribed.
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The only reason for an automatic rent decrease is a realty
tax reduction. The lawful rent is automatically reduced the
following January 1st if municipal realty taxes decline by
more than 2.49% in a calendar year (RTA, s. 131; General,
s. 41).
3.3 Above-guideline applications
All applications for an AGI must be approved by the LTB
(RTA, s. 126).
The grounds for an AGI are
ƒ extraordinary increases in operating costs (EOC) for
municipal taxes and charges for the complex or
building in which the units are located;
ƒ capital expenditures; and
ƒ operating costs for building security services
provided by persons not employed by the landlord
(s. 126).
Capital expenditure and building security increases can be
capped at the discretion of the LTB at up to 3% above the
guideline for up to a maximum of three years (s. 126(11));
the RTA is silent on caps on the pass-through of EOC
based on municipal taxes and charges. The rules relating
to the calculation of AGIs are extremely complex under the
RTA regulations (General, ss. 18–34).
A capital expenditure will only be allowed in an AGI
application if it is “eligible.” A capital expenditure is
eligible if it (RTA, s. 126(7))
ƒ is necessary to protect or restore the physical
integrity of all or part of the building;
ƒ is necessary to achieve maintenance, health, safety,
or other housing-related standards required by law;
ƒ is necessary to maintain plumbing, heating,
mechanical, electrical, ventilation, or air-
conditioning systems;
ƒ increases access for persons with disabilities;
ƒ promotes energy or water conservation; or
ƒ maintains or improves security.
Capital expenditures based on replacement of a system or
thing are not eligible if the LTB determines that the system
or thing did not require repair or replacement unless the
expense promotes (s. 126(8))
ƒ access for persons with disabilities;
ƒ energy or water conservation; or
ƒ security of all or part of the residential complex.
An AGI order does not apply to any tenant who moves in
later than 90 days before the first effective date under the
order (s. 126(14)). In other words, tenants who were not
living in the complex when an AGI application was filed
cannot be affected by it.
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If the landlord does not comply with detailed filing
requirements or if the landlord is in breach of certain
statutory obligations to maintain and repair, the LTB may
dismiss the landlord’s AGI application or may postpone
any justified rent increase (ss. 126(12)–(13)).
4. Rules governing conversions
Depending on the landlord’s plans for converting rental
residential properties to other uses or undertaking
extensive renovations, there are provisions in the RTA
that protect the tenants’ interests by
ƒ granting rights of first refusal to buy or re-occupy
units (ss. 50(3) and 51(5));
ƒ prohibiting the giving of notices of termination in
certain circumstances;
ƒ granting compensation where certain notices of
termination were given in bad faith (s. 57(3)–(4));
ƒ maintaining rents at pre-renovation levels; and
ƒ providing substantial compensation to tenants for
their inconvenience (ss. 52(1)–(2) and 54(3)–(4)).
In Toronto, By-Law 885-2007 was passed in July 2007
under s. 111 of the City of Toronto Act, 2006, which gives
the City of Toronto enhanced authority to protect rental
housing from demolition and conversion to non-rental
purposes (e.g., condominiums, offices, or other non-rental
uses). The policies and the by-law apply to properties
containing six or more rental units. Under the by-law,
property owners must obtain a permit from the city to
convert their rental buildings to another use, demolish
their buildings, perform renovations that change the
number or type of rental units, or sever rental property.
The by-law makes it an offence to demolish or convert
rental housing to non-rental purposes without a permit
issued by the city under the new Chapter 667 of the City of
Toronto Municipal Code. By-Law 885-2007 complements
the notice and compensation provisions set out in the
RTA.
Regarding condominium conversions, the registration of
a declaration and description does not terminate a
tenancy, constitute grounds for a notice of termination, or
affect the rights of the tenants at the time of registration
(see ss. 4(2)–(3) of the Condominium Act, 1998).
Restrictions on giving notice of termination do not apply
to certain complexes when, among other things, the
condominium declaration is registered within two years of
the first rental in the complex (RTA, s. 51(3)).
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5. Remedies and enforcement provisions
5.1 Tenant applications
There are many grounds for tenants (and, in some cases,
former tenants) to make application to the LTB for rent
decreases, abatements, rebates, or damages, including
ƒ reduction or discontinuance of a service or facility
(s. 130);
ƒ reduction in municipal taxes by more than the
prescribed percentage (s. 131);
ƒ imposition of illegal charges, such as “key money”
(s. 134);
ƒ collection of illegal rent, such as a rent increase that
exceeds the guideline or a rent increase taken
without proper notice (s. 135); and
ƒ the landlord’s failure to maintain the unit and the
complex in a good state of repair and fit for
habitation and to comply with health, safety,
housing, and maintenance standards or the
landlord’s causing damage to tenants’ property
(s. 29(1)).
A former tenant may apply to the LTB for damages based
on a landlord giving a notice of termination under s. 48
(landlord’s personal use), 49 (purchaser’s personal use),
or 50 (demolition, conversion, or repairs) in bad faith
(s. 57(1)). Where a landlord gives a notice of termination
under s. 53 (for repairs and renovations requiring vacant
possession) and fails to afford the tenant a right of first
refusal for re-entry, the former tenant has up to two years
after the tenant vacated the rental unit to apply to the LTB
for damages (s. 57.1).
A tenant who wishes to initiate an application for a remedy
under the RTA must do so by completing the prescribed
form created by the LTB for that specific type of
application. A failure to use the proper form is likely to
result in a dismissal of the tenant’s application, and if the
limitation period for refiling the proper form has expired,
then the tenant may be deprived of any remedy for the
alleged breach.
By contrast, and only in response to a landlord’s
application for termination and eviction based on non­
payment of rent, s. 82 allows tenants to raise the above
issues at a hearing of the landlord’s application and any
other issue that could be subject to the application,
provided prior notice is given to the landlord or, if no
notice is given, the tenant provides a satisfactory
explanation as to why advance notice was not provided
(s. 82). The LTB can award any relief to the tenant that
could have been awarded had the tenant brought the
application under the RTA. In cases where the tenant
alleges harassment or a failure by the landlord to maintain
the rental unit, the tenant may seek an order for early
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termination of the tenancy (ss. 30(1)1 and 31(1)(e)) or
requiring the landlord make specific repairs (s. 30(1)4).
In general, the limitation period for a tenant to commence
an application is one year after the alleged infraction or
breach. In particular, rent charged one or more years
earlier is deemed to be lawful rent unless an application to
dispute the lawfulness is made within one year after the
date that amount of rent was first charged (s. 136).
Notwithstanding a tenant’s right to seek rebates resulting
from a landlord collecting illegal rent, as further described
above (s. 135), a rent increase that would otherwise be
void due to failure to provide requisite notice shall be
deemed not to be void if the tenant has paid the increased
rent for 12 consecutive months and has not made an
application to the LTB to challenge the increase in rent
within one year after the date the rent increase is first
charged (s. 135.1).
The monetary jurisdiction of the LTB for payment orders
(such as rent rebates) is currently capped at the monetary
jurisdiction of the Small Claims Court (i.e., $35,000 as of
January 1, 2020) (s. 207(1)).
In some applications (such as for harassment), the LTB
can also impose an administrative fine, with the same
monetary jurisdiction as set out above.
5.2 Provincial offences
There are many offences in the RTA, several of which do
not require intent (s. 234). For example, it is an offence to
charge rent in an amount greater than permitted under
the RTA (s. 234(x)) or to fail to pay annual interest on a
deposit (s. 234(e)). By contrast, offences listed in s. 233 do
specifically require that intent be shown; for example, it is
an offence if the landlord “knowingly” interferes with the
supply of utilities to the property (s. 233(a)).
The fines are up to $50,000 for an individual or up to
$250,000 for a corporation (s. 238).
6. Exemptions
Some types of accommodation are exempt from the entire
RTA, some from the annual guideline, and some from
rules relating to increase notices or anniversary dates for
increase.
If a rental unit is located in a building, mobile home park,
or land lease community or in an addition to one of these,
where no part of such rental unit was occupied for
residential purposes on or before November 15, 2018,
there is no guideline restriction on the annual rent
increase (s. 6.1). Rent increases are also not restricted to
the guideline in rental units in single detached, semi­
detached, or row houses if the house meets detailed
physical criteria and the rental unit was created after
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November 15, 2018 (s. 6.1(3)). Regardless of the reason
for exemption, any rent increase made for exempt rental
units must still comply with notice requirements that
apply to non-exempt rental units.
There are special partial exemptions for properties
governed by other statutes (such as the Services and
Supports to Promote the Social Inclusion of Persons with
Developmental Disabilities Act, 2008), government
housing, non-profit housing projects, and rent geared-to­
income tenancies (RTA, ss. 6–8).
The RTA does not apply at all to units in which the tenant
is required to share bathroom or kitchen facilities with the
owner (s. 5(i)). Certain living accommodations (e.g., in
hotels, prisons, emergency shelters, educational
institutions, hospitals, nursing homes, rehabilitative or
therapeutic facilities, and transitional housing) may also
be exempt if the specific requirements of the statute are
met (ss. 5–5.1).
Under the RTA, units in non-profit housing co-operatives
are subject to specific rules relating to termination and
eviction. Non-profit housing co-operatives are governed
by the Co-operative Corporations Act; however, Part V.1
of the RTA provides non-profit housing co-operatives with
access to the LTB for the purpose of terminating the
occupancy rights of members (RTA, s. 94.7), including in
instances where a member of a non-profit housing co­
operative ceases to meet the qualifications of such non­
profit housing co-operative (s. 94.2).
A landlord or tenant may apply to the LTB for an order
determining whether the RTA applies (s. 9(1)).
7. Acting for a purchaser or borrower
7.1 Drafting the agreement of purchase and
sale
The purchaser’s solicitor should consider including the
following in the agreement of purchase and sale:
ƒ a right in favour of the purchaser to terminate the
agreement if the purchaser is not satisfied that all
rents currently being charged are legal, that
appropriate notices have been given to validate any
rent increases, and that any statutory rebates have
been paid.
ƒ a requirement that the vendor deliver to the
purchaser certain documents, old rent control
orders, documentation relating to any applications
outstanding, current rent-rolls, past rent records,
directions to tenants regarding payment of future
rents to the purchaser, etc. Most importantly, the
vendor must deliver a list of the dates when each
tenant commenced occupancy and the rent first
charged. Tenants’ acknowledgments or estoppel
certificates will be valuable to prove rent legality,
since lawful rent is determined based on the first
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actual rent plus subsequent guideline increases
taken.
ƒ a requirement that the vendor advise the purchaser
of any above-guideline rent increase orders, any
outstanding OPRIs, and applications or
investigations commenced prior to closing.
ƒ extensive representations and warranties relating to
compliance with the RTA (and all prior rent control
legislation) as well as confirmation of compliance
with all municipal property standards and other by­
laws or orders with a statutory declaration
confirming the above to be delivered on closing.
ƒ some financial recourse or security to protect the
purchaser in the event any of the representations
are inaccurate or in the event there is an
outstanding OPRI affecting the asset.
ƒ a requirement that the vendor deliver certain
information needed in order to make a rent control
application subsequent to closing, such as revenues
and expenses for the past several years and
supporting invoices and deposit receipts.
ƒ a vendor’s obligation to provide information and
documentation when necessary post-closing to
defend a tenant’s application.
ƒ a provision for adjusting rent deposits (including
statutory interest) and any arrears.
ƒ a requirement that the vendor provide an
authorization for a search of the “Case Load System”
of the LTB.
7.2 Searches
The following searches are advisable:
ƒ the LTB regarding a search of the “Case Load
System,” for which vendor authorization may be
necessary, to determine if there are any applications
pending necessary to support the rents represented
(such as an above-guideline application or OPRI) or
that might reduce the cash flow for the complex
(such as a tenant rebate application);
ƒ the Ministry of Municipal Affairs and Housing
regarding any work orders applicable if the complex
is located in an unorganized territory or where there
is no property standards by-law; and
ƒ the local municipality regarding any realty tax
reductions that may cause an automatic rent
reduction or give grounds for a tenant application or
any outstanding municipal work orders affecting the
property.
7.3 Requisitions
If the obligation to deliver rent-related documents has not
been included in the agreement of purchase and sale, a
request for them should be included in the letter of
requisitions.
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7.4 Financing documents
A lawyer should beware of any broad statements found in
the commitment or mortgage document itself to the effect
that the property complies in all ways with the RTA (or all
applicable laws), unless the purchaser is in a position to
satisfy itself and the lender as to these matters.
7.5 Opining and reporting
An opinion on the legality of rents should be given to the
client in writing before closing and will depend very much
on the type of information available. To the extent that
most or all of the tenants are existing tenants, the lawyer
should seek instructions to give an opinion on whether the
rents being collected are apparently lawful based on
information provided by the vendor plus permissible
increases under applicable rent control legislation. The
opinion would not be on the lawfulness of the actual rents
(which involves an examination of the form, timing, and
service of rent increase notices), but on the apparent
legality of the quantum of rent.
The lawyer should determine with the client whether all
tenancies will be reviewed or just a spot check will be
conducted. For an opinion as to the apparent lawfulness
of rents, the lawyer would have to determine the lawful
rent as of each tenant commencing occupancy and then
update by guideline or by other applicable grounds for
increase (such as a tenant agreement) less any rent freeze
orders. The lawyer should seek instructions regarding any
review of individual notices of increase, its timing, and its
service procedures.
It is always prudent to qualify any opinion on rent legality
with respect to the provisions in the RTA for retroactive
rent reductions.
Depending on the complex, the opinion may be on
whether some or all of the units are exempt from the RTA
in whole or in part, which opinion will require verification
of different types of representations.
The scope of the retainer should be clearly described and
confirmed in the reporting letter. Any information or
advice given to the purchaser before closing should be
reconfirmed or incorporated by reference to earlier
correspondence. Given the complexity and amount of
work required to ensure continuity of income stream as
part of the due diligence process, counsel should clearly
articulate, in writing, any limits on the scope of the
retainer with respect to the lawfulness of rents.
7.6 Advising the potential purchaser
Owning and managing a rental residential property in
Ontario is a highly regulated business. It presents many
potential pitfalls for the novice landlord who might, out of
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ignorance, breach the RTA. For example, consider the
following scenarios:
ƒ The client has owned the property for two years.
The realty taxes have declined by 5% each year. The
client is charged with failing to reduce the rents
appropriately under the RTA and is facing a
possible fine of $10,000.
ƒ The client bought the property to demolish and
build a corner store. Since the tenants may refuse to
leave voluntarily, the client has cut off the utilities to
the property as of the proposed date of termination,
an offence under the RTA.
ƒ The client voluntarily decided to do work on the
property and verbally asked the tenants to pay an
extra 50% in rent. Now the tenants have discovered
that this was illegal for a number of reasons and
have stopped paying the extra. As a result, the client
cannot pay the balance that is owing to the
contractor.
In each of the above cases, an uninformed landlord may
not know that the landlord was acting within a highly
regulated framework and, therefore, took a course of
action that could have been avoided. Prior to purchasing
the property, the landlord needed to be advised to
ƒ become personally knowledgeable about the legal
parameters affecting the business;
ƒ seek expert advice post-closing regarding business
management; or
ƒ consider retaining an expert property manager.
The issue for the conveyancing lawyer is not necessarily to
teach the new landlord the law, but to highlight the types
of regulatory issues involved or, in the alternative, obtain
a clear waiver.
The lawyer should consider the level of business and
property management experience of the client. The lawyer
should also consider some of the following issues when
advising a potential purchaser of a rent-controlled
property:
ƒ The legality of the rent affects the value of the
property and the anticipated cash flow, since legal
rents are subject to reduction and increases in rent
are strictly controlled.
ƒ The use of the property cannot necessarily be
changed without significant cost.
ƒ Financing should be structured to ensure that the
purchaser can at least pay debt service and
operating costs out of existing legal cash flows.
ƒ Since a purchaser will be unable to increase rents to
cover losses from operations or capital expenditures
(except in a limited fashion), the purchaser should
realize that the ongoing viability of the investment
must be determined from the outset.
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ƒ The ability to charge and collect rent and the
obligation to repair and use the property are
government regulated, and the client is not free to
do as the client wishes with the property, the rents,
or the tenants.
ƒ If the agreement of purchase and sale has been
executed without legal advice, any deficiencies or
limitations on the client’s rights and remedies
arising from the agreement should be reviewed with
and summarized in writing to the client.
8. Acting for the vendor
8.1 Advising the vendor regarding the
potential sale
The vendor should be made aware that the true value of
the property will be directly related to its cash flow, and
therefore, it should be prepared to prove the legality of the
rents to the purchaser.
8.2 Representations and warranties in the
agreement of purchase and sale
The vendor’s solicitor should be prepared to explain to the
vendor the nature and intent of all representations and
warranties found in the agreement of purchase and sale
regarding the RTA and to ensure that the vendor has the
necessary advice to determine the compliance of the
property with the RTA, even if that involves seeking
outside assistance.
8.3 Closing documents
Depending on the terms of the agreement of purchase and
sale, the vendor should be prepared to produce extensive
documentation on closing, such as tenants’
acknowledgments, assignments of leases or tenancy
agreements, statutory declarations, and directions to
tenants regarding future payment of rent. The vendor’s
financial information will have to be completely up to date
to enable the vendor’s lawyer to prepare the statement of
adjustments for the transaction.
9. Acting for the mortgagee
The lender’s solicitor’s role in a loan transaction should
also be defined and limited where appropriate. The
lender’s solicitor should consider the legislation at the
following stages of the transaction.
9.1 The commitment
The commitment may require the borrower to deliver all
documentation needed to establish the legality of the
rents, such as registration forms, old rent review orders,
current applications, and a current rent-roll with a
commencement date for each tenancy. It may also contain
representations and warranties regarding compliance
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with the RTA and, in particular, a warranty that all rents
are legal and that any required rebates have been paid.
9.2 Searches
The same searches that the purchaser’s solicitor performs
will usually be appropriate.
9.3 Mortgage documentation
Depending on the terms of the commitment, the loan may
become due and payable in full at the option of the lender
in the event that illegal rents are discovered or an illegal
conversion or renovation is attempted.
9.4 Scope of retainer and reporting
The solicitor should beware of broad statements in the
instructions to the solicitor and in the interim or final
reports on title. It is impossible for a solicitor to give an
unqualified opinion on the legality of rents and the
compliance of a rental operation with the RTA. The
lender’s solicitor should seek instructions at the outset as
to the solicitor’s role and the opinions the solicitor will be
required to give.
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10. Acting for landlord or landlord’s agent
The landlord’s solicitor should become familiar with the
following, at a minimum:
ƒ procedure for obtaining a rent increase, especially
filing deadlines, required documentation, and time
frames;
ƒ residential rental guidelines and their impact;
ƒ grounds for tenant applications (such as rent
reductions, rent rebates, and illegal charges) as well
as grounds on which tenants may obtain rent
decreases (property tax reductions and rent
freezes);
ƒ provisions regarding change of use, renovation, or
conversion;
ƒ grounds for termination of tenancies; and
ƒ statutory compliance requirements for all tenancies,
such as provisions regarding rent deposits, annual
interest, rights of entry, handling of tenants’
possessions, and so forth.
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Remedies — what to do in the event of default
The purpose of this chapter is to discuss various steps that
can be taken when a transaction is at risk of being in
default.
1. Requisitions
One of the most common areas where problems arise is
with respect to requisitions. Accordingly, it is important to
know the following:
ƒ what constitutes a valid requisition;
ƒ how and within what times a requisition must be
made;
ƒ how and within what times a requisition must be
answered;
ƒ what procedures are available to resolve
disagreements as to the validity of a requisition or
the sufficiency of the answer given;
ƒ what other procedures are available for clarification
or correction of title problems; and
ƒ what are the rights of each party to terminate the
agreement if a sufficient answer cannot be given.
1.1 Application under the Vendors and
Purchasers Act
Subsection 3(1) of the Vendors and Purchasers Act
provides that an application may be made:
in respect of any requisition or objection or any claim
for compensation or any other question arising out of or
connected with the contract, except a question affecting
the existence or validity of the contract ....
Courts have held that the phrase “or any other question
arising out of or connected with the contract” is limited by
the ejusdem generis rule of statutory interpretation to
matters relating to requisitions, objections, or claims for
compensation. Accordingly, such an application is not
appropriate for dealing with controversial disputes that
are more properly the subject of an action. Specifically, the
courts have held that the following are not appropriate
matters for a Vendors and Purchasers Act application:
ƒ a disputed claim for possessory title;
ƒ disputes respecting a purchaser’s right to assign an
agreement of purchase and sale;
ƒ a request for an order of conveyance of land where
such application does not arise in the context of an
answer to a requisition; and
ƒ disputes respecting the answering of a requisition
relating to a zoning by-law on the grounds that
these do not constitute requisitions on title.
It is essential that requisitions be thought through and
clearly worded both when being made and when being
answered. On an application under the Vendors and
Purchasers Act, the court determines whether, in fact, the
purchaser made a valid requisition and whether the
vendor made a sufficient answer to the requisition, not
whether a valid requisition or sufficient answer could have
been made.
Orders made on applications under the Vendors and
Purchasers Act are in personam and not in rem and, as a
result, are binding only upon the parties to the application.
As a result, the same set of facts disclosed by an abstract
of title could, in a series of transactions, give rise to the
same requisition and the same answer and could give rise
to a series of applications under the Vendors and
Purchasers Act in which different findings could be made.
Remember that properly dealing with the matter
requisitioned may require counsel to serve motion
materials on a person who is not a party to the transaction
yet would be affected by it; the person would then be
before the court and subject to the order made on the
motion (Rules of Civil Procedure, r. 38.06).
Note that you are not entitled to any extension of the
closing date under the agreement of purchase and sale in
order to bring an application under the Vendors and
Purchasers Act.
1.2 Other applications
Some matters relating to the title to the property can be
dealt with by an application under r. 14.05(3), which
provides as follows:
14.05(3) A proceeding may be brought by application
where these rules authorize the commencement of a
proceeding by application or where the relief claimed is,
…
(d) the determination of rights that depend on the
interpretation of a deed, will, contract or other
instrument, or on the interpretation of a statute, order
in council, regulation or municipal by-law or resolution;
(e) the declaration of an interest in or charge on land,
including the nature and extent of the interest or charge
or the boundaries of the land, or the settling of the
priority of interests or charges;
…
(h) in respect of any matter where it is unlikely that
there will be any material facts in dispute requiring a
trial.
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2. Conditions
Agreements of purchase and sale often contain conditions
affecting the rights and obligations of the parties to the
agreement. A condition can generally be stated to be a
provision that makes the existence of a right dependent
upon the happening of an event.
Certain conditions are conditions precedent. Conditions
precedent exist, according to the judgment in Turney v.
Zhilka, where:
[t]he obligations under the contract, on both sides,
depend upon a future uncertain event, the happening of
which depends entirely on the will of a third party.
A true condition precedent cannot be unilaterally waived.
The obligation of a party with respect to the satisfaction of
a condition is, at the very least, to make a genuine effort to
obtain what was necessary to carry out the agreement.
Therefore, a party to an agreement cannot avoid the
agreement entirely due to the non-satisfaction of a
condition if that party has made no effort at all to satisfy
it. In addition, a party to the contract whose assistance is
required in order to satisfy a condition must reasonably
co-operate with the party whose obligation it is to satisfy
the condition.
Where an application to a court is required to satisfy a
condition, the party who is obligated to attempt to fulfill
the condition may not be required to make such
application.
There is also authority that a party cannot justify its
refusal to complete a transaction by relying on a matter of
conveyancing that is within such party’s power to correct,
even if the cost is significant. Similarly, where the
agreement of purchase and sale is silent as to which of the
parties will assume the obligation relating to the
satisfaction of the condition, the nature of the condition
may cast the obligation on one party as opposed to
another.
2.1 Right to waive
As mentioned above, a party cannot waive a condition
precedent. However, if a condition was obviously inserted
for the benefit of one party as opposed to another, the
party for whose benefit it was inserted may waive it. For
example, if a purchase is made conditional upon the buyer
obtaining suitable financing, the buyer should be able to
waive the condition.
2.2 Satisfaction of condition
Conditions can be worded to provide that notice of
satisfaction must be given within a specified time, failing
which the condition will be deemed to have not been
satisfied and the agreement will be terminated. Conditions
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can also be worded to provide that unless written notice of
non-satisfaction is given within a specified time, the
condition will be deemed to be satisfied. Other conditions
are worded without any requirement for notice as to
satisfaction or non-satisfaction, and in the latter case, it
will simply be a question of fact as to whether the
condition is or is not satisfied.
2.3 Rights of termination — alternatives to
conditions
As an alternative to using conditions in an agreement of
purchase and sale, it may be preferable to provide a right
of termination that may be exercised by one or both of the
parties under a stipulated set of circumstances. In this
way, you can avoid the difficulties of determining whether
a condition is a condition precedent, whether a party has
a right to waive the condition, etc.
It will always be necessary to examine the wording of the
termination provision and, if exercising the right, to
adhere strictly to the contractual provision as to time
limits, giving of notice, and any other such requirements,
but at least the law of conditions and its uncertainty are
avoided when a right of termination is provided.
3. Repudiation
3.1 When does repudiation occur?
Repudiation of a contract occurs when one party to a
contract acts in such a manner as to permit the other party
(or parties) thereto to conclude that the first party no
longer intends to honour or be bound by the provisions of
the contract.
3.2 What is repudiation?
Not every breach of the terms of a contract will amount to
a repudiation. To constitute repudiation, the threatened
breach must be such as to deprive the injured party of a
substantial part of the benefit to which the injured party is
entitled under the contract.
3.3 Response to repudiation
When faced with repudiatory conduct, an innocent party
must be careful to clearly state the innocent party’s
position. The innocent party may take the position that the
breach of the contract by the repudiating party relieves the
innocent party of any further obligations under the
contract and permits the innocent party to bring an action
for damages flowing from the breach. Alternatively, if the
innocent party wishes to uphold the contract and sue for
specific performance, the innocent party must very clearly
state that position and subsequently do nothing
inconsistent with such position. If a vendor repudiates an
agreement of purchase and sale, the purchaser cannot
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REMEDIES — WHAT TO DO IN THE EVENT OF DEFAULT
demand return of the deposit and sue for specific
performance since those two positions are totally
inconsistent. If the innocent party wishes to uphold the
contract, the innocent party will have to await the day of
closing, tender, and immediately commence an action for
specific performance. If the repudiatory conduct amounts
to anticipatory breach, the innocent party may
immediately commence action for specific performance.
4. Rescission
“Rescission” has been used to mean a number of different
things and is therefore often misunderstood. It would be
better to avoid the use of the word and to use other
language to articulate very clearly the position being taken
by your client.
Rescission can be thought of as negating or unwinding an
agreement that should never have been executed. It often
relates to contracts entered into under inequitable
circumstances such as duress, undue influence, illegality,
fraud, misrepresentation, mistake, or frustration. When a
contract is rescinded, the parties are not only released
from their contractual obligations but are also to be
restored to their respective pre-contractual positions. For
example, a purchaser’s deposit would be returned. Note
that after closing, a purchaser’s right to rescission may be
restricted by caveat emptor and the doctrine of merger.
5. Specific performance
5.1 What is specific performance?
Specific performance is an equitable remedy whereby the
court orders a party to a contract to fulfill its contractual
obligations. In the case of a purchaser, the rationale for
allowing specific performance is based on the assumption
that an estate in land possesses a particular value for the
purchaser and that pecuniary damages would therefore be
inadequate. This assumption is rebuttable and must be
carefully examined following the declaration of the
Supreme Court of Canada that specific performance will
only be available if the property is truly “unique.” The
availability of specific performance as a remedy for a
vendor is not quite as clear; however, it may be justified
on the basis of mutuality, i.e., the reciprocity of remedies
for a vendor and purchaser. It might also be justified on
the basis that damages are inadequate in a transaction
where the vendor does not obtain the full price on closing
(e.g., vendor take-back charge) and, on an action for
damages, would only be entitled to the difference between
the sale price and the market value of the land.
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5.2 Desirability of specific performance
There are many reasons why a party might seek specific
performance rather than accept the repudiation by the
other party and claim damages:
ƒ A plaintiff may join a claim for specific performance
with a claim for damages in the alternative and may
elect the remedy up to the conclusion of the trial.
ƒ If, at the conclusion of the trial, damages are
awarded in lieu of specific performance, the plaintiff
may claim that the damages be assessed as of the
date of trial and not as of the date of the breach,
which is the normal date of assessment.
5.3 Prerequisites to a purchaser seeking
specific performance
As stated earlier, a purchaser is entitled to claim specific
performance on the basis that the purchaser has a
particular interest in the land that cannot be compensated
by damages. Recent case law suggests that one may look
behind the transaction in order to determine uniqueness
before granting specific performance as of right. For
example, if land is purchased as an investment, any loss of
profits intended to flow from the transaction can easily be
compensated for in damages. In these circumstances, it
will be difficult to seek specific performance. A vendor
used to have the same entitlement as the purchaser to
specific performance on the basis of mutuality of
remedies. Though now a rare occurrence, a vendor may be
granted specific performance if damages might not
provide an appropriate remedy or if the vendor is unable
to mitigate damages by finding a suitable new purchaser.
5.4 Ready, willing, and able to close/tender
Before a party may successfully apply for a decree of
specific performance, that party must show that on the
date set for closing, that party was ready, willing, and able
to fulfill his or her obligations under the contract. This
readiness, willingness, and ability to close must continue
not only beyond the original closing date but right up to
the time of the conclusion of the trial. Specific
performance will not be granted in circumstances where,
subsequent to the date set for closing (and upon which
date the party was ready, willing, and able to close), that
party ceases to be ready, willing, and able to close.
To show that a party is ready, willing, and able to close, in
most cases it will be advisable, if not absolutely necessary,
to tender on the defaulting party. Great care should be
taken to ensure that the tender is complete and that tender
is effected upon the defaulting party (unless the
agreement of purchase and sale permits tendering upon
the solicitor for the defaulting party). Any effective tender
requires the tendering on the defaulting party of all things
required to be produced by the innocent party at the
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closing of the transaction. A letter listing all of the plaintiff to mitigate its damages from not being able to
deliveries would be useful evidence, as would a witness. acquire the original property, the existence of such other
suitable property is proof that the original property is not
If the transaction is to close with the electronic
unique and will therefore undermine the claim of specific
registration of the transfer and any charge back to the
performance.
vendor, the lawyer will tender all off-title documents and
money, if appropriate, together with a copy of the DRA 5.6 Specific performance with abatement
signed by the lawyer. The lawyer should ensure that the
Specific performance with an abatement in purchase price
lawyer has in the lawyer’s possession an appropriate
is available to both purchaser and vendor, although the
acknowledgement and direction authorizing both the
purchaser’s rationale is stronger than that of the vendor.
closing and the tender. As well, if appropriate, the lawyer
Abatement, or reduction, of the purchase price is claimed
should set out in a letter accompanying the tender all
as a result of the vendor not being able to convey all that
conditions to which the tender is subject, such as
the agreement of purchase and sale requires to be
satisfactory answers to requisitions.
conveyed.
Tender may be expressly waived by a defaulting party or
When sought by a purchaser, the rationale is that the
may be unnecessary where the facts show that a tender
purchaser is entitled to take whatever the vendor has to
would be absolutely useless. If in doubt as to whether a
convey and to have an abatement of the price. This right
tender is necessary, the safest course of action is to effect
is, of course, subject to any other provisions of the
a tender.
contract, including an annulment clause, which may
5.5 Bars to specific performance permit the vendor to terminate the agreement if there are
defects in title that the vendor is unable or unwilling to
Since the remedy of specific performance is an equitable
remedy.
remedy, it is within the discretion of the court to grant or
deny such a remedy. Some matters that may be considered When specific performance with an abatement is sought
by the court in exercising its discretion are the following: by the vendor, the circumstances under which the vendor
will obtain the decree are generally limited to those where
ƒ whether there has been misrepresentation by a
plaintiff claiming specific performance. the vendor is able to substantially fulfill the vendor’s
obligations under the agreement and it would be
ƒ the unfairness, if any, of the contract.
inequitable to permit the purchaser to withdraw.
ƒ hardship on the defendant.
Abatement will not be allowed if it is found that the
ƒ inadequacy of consideration.
bargain between the plaintiff and the defendant was such
ƒ whether the plaintiff is in breach of the plaintiff’s that the plaintiff would take whatever the vendor had at a
obligations under the contract.
set price and that there could not be a deficiency in area
ƒ delay (laches). In order for delay to constitute a bar under the terms of the agreement. Essentially, the court
to the remedy of specific performance, the
attempts to identify the expectations of the parties and to
defendant must show one of the following:
make an order that will further those expectations.
— The delay of the plaintiff caused the defendant
to change the defendant’s position such that it 5.7 Specific performance plus damages for
would be inequitable to now require the delay
defendant to carry out the contract.
When claiming specific performance, the plaintiff may
— The delay must be of such a character as to
also claim damages for delay in closing, if applicable, and
justify the inference that the plaintiff intended
to abandon the plaintiff’s rights under the may also include a claim for damages in the alternative.
contract.
5.8 Certificate of pending litigation
In Southcott Estates Inc. v. Toronto Catholic District
When an action for specific performance has been
School Board, the Supreme Court of Canada held that a
commenced by a purchaser, to prevent the vendor from
party seeking specific performance still has a duty to
disposing of the land to an innocent third party and thus
mitigate damages (i.e., in this case, purchasing a similar
defeating the goal of the action, a purchaser can obtain
property for development) where there is not a compelling
and register on title to the land a certificate of pending
reason why damages would not be appropriate. The lone
litigation. In order to obtain such a certificate, the plaintiff
dissenting opinion points out the inconsistency of
must assert a claim that would result in a judgment in rem
requiring mitigation where a claim for specific
or a judgment requiring the defendant to convey title to
performance is pursued—if the plaintiff is successful in
finding another suitable property that will allow the

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the plaintiff. Reference should be made to the Courts of
Justice Act.
6. Damages
The innocent party may accept a repudiation as relieving
the innocent party of having further obligations under the
agreement and sue for damages resulting from such
breach. This claim for damages may be made as an
alternative to a claim for specific performance and may be
claimed in the same statement of claim. However, if the
innocent party accepts a repudiation and does not
continue to uphold its obligations under the agreement,
the innocent party will not be able to pursue specific
performance. If a claim for specific performance is made
but not pursued to judgment, the action may then proceed
as an action for damages.
6.1 Measure of damages
A plaintiff who has suffered damages is to be restored to
the position the plaintiff would have been in had the
contract been performed subject to the rule of remoteness
and so far as money can do so.
There is authority that damages may be assessed on a date
subsequent to the breach, usually the date of trial. This is
consistent with the underlying rule in awarding damages,
namely, that the innocent party is to be put into the
position the innocent party would have been in had the
contract not been wrongfully repudiated.
The measure of damages that may be awarded for breach
of an agreement for the purchase and sale of land is
usually the difference between the contract price and the
market price of the land at the time damages are assessed.
It should be noted that many agreements of purchase and
sale effectively limit the purchaser’s rights to a refund of
the deposit if there is a defect in title that prevents the
closing of the transaction.
7. Deposits
Almost all agreements of purchase and sale provide for
one or more deposits to be paid to the vendor or to the
vendor’s solicitor or agent to be held in trust pending
closing or earlier termination of the agreement and to be
credited against the purchase price on closing.
A true deposit is a guarantee of performance by the
purchaser. If the agreement is not clear, the parties will
need to examine the circumstances in order to determine
whether any payment made by the purchaser to the
vendor, whether upon delivery of the offer to purchase or
at some other time prior to closing, is a deposit or a part
payment of the purchase price. Such circumstances may
be looked at to determine the intention of the parties as to
the character of the payment.
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The agreement will usually state the nature of the payment
(i.e., that it is a deposit), what is to happen to it upon the
closing or earlier termination of the agreement, and in
some cases, what is to happen to it in the event of default.
A deposit made against the purchase price will generally
be forfeited to the vendor on the default of the purchaser.
This result can only occur if the vendor does not intend to
sue for specific performance. If the vendor intends to sue
for specific performance, the vendor is not in a position to
claim forfeiture of the deposit.
Conversely, if the vendor is in breach and the purchaser
intends to sue for specific performance, the purchaser
should not demand return of the deposit since that is
inconsistent with the maintenance of the agreement and
an action for specific performance. Generally, if the
payment was a true deposit and the transaction fails to
close because
ƒ the vendor failed to close when the purchaser was
ready, willing, and able to do so; or
ƒ the purchaser, having used reasonable efforts to
satisfy conditions of the agreement, was unable to
do so and withdrew from the agreement as
permitted by the agreement,
the purchaser will be entitled to a return of the deposit.
It is a general rule that a purchaser of land, when entitled
to a return of the deposit, is also entitled to a lien against
the land to protect the payment of the deposit money and
any other moneys paid on account of the purchase price,
as well as interest and costs. This lien is in the nature of an
equitable interest. The lien may be claimed in an action,
and a certificate of pending litigation may be registered.
The effect of the lien is to bind the land and any
subsequent purchaser, except a subsequent purchaser for
value without notice of the lien, and thus is afforded the
protection of the Land Titles Act and the Registry Act.
7.1 Relief against forfeiture
Section 98 of the Courts of Justice Act provides as follows:
98.— A court may grant relief against penalties and
forfeitures, on such terms as to compensation or
otherwise as are considered just.
According to case law, two criteria must be met before an
order granting relief under this section will be obtained:
ƒ The amount of the deposit must be out of all
proportion to the damages suffered.
ƒ It must be unconscionable for the vendor to retain
the deposit in full.
8. Representations and collateral
agreements/exclusionary clauses
A representation is a statement of fact made by one party
to the contract to the other party which, while not forming
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a term of the contract, may induce the other party to enter
into the contract.
A purchaser may rescind an agreement of purchase and
sale prior to closing because of material
misrepresentations made by the vendor or the vendor’s
agent that induced the purchaser to enter into the
agreement. Rescission may be possible in such cases
whether the misrepresentations were innocent,
fraudulent, or negligent.
A collateral agreement is a contract that is made collateral
or prior to the main contract, in return for which a party is
induced to enter into the main contract. A collateral
contract may entitle the purchaser to repudiate the main
contract. Most agreements of purchase and sale contain an
exclusionary clause stating that there are no
representations, warranties, or collateral agreements
affecting the subject matter of the agreement except those
contained in the agreement itself. If there was a
representation or collateral agreement that induced the
entering into of the agreement of purchase and sale and
the representation was inaccurate or there was breach by
the vendor of the collateral agreement, the exclusionary
clause may not be of assistance. In addition, if there is
fraud, the exclusionary clause will not protect the party
guilty of the fraud.
9. Merger
Following closing, the basic rule is that any unfulfilled
obligations will merge in the conveyance. Reasoning in
support of the doctrine of merger is that there being a need
for finality in commercial transactions, the parties are
considered to have accepted the consideration flowing on
closing as full satisfaction of the contractual obligations.
However, if the contract expressly provides for the
survival of contractual obligations, or if the court finds,
from the surrounding circumstances, that the parties’
intention was that a particular obligation would survive,
then the doctrine of merger will not apply.
If the agreement is not clear and it is desired that certain
contractual obligations survive, then appropriate
covenants, undertakings, or agreements should be entered
into at closing to achieve that result.
10. What to do
10.1 When acting for a purchaser
ƒ Make an application under the Vendors and
Purchasers Act to determine the validity of
requisitions and/or the sufficiency of answers given.
Remember that if there is a dispute as to the validity
of a requisition, the purchaser refuses to close, an
action is commenced by the vendor for damages,
and the requisition is determined at trial not to have
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been a valid requisition, then the purchaser will be
in breach of the agreement and liable to the vendor.
ƒ To prevent the vendor from improperly disposing of
the land, register notice of the agreement of
purchase and sale (or in the case of an option to
purchase, the option agreement) on title or, in the
land titles system, register a caution. You should
note that land transfer tax will be payable upon the
registration of the notice of agreement of purchase
and sale.
ƒ If the purchaser was induced to enter into the
agreement of purchase and sale by representations
or collateral agreements that have either proven to
be untrue or are not being fulfilled, notify the
vendor, set out the right of the purchaser to be no
longer bound by the agreement, and claim a refund
of the deposit and other damages. The grounds for
withdrawing must be clearly communicated and
understood.
ƒ Allow the agreement to terminate for non-
satisfaction of conditions, provided reasonable
efforts have been made to satisfy such conditions,
and have the deposit refunded. If reasonable efforts
have not been made to satisfy conditions, consider
treating the conduct of the vendor as an anticipatory
breach and commencing an action for specific
performance.
ƒ Exercise a contractual right of termination under
appropriate circumstances, and have the deposit
refunded. If the right of termination lies with the
vendor and the right is not being exercised
capriciously, then permit the termination, and
require a refund of the deposit. If there is a
capricious exercise of such right, consider treating
the vendor’s conduct as an anticipatory breach and
commencing an action for specific performance.
ƒ Sue for damages resulting from a breach of the
agreement by the vendor, and require a refund of
the deposit. To secure a refund of the deposit,
consider claiming a lien for the deposit and
registering a certificate of pending litigation.
ƒ Tender upon the vendor, and thereafter sue for
specific performance (with damages resulting from
the delay in closing), if available, and for damages
for breach of contract in the alternative. Register a
certificate of pending litigation. Consider the
purchaser’s obligation to mitigate damages.
ƒ If the purchaser is in default, consider whether it is
appropriate to apply for relief from forfeiture of the
deposit.
ƒ Clearly understand and state the position you are
taking and the grounds for taking it.
10.2 When acting for the vendor
ƒ Make an application under the Vendors and
Purchasers Act to determine the validity of
requisitions and/or the sufficiency of answers given.
Remember that if there is disagreement as to the
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sufficiency of an answer given, the purchaser
refuses to close, an action is commenced, and at
trial the answer given is found not to be sufficient,
then the vendor will be in breach of the agreement.
ƒ Allow the agreement to terminate for non-
satisfaction of conditions, provided reasonable
efforts have been made to satisfy such conditions,
and refund the deposit. If reasonable efforts have
not been made by the purchaser when responsible
for satisfying conditions, consider treating the
conduct of the purchaser as an anticipatory breach
and commencing an action for specific performance.
ƒ Exercise a contractual right of termination under
appropriate circumstances and refund the deposit.
If the right of termination lies with the purchaser
and the right is not being exercised capriciously,
then permit the termination and refund the deposit.
If there is a capricious exercise of such right,
consider treating the purchaser’s conduct as an
anticipatory breach and commencing an action for
specific performance.
ƒ Sue for damages resulting from a breach of the
agreement by the purchaser and claim forfeiture of
the deposit.
ƒ Tender upon the purchaser, and thereafter sue for
specific performance of the agreement (with
damages resulting from the delay in closing), if
available, and for damages for breach of contract in
the alternative. Consider the vendor’s obligation to
mitigate damages.
ƒ Clearly understand and state the position you are
taking and the grounds for taking it.
10.3 Summary
Each case necessarily depends upon its own facts. When a
party wishes to withdraw from the transaction or the
transaction appears to be falling apart, a clear
consideration of the particular facts and the particular
agreement is necessary.
If the vendor is in breach of the agreement, does the
purchaser wish to preserve the right to bring an action for
specific performance? If so, then the purchaser must be in
a position to make a valid tender upon the vendor on the
date set for closing and must thereafter immediately
commence an action for specific performance. The
purchaser can then claim damages for breach of the
agreement in the alternative and can register a certificate
of pending litigation. Under these circumstances, the
purchaser must not demand a return of the deposit, must
make it clear that the purchaser is upholding the
agreement, and must at all times (provided the purchaser
does not wish to abandon the claim for specific
performance) remain ready, willing, and able to close the
transaction, up to the time of judgment in the action.
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If the purchaser does not wish to claim specific
performance but wishes instead to accept the vendor’s
breach of agreement as relieving the purchaser of any
further obligation, then the purchaser should notify the
vendor, in clear language, that the vendor has breached
the agreement, that the purchaser is no longer bound by
the agreement, and that the purchaser will be looking to
the vendor for all damages suffered as a result of the
breach. The purchaser will also demand and, if necessary,
commence an action for return of the deposit, claim a lien
against the land, and register a certificate of pending
litigation. The purchaser will have an obligation to
mitigate damages under these circumstances.
If the purchaser is in breach of the agreement, does the
vendor wish to preserve the right to bring an action for
specific performance? If so, then the vendor must be in a
position to make a valid tender upon the purchaser on the
date set for closing and must thereafter immediately
commence an action for specific performance. The vendor
can claim damages for breach of the agreement in the
alternative. The vendor must not under these
circumstances claim forfeiture of the deposit but must
make it clear that the vendor is upholding the agreement
and must at all times up to the time of judgment in the
action (provided the vendor does not wish to abandon the
claim for specific performance) remain ready, willing, and
able to close the transaction.
If the vendor does not wish to claim specific performance
but wishes instead to accept the purchaser’s breach of the
agreement as relieving the vendor of any further
obligation, then the vendor should notify the purchaser in
clear language that the purchaser has breached the
agreement and that the vendor is no longer bound by the
agreement and will be looking to the purchaser for all
damages suffered as a result of the breach. The vendor will
claim that the deposit is forfeited and will have to apply it
against the damages suffered as a result of the purchaser’s
breach. The vendor will have an obligation to mitigate
damages under these circumstances.
Unfortunately, there is often uncertainty as to whether
one party or the other is entitled to rescind an agreement
of purchase and sale, whether one party has acted
reasonably in attempting to satisfy conditions, whether
the vendor has acted reasonably in attempting to answer
requisitions, etc. Care should be taken to make it clear to
the other party exactly what course of action is being taken
and the basis upon which it is taken. Thereafter, ensure
that all actions taken are consistent with the rights or
remedies claimed.
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The purchase and sale of a condominium unit
1. Introduction
In this chapter, we examine condominium law in Ontario
as it pertains to the purchase and sale of condominium
units, including the legal structure of condominium
ownership; aspects of the title search process specific to
condominium transactions, including the status
certificate; financial issues from a buyer’s perspective; and
statutory protections applicable to buyers of newly built
condominium units.
Condominium law in Ontario is primarily set out in the
Condominium Act, 1998 (Act) and its regulations.
1.1 Bill 106
On December 3, 2015, the Protecting Condominium
Owners Act, 2015 (Bill 106) received Royal Assent.
Bill 106, some but not all of which has been proclaimed in
force, amended the Act, the Ontario New Home
Warranties Plan Act (ONHWPA), and other statutes. It
also created a new statute, the Condominium
Management Services Act, 2015, which regulates
condominium property management. Designation of
Condominium Authority, O. Reg. 181/17, made under the
Act, creates the Condominium Authority of Ontario to
administer certain portions of the Act, and Part I.2 of the
Act establishes the Condominium Authority Tribunal and
defines its functions.
1.2 General terminology and organization
While reading this chapter, keep in mind the following:
ƒ The word “condominium,” when used alone, refers
generically to the buildings and underlying land as
shown on a condominium plan.
ƒ References to a condominium corporation either
use that term or simply the “corporation.”
ƒ Individual units are called a “unit” or
“condominium unit.”
ƒ A “declarant” is the person or corporation that owns
the underlying land and registers the documents
that create a new condominium.
ƒ The statute-defined term “description” and the term
“condominium plan” are often used
interchangeably. See “The description and the
condominium plan,” below. A “description” is a
registrable instrument, but the word can also be
used generically, as in “legal description.”
ƒ “Agreement” usually refers to the OREA form of
condominium unit agreement of purchase and sale.
1.3 About the Condominium Act, 1998
The Act contains sections that apply both to new and
resale units, sections that apply only to new units, and
sections applicable only to resale units. Some of these
sections are commingled, and the distinction is not always
obvious. Generally, if a section of the Act begins with “the
declarant” or refers to a “proposed unit,” one can infer that
it applies to new units only.
For example, in Part V (sale and lease of units) of the Act,
s. 71.1 refers to both new and resale units, ss. 72–75 refer
to new units only, ss. 76–77 apply to both new and resale
units, ss. 78–81 apply to new units only, ss. 82.1–82.2
(under Bill 106) appear to apply to both, and so on.
2. The legal structure of the condominium
2.1 Units and common elements
The term “condominium” generally describes a system of
ownership for a multi-unit building whereby under a
condominium “description” the land comprising the
condominium and the buildings and improvements are
divided into common elements on the one hand and units
on the other. The declaration defines and the description
illustrates the units and the common elements.
Each unit is owned by the person or corporation that
purchases it. In new condominiums, the units are initially
owned by the declarant.
2.2 Common elements
The “common elements” are shared parts of the
condominium owned by all the unit owners as tenants in
common (Act, s. 11(2)). Any part of the property that (a) is
not a unit as shown on the description, and (b) is located
inside the land boundaries of the condominium plan, is a
common element. The grounds; landscaping; building
lobbies; elevators; halls; fitness facilities; foundation;
exterior walls; roof; building-wide HVAC system;
electrical, mechanical, and plumbing systems, including
wiring, pipes, and ducts; and so on, are all common
elements unless they are located within the boundaries of
a unit or are otherwise defined to be part of the unit in the
declaration.
Each unit owner as a tenant in common has an undivided
interest in the common elements. These interests are in a
fixed proportion—usually the proportion that the size of
the unit bears to all the units in the condominium. For
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instance, if the 50 units in a condominium plan have a
total area of 50,000 square feet, and the area of a
particular unit is 1,000 square feet, then that particular
unit’s proportionate share of the common elements is 2%
(1,000/50,000). Similarly, this unit’s (and its owner’s)
proportionate share of the debts and obligations of the
condominium corporation is 2% in this example. Unit
owners do not have the protection of a “corporate veil” of
the kind provided to shareholders of a corporation.
2.3 The condominium corporation
The condominium corporation is not a business
corporation. It is a creature of statute that is created solely
to manage the affairs of the condominium corporation
including maintenance and repair of the building(s) that
form the condominium property.
Under s. 2(3) of the Act, the registration of the declaration
and description creates a condominium corporation
without share capital. Its members are the unit owners
from time to time (s. 5(1)).
Under s. 6, two types of condominium corporations can be
created under the Act: a freehold condominium
corporation and a leasehold condominium corporation. In
turn, there are presently four types of freehold
condominium corporations:
ƒ Common elements condominium
corporation: The condominium corporation
consists solely of the jointly owned property. The
individually owned parcels of tied land (commonly
referred to as “POTLs”), which are tied to the
condominium through an ownership interest in the
condominium, are not part of the condominium
corporation. A project that is created as a common
elements condominium corporation allows property
owners to jointly share in the costs of the common
property, such as private roads and recreational
areas, with a mechanism for ensuring that
contributions to pay for these facilities are made.
Although the POTLs are not part of the
condominium, unpaid common expense
contributions can be collected by way of a lien
against the POTL.
ƒ Phased condominium corporation: The
condominium corporation is created in multiple
phases. With the construction of the first phase of
the project, the developer registers a declaration
and description to create the phased condominium
corporation, and when the second phase of the
project is built and registered, it is collapsed into the
existing condominium corporation to create a single
condominium corporation.
ƒ Vacant land condominium corporation: This
condominium corporation allows for parcels of land
to be registered as condominium units without the
need for buildings. Each unit will consist of the land
plus whatever is built on it, while the common
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elements will usually consist of roads, sewers, water
systems, and any recreational facilities. Typically,
the declaration of a vacant land condominium
corporation will contain restrictions and/or
specifications for what can and cannot be built on
the units so that there is uniformity in the homes
that are constructed.
ƒ Standard condominium corporation: This is a
condominium corporation other than a common
elements, phased, or vacant land condominium
corporation.
Most condominium corporations are standard
corporations. Common elements condominium
corporations and vacant land condominium corporations
are, however, increasing in popularity, especially in
suburban areas since they allow municipalities to pass
onto the condominium corporation costs that would
otherwise be paid by the municipality, such as road
maintenance and snow clearing.
Under ss. 27–41, every condominium corporation is
governed by an elected board of directors. These sections
address the qualifications, elections, meetings, liability,
indemnification, and conflicts of interest of directors.
Under s. 36, a corporation has officers who are
determined by the board unless the by-laws provide
otherwise. Many corporations carry directors’ insurance.
2.4 Key condominium documents
The following documents, the first three of which are
registered in the land titles office, are major components
of every condominium’s legal structure:
ƒ the declaration;
ƒ the description;
ƒ the by-laws; and
ƒ the rules.
2.4.1 The declaration
The declaration and description are the condominium’s
constating, and therefore primary, documents.
Subsection 7(2) of the Act requires the declaration to
contain seven mandatory components (plus other
material required by General, O. Reg. 48/01, made under
the Act). Bill 106 adds an eighth component and will
probably add new regulations. Mandatory information
includes, for example, the boundaries of each unit, the
percentage of the common expenses each particular unit
owner is responsible for, and the exclusive-use common
elements set aside for particular units. Under s. 107 of the
Act, declarations can be amended either by a vote of 80%
or 90% of unit owners (or such other percentage that is
prescribed (Bill 106)), depending on which part of the
declaration is being amended. Alternatively, a judge of the
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Superior Court of Justice may amend the declaration upon
application under s. 109 of the Act if there is an error or
inconsistency that appears in the declaration or that arises
out of carrying out the intent and purposes of the
declaration. Some errors may be corrected by the Director
of Titles under s. 110.
Subsection 7(4) permits five more categories of content,
which cover common expenses, occupation and use of
units and common elements, and repair obligations of the
corporation and the unit owners after damage occurs.
2.4.2 The description and the
condominium plan
The description is prepared by an Ontario land surveyor
in accordance with Description and Registration,
O. Reg. 49/01, made under the Act. The description is a
set of survey sheets, architectural and structural plans,
and any other parts necessary to describe fully the land
and buildings that constitute the physical parts of a
condominium.
A condominium’s description and declaration are
registered together in the land titles office after an
approval process.
The term “condominium plan” is part of the name
formally assigned to the legal description of the property
as a whole when the declaration and description for a new
condominium are registered. For example, “Peel
Condominium Plan No. 1234” is the registered name of
the legal description of the property as a whole assigned
when the 1,234th declaration and description are
registered in Peel. The same number identifies the
corporation: “Peel Condominium Corporation No. 1234.”
Numbers are assigned to condominiums in order of the
registration of their declarations.
The description physically divides the land and buildings
into
ƒ levels (one per floor);
ƒ units (typically apartments) on each level; and
ƒ common elements.
The description as depicted on the survey sheets provides
precise, detailed diagrams of the legal boundaries of all the
units and common elements including both the general
and exclusive-use common elements.
2.4.3 Legal description of units
A typical plan of a 10-storey apartment building in
Brampton, Ontario, might consist of Peel Condominium
Plan No. 1234 having levels 1 to 10 containing apartment
units, and levels A and B containing below-grade parking
units and locker units. The plan and each level and unit
are assigned numbers, which are then used to identify
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specific units. So a client may, for instance, buy Unit 8,
Level 5, Peel Condominium Plan No. 1234. This unit may
have a municipal address of “Suite 508, 9876 Main
Street”; however, suite numbering is not necessarily a
matter of common sense. Some condominiums do not use
the floor numbers 4 or 13 in suite numbers, so suite 508
may actually be described legally as unit 8, level 4.
All individual units (being the dwellings and often the
parking spaces and storage lockers) are legally described
as above, each with its own unique unit, level, plan, and
e-reg property identifier number (PIN). Each unit is
transferable, alone or together with other units owned by
the same owner in the same condominium plan subject to
any restrictions or limitations set out in the declaration.
For example, a declaration may require that a buyer of a
parking or locker unit must be the owner of a residential
unit in the condominium.
2.4.4 By-laws
All by-laws must be registered on title in order to be
effective. Every condominium corporation, as a practical
matter, must have at least one by-law that governs the
procedures for election and functioning of the board,
member meetings, and so on. Other by-laws may deal with
any of the other matters enumerated in ss. 21, 56, and 57
of the Act.
While the directors may make, amend, or repeal by-laws,
under s. 56(10), a by-law must be confirmed by a majority
of unit owners or such other number of owners that is
prescribed before becoming effective.
2.4.5 Rules
Rules may be made, amended, or repealed by the board
under s. 58 of the Act. Pursuant to s. 58(6), notice of
proposed new rules or changes in the rules must be given
to each owner. If the board does not receive a requisition
for a meeting of owners by owners owning at least 15% of
the units within 30 days of the giving of the notice, the rule
is effective at the expiry of the 30-day period. If such a
requisition is received, the changes will not be effective
unless approved at the owners’ meeting. Unlike by-laws,
rules are not registered on title, but they accompany every
status certificate issued under s. 76, and they bind every
unit owner and occupant.
Rules may only deal with the use of common elements and
units. Section 58 states that the rules must be intended to
“promote the safety, security or welfare of the owners and
of the property and the assets, if any, of the corporation”
or to “prevent unreasonable interference with the use and
enjoyment of the units, the common elements or assets, if
any, of the corporation.”
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2.4.6 Mutual use/reciprocal agreements
In addition to the above-noted governing documents of a
condominium corporation, many condominium
corporations, especially in urban settings, are part of
mixed-use and/or multi-phase developments that entail
easements and/or mutual use agreements with other
phases or components of the development. Shared
facilities agreements, cost-sharing agreements, easement
and reciprocal agreements, and similar mutual use
agreements are generally used to set out the boundaries,
governance, and obligations (including cost-sharing) for
areas used by the condominium corporation and one or
more other parties. Such mutual use agreements should
also be reviewed to understand where the governance of
the shared facilities lies and the obligations placed on the
condominium corporation, since such obligations will
have a direct impact on the common expenses of the unit
owners and may also create restrictions on activities that
can be carried out in the condominium.
If a condominium corporation is a party to a mutual use
agreement, the agreement must be listed in s. 33 of the
status certificate received from the condominium
corporation, and notice of the agreement will typically be
registered on title to the condominium units.
2.5 Exclusive-use common elements
Exclusive-use common elements are a subset of common
elements. They are defined in the declaration and
description, have their own boundaries, and are
specifically “attached” to a particular unit. Exclusive-use
common elements are for the sole use of the owners of one
designated unit, as opposed to the general common
elements used by all owners. The condominium
corporation is responsible for major repairs and
replacements thereof in most cases. Examples may
include unit balconies; the front yards, backyards, and
patios of some townhouses; and in some condominiums,
parking, bicycle, and locker spaces.
2.6 Parking and storage spaces
Parking spaces and lockers may be classified in one of four
different ways in a condominium’s declaration and
description:
 as a separately identified and transferable
unit, with its own registered legal description
consisting of unit and level numbers and its own
PIN.
 as part of the dwelling or other main unit
being purchased. For instance, a parking space
may be an integrated part of a townhouse unit
instead of having its own legal description or being
part of the common elements.
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 as part of the general common elements of
the condominium, with (or without) the board
assigning all parking and locker spaces to unit
owners from time to time. In this case the
declaration does not attach parking and locker
spaces to any particular units. Unit owners (and
prospective buyers) have no certainty that any
particular parking space will be permanently
enjoyed by that unit owner.
 as an exclusive-use common element legally
“attached” to a specific dwelling unit, with
each such parking and locker space designated as
belonging to a specific dwelling unit in a schedule to
the declaration. Only the owner of such dwelling
unit will be entitled to use the parking space and
storage unit in question.
2.6.1 Selling parking and storage units
Units that lack their own legal descriptions cannot be
bought or sold separately from their associated dwelling
units. If the declaration describes them as general
common elements, they are usually assigned to dwelling
units by the board. If they are described as exclusive-use
common elements, then they are assigned to units by the
declaration and so cannot be reassigned without
amending the declaration.
Where parking and storage units have their own legal
descriptions and PINs, an owner may wish to sell a
parking space that the owner owns but does not need.
Some declarations prohibit the sale of such units
separately from the associated dwelling units; others allow
separate sales to other unit owners only; and occasionally,
sales to non-owners are also allowed. A buyer’s solicitor
must ensure that any transaction complies with any such
restrictions in the declaration relating to the conveyance
of parking and/or storage units.
3. Searching title to condominium units
The material below summarizes some of the title searches
and investigations specific to the purchase of a
condominium unit, in addition to the standard searches
and investigations otherwise required.
3.1 Title searches and the legal description
Every unit registered in the land titles system has its own
PIN and legal description. Condominium units consisting
of exclusive-use or general common elements will not
have individual registered titles because they are common
elements. For a description of title searching in general,
refer to the land titles portions of Chapter 49 (Title
searching) of these Study Materials.
3.1.1 Search every PIN
The buyer’s solicitor must obtain and review the parcel
register for every registered unit being purchased. The
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lawyer should ensure that the search of each PIN and its
corresponding unit and level numbers correspond to the
one unit the client is buying as described in the agreement.
To determine the units to search, the lawyer should first
determine from the agreement what the client is buying,
including
ƒ the dwelling unit; and
ƒ perhaps one or more units for parking or storage
each of which may (a) have registered ownership or
(b) consist of exclusive-use common elements or
general common elements.
Potential problems may include the following:
ƒ Similar to suite numbering, physical numbering of
some registered parking and locker units (with a
number printed on each unit) may not correspond
to the unit and level numbers of the unit’s legal
description. If an agreement only refers to
municipal or physical numbering, do not assume
that the unit and level numbers will necessarily
correspond. Obtain clarification, and if necessary,
require that the agreement be amended.
ƒ The fact an instrument is (or is not) registered
against a dwelling unit does not necessarily mean it
will (or will not) be registered against all of the units
being sold. A seller’s original transfer of the
dwelling unit may not include all registered units
being sold if the seller separately acquired one or
more of these units after the original purchase. For
instance, a seller may have separately purchased a
parking or locker unit from another owner a year
after the original purchase. Years later the seller
sells the dwelling unit and the added parking unit. If
the seller’s lawyer, while preparing the transfer,
refers only to the legal description in the seller’s
original transfer of the dwelling unit and does not
read the agreement, the added parking space may
be omitted from the new transfer. This can easily be
avoided if lawyers always verify that the units
described in the seller’s transfer and the units
described in the agreement are the same.
In the course of a condominium title search, the parcel
register will list (a) all registered instruments specific to
the unit, such as the owner’s transfer and mortgages;
(b) the declaration, description, and by-laws; and
(c) other instruments registered against most or all of the
condominium’s units by the original developer, such as
utility easements, rights 0f way, and registered
agreements, which should be reviewed for provisions that
may affect the buyer.
3.1.2 Review the declaration
The lawyer should always review the declaration and its
schedules. Declarations identify (a) all exclusive-use
common elements that attach to each dwelling unit;
(b) physical changes to, permitted uses of, and
maintenance of owned units and exclusive-use common
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elements; (c) each unit’s proportionate share of the
condominium’s total common expenses; (d) insurance
obligations for both the corporation and each unit owner;
(e) provisions relating to the sale of parking, locker,
and/or ancillary units; (f) provisions relating to renting or
leasing the dwelling unit, which often include restrictions
on short-term transient uses; and (g) many other
fundamental matters that will be of interest to the buyer.
3.1.3 Identify unit locations, boundaries,
and exclusive common elements
The lawyer should review the declaration with the buyer
in conjunction with the description. This will help buyers
understand the distinction between ownership, exclusive-
use, and general-use common elements.
The lawyer should locate and review with the buyer the
portions of the description that illustrate the purchased
units. The legal boundaries of each residential, parking,
and storage unit should be identified for the buyer. The
lawyer should point out also the vertical and horizontal
boundaries of the dwelling unit so that the buyer can
confirm that it is the unit the buyer is buying and can see
where the unit ends and the common elements begin. This
can help prevent mistakes.
For instance, suppose that before a buyer makes an offer
to purchase, the real estate agent shows her a parking
space that, according to the real estate agent, is the seller’s
unit. The real estate agent turns out to be wrong, since the
correct parking space is actually in a less desirable
location. If the buyer sees the location of the seller’s actual
parking unit on the condominium plan, she may recognize
that this is not the well-located space the real estate agent
showed her.
The buyer’s repair and maintenance obligations do not
include common elements. The buyer may not modify the
common elements without the written authorization of
the board of directors. See s. 89 of the Act. The lawyer
should explain, with respect to any exclusive-use common
elements, subject to a review of the declaration and
ss. 89–92 of the Act, that the corporation has the sole right
and responsibility to repair exclusive-use common
elements. Otherwise the buyer may unnecessarily incur
repair expenses and breach parts of the declaration and
the Act in doing so.
3.1.4 The over-riding importance of
details
The Court of Appeal for Ontario’s decision in Orr v. MTCC
1056 confirms that verifying the horizontal and vertical
boundaries of units is required of a prudent solicitor.
Orr illustrates the potentially far-reaching consequences
of not checking details, such as (a) unit boundaries, and
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(b) whether s. 98 agreements have been entered into for
proposed renovations. In Orr a condominium townhouse
owner extended the unit vertically into the “attic” of the
townhouse by adding a third floor without the knowledge
or consent of the corporation. The attic was part of the
common elements, not part of the unit. The unit’s upper
vertical boundary as shown in the description ended at the
second-floor ceiling so that the extension constituted an
encroachment or trespass into the general common
elements and breached the condominium’s declaration.
The owner later entered into an agreement to sell the
townhouse. The buyer believed she was buying a
townhome with a beautiful attic living space. When the
buyer’s lawyer met with the buyer, the lawyer reviewed the
horizontal boundaries with the client, but not the vertical
boundaries. Had the vertical boundaries been reviewed,
the client would likely have brought the encroachment to
the lawyer’s attention. Inquiry with the property manager
would have also revealed that the third-floor construction
into the attic was unauthorized. The agreement would
probably have been terminated: one cannot sell what one
does not own. Unfortunately, this buyer bought a
residence that included what the seller did not own—the
converted attic space. After closing, the corporation
discovered the construction, and a complex lawsuit
ensued. The buyer’s dream home turned into a legal and
financial nightmare.
Situations similar to Orr are becoming increasingly
common, as owners sometimes brazenly ignore boundary
limits.
3.1.5 Additional execution search
To assure that a buyer of a condominium unit is
purchasing a good and valid title free and clear of all
encumbrances, executions must be searched against the
condominium corporation in addition to the usual
searches against the seller and buyer.
Under s. 23(6) of the Act, a judgment for the payment of
money against the corporation is also a judgment against
each unit owner at the time of the judgment. The unit
owners are liable for a portion of the judgment determined
by their proportionate interests in the common elements.
If a large judgment is issued against the corporation, this
may result in a special assessment to all the current unit
owners. It is the duty of the buyer’s (and lender’s) lawyer
to determine that there are no such judgments at the time
the buyer’s purchase (and lender’s charge) is completed.
3.2 Liens for common expenses
The corporation has a lien against units for arrears of
common expenses and for unpaid special assessments as
well as interest, legal costs, and expenses (s. 85(1)).
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Unregistered liens expire three months after the default
that gave rise to them unless the corporation within that
time registers a certificate of lien (s. 85(2)).
Unit owners must be given notice of the lien at least 10
days before the lien is registered (s. 85(4)). Registered
liens have priority over all registered encumbrances
subject to certain exceptions (ss. 86(1)–(2)). Registered
liens also secure arrears accruing after their registration
(s. 85(3)(b)).
Registered liens found in the title search are
encumbrances that must be discharged at closing based on
an unconditional discharge statement obtained by the
buyer’s lawyer directly from the corporation and then sent
to the seller’s lawyer.
Condominium liens are enforceable in the same manner
as a mortgage (s. 85(6)); that is, they may be enforced
using the statutory power of sale procedures contained in
Part II of the Mortgages Act or by foreclosure or judicial
sale under R. 64 of the Rules of Civil Procedure.
3.3 Registration of unit leases
Where a tenant (usually a commercial tenant) leases a
condominium unit for a term of less than three years and
the tenant is in actual possession of the unit, the tenant’s
rights under its lease will prevail against third parties such
as mortgagees, and a notice of the lease need not be
registered. However, a notice of a lease having a term of
three years or more must be registered under s. 44(1) of
the Land Titles Act in order for the lease to have priority
over subsequently registered encumbrances.
4. Financial aspects of a condominium
4.1 Common expenses
The phrase “common expenses” in the Act is defined as the
following:
“common expenses” means the expenses related to the
performance of the objects and duties of a corporation
and all expenses specified as common expenses in this
Act, in the regulations or in a declaration.
Every year the condominium’s board must approve a new
budget for the corporation’s forthcoming financial year.
The budgeted total is allocated among the unit owners as
common expenses according to the schedule of the
owners’ proportionate contribution to common expenses
contained in the declaration (which may or may not be the
same as the percentage common interest as described in
“Common elements,” above). Every unit owner is required
to pay that owner’s proportionate share of all of the
expenses of the condominium corporation. Common
expenses are payable monthly.
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The statutory basis for this is in ss. 84–88 of the Act. The
declaration also usually describes the unit owners’
obligation to pay common expenses and the establishment
of a reserve fund, and has a schedule listing the expenses
to be included in common expenses.
Sometimes special assessments of unit owners may also be
needed. A special assessment is a non-routine levy by the
board, usually for large unanticipated expenses, and is
charged and payable as a common expense in the same
proportions as the common expenses.
Municipal property taxes are individually levied on each
unit and invoiced by the municipality to the unit owners.
They are not part of common expenses. It is also common
for the utilities servicing the dwelling units to be
separately metered, sub-metered, or check-metered by a
third-party meter reading company, and where this
applies, such utility costs are not part of the common
expenses. The declaration and status certificate issued by
the condominium corporation should be carefully
reviewed to determine what costs are included in the
common expenses of the condominium.
4.2 Reserve fund
Section 93 of the Act requires that the condominium
corporation maintain a special fund to be used “solely for
the purpose of major repair and replacement of the
common elements and assets of the corporation.” The unit
owners are required to contribute to the reserve fund
monthly with payments being part of each unit’s common
expenses. Bill 106 will expand this section with, among
other things, a detailed definition of “major repair” in the
regulations.
The reserve fund is intended to provide a pool of funds to
repair or replace in the future a building’s roof, HVAC
systems, electrical and plumbing systems, elevators, and
so on.
Under s. 94 of the Act and Part IV of General, each
corporation must obtain a reserve fund study (performed
by a professional engineer or similar) at regular intervals,
and act on each study as required by the Act and the
regulations. Major studies provide detailed reports to the
board and the unit owners on the physical condition of the
major components and systems of the building.
The studies predict what increases in the condominium’s
reserve fund will be necessary in future years to maintain
the reserve fund at required levels. This is based in part on
the expected timing of future repairs and replacements of
the common elements. Studies may result in increases to
the common expenses, and sometimes may result in a
special assessment.
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Within 120 days of receiving a reserve fund study, the
board must review it and send to unit owners a plan for
the future funding of the reserve fund based on the study.
5. Remedies
5.1 Existing remedies
There are several remedies available to unit owners,
condominium corporations, and declarants for dispute
resolution. These are found in Part IX (enforcement) of
the Act. The remedies include the appointment by the
Superior Court of Justice of an inspector (s. 130), the
appointment of an administrator (s. 131), compulsory
mediation and arbitration of certain issues (s. 132), an
application to the Superior Court of Justice for damages in
certain circumstances (s. 133), a compliance order
(s. 134), and an oppression remedy (s. 135).
5.2 New legal structures and remedies
under Bill 106
5.2.1 Condominium Authority of Ontario
Part I.1 of the Act and Designation of Condominium
Authority create the Condominium Authority of Ontario,
a corporation without share capital responsible for
(a) creating a condominium guide for buyers, owners, and
condominium corporations; (b) administering a new
Condominium Authority Tribunal; (c) maintaining a
register where every condominium corporation must
maintain up-to-date records of the names of its directors
and officers for access by the public; and (d) establishing
a program for training condominium directors.
The Authority is a self-supporting entity which finances
itself by levying user fees and annual “assessments” of
condominium corporations. Unit owners will ultimately
pay for the latter through increases in their common
expenses.
5.2.2 The Condominium Authority Tribunal
Part I.2 of the Act establishes the Condominium Authority
Tribunal. Condominium Authority Tribunal,
O. Reg. 179/17, made under the Act, defines the scope of
its jurisdiction. Condominiums, unit owners, unit
mortgagees, and to a very limited extent purchasers may
apply to the Tribunal under s. 1.36 of the Act for resolution
of certain prescribed disputes, which at the present time
are limited by Condominium Authority Tribunal to
ƒ disputes involving the keeping, production,
examination, and storage of condominium records
under s. 55 of the Act;
ƒ disputes about provisions in a condominium
corporation’s governing documents related to pets
or other animals, vehicles, parking, and storage;
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ƒ disputes about nuisances, annoyances, or
disruptions under s. 117(2) of the Act and s. 26 of
General, whether in relation to provisions in a
condominium corporation’s governing documents
or otherwise; and
ƒ disputes about indemnification or compensation
provisions in the condominium corporation’s
governing documents.
In the future, other disputes, as indicated in the
regulations to the Act, will also be dealt with at the
Tribunal. In addition, as of October 1, 2020, the Tribunal
has created an online dispute resolution system, which
offers a three-stage dispute resolution process,
commencing by negotiation between the parties, followed
by mediation if necessary, and adjudication by a Tribunal
member if the matter is not resolved by negotiation or
mediation, all of which are conducted electronically.
The Tribunal has power to make orders as set out in s. 1.44
of the Act.
The Tribunal does not have the power to hear disputes
between buyers and declarants (which are the domain of
TARION Warranty Corporation, and in some cases, the
courts), nor between buyers and sellers of resale units. In
addition, Condominium Authority Tribunal expressly
provides that the Tribunal’s jurisdiction does not include
matters that are governed by s. 117(1) of the Act
(dangerous activities likely to damage property or cause
injury to residents).
6. The purchase and sale of a resale
condominium unit
The buyer’s solicitor must understand the framework of a
resale condominium transaction so that the solicitor can
take proper steps to protect the client. A solicitor for a
prospective buyer can be of great help to the buyer by
reviewing the agreement prior to its execution and by
reviewing a status certificate before the transaction
becomes firm and binding.
6.1 The OREA residential resale
condominium agreement
The OREA form of agreement for resale residential
condominium transactions (Appendix A) includes a
number of clauses dealing with issues specific to resale
condominiums. The lawyer should read especially the
warranties and covenants in paras. 7, 8, 11, 13, and 15.
Paragraph 21 refers to the adjustment for prepaid
common expenses, which is included in every resale
condominium transaction.
Unlike the sale of a newly built condominium unit, which
is discussed further on, when units are resold by the first
and later unit owners, the disclosure, rescission, and
declarant accountability provisions in ss. 72–75 of the Act
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and the declarant’s implied covenants and duties, the
interim closing, and the trust and deposit interest
provisions in ss. 78–82 have no application. In a resale
transaction, there will be only one closing, as opposed to
the two-stage closing often used for closing unit purchases
in newly constructed buildings.
6.2 The primary role of the condominium
status certificate
6.2.1 Issues for buyers of resale units
Among the major concerns of resale unit buyers and their
mortgage lenders are the financial status of the
condominium corporation and any liabilities of the unit
owner to the corporation. If a corporation has a poor
financial outlook, a buyer can expect significant future
increases in common expenses, the possibility of a special
assessment against all unit owners, and perhaps a
declining unit market value due to deteriorating physical
conditions. An unsound financial condition may signify
poor management or structural problems with the
building. Mortgage lenders have the same concerns, for
similar reasons.
6.2.2 The status certificate: content
A primary source of statutory protection for buyers of
resale condominium units is found in s. 76 of the Act: the
status certificate, which a condominium corporation must
provide in statutory form for a particular unit or units to a
person who requests one. A status certificate can be relied
on as a source of more or less full disclosure of the
financial condition of the corporation. Subsection 76(1) of
the Act sets out in clauses (a)–(s) the information to be
contained in or attached to the status certificate, including
financial, organizational, and other information about the
condominium corporation. Accompanying the status
certificate are copies of the declaration, by-laws, rules,
current budget, most recent annual audited financial
statements, most recent reserve fund study, insurance,
and other documents of the corporation. By s. 76(6), the
status certificate binds the corporation with respect to the
information that it contains as against a purchaser or
mortgagee of a unit who relies on the certificate.
6.2.3 The status certificate: some issues
to look for
Of particular interest to buyers will be the following issues,
among others:
ƒ Do the unit legal descriptions in the certificate
correspond to the dwelling, parking, and locker
units being purchased?
ƒ Are the payments of common expenses up to date?
ƒ Is there or will there be a special assessment?
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ƒ Does the certificate confirm or contradict the
representations made by the seller in paras. 13 and
15 of the OREA resale condominium agreement?
ƒ If the condominium corporation is a party to a
lawsuit,
— what is the claim for?
— is the corporation, if a defendant, insured for
the full amount of the claim?
— if the claim is for breach of contract or some
other uninsured matter, what is the subject
matter and the amount of the claim, and what
is the ultimate worst-case potential liability for
damages and legal costs?
Currently, the Act is silent about the extent to which
a corporation must disclose details of lawsuits.
Bill 106 adds to s. 76(1) a requirement that the
certificate disclose the financial implications, as
may be prescribed, of any judgments and legal
actions (s. 76(1)(h.1)).
If an uninsured settlement or judgment against the
corporation ensues, all unit owners will have to pay
their pro rata portion possibly by way of large
special assessments of every unit. Buyers must be
sure they will not be exposed to such unknown
liabilities.
ƒ Is the reserve fund study more than three years old?
These studies must be updated every three years,
but boards sometimes are careless about this or
slow in implementing recommendations—a sign of
poor management, or worse, of concealment of
problems.
ƒ What does the last reserve fund study state
regarding future increases of the reserve fund? The
notes to the financial statements that accompany
the status certificate will indicate if the
condominium corporation has been complying with
the contribution levels set out in the reserve fund
study.
ƒ Is there a s. 98 agreement in place relating to
alterations to the common elements made by the
seller or a prior owner of the unit? Are there any
unauthorized physical changes in the unit or to the
common elements, such as the removal or
installation of walls or new plumbing, electrical
work, or flooring materials? Many status certificates
warn about this possibility and that the corporation
has not made a recent inspection of the unit. There
is no statutory obligation requiring the corporation
to inspect all units periodically. Unless the buyer in
the agreement requires the unit to be inspected by
the corporation at the outset, the buyer cannot
know whether the seller made changes to the unit or
the common elements in breach of the Act and
declaration. See “Additions to a unit’s common
expenses (‘chargebacks’),” below, and for an
example of the consequences, see “The overriding
importance of details,” above.
ƒ Is a large percentage of the units leased to tenants?
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ƒ Is the condominium proposing to make substantial
changes to the common elements that have not yet
been implemented?
ƒ Is the condominium corporation a party to any
mutual use agreement(s)? If so, a copy of such
agreement(s) should be obtained and reviewed as
part of the title search.
As earlier noted, the Condominium Authority of Ontario
maintains a public register for all condominium
corporations in Ontario. The registry is free and can be
searched by the general public. It is prudent to compare
the information set out in the status certificate with that
set out in the public registry for the condominium
corporation, since inconsistencies between the public
registry and the status certificate may be a red flag
regarding the management and/or operation of the
condominium corporation (each condominium
corporation is required to maintain the public registry
current and to update the registry in the event of any
changes to the composition of the board of directors
and/or property manager).
6.2.4 Protecting the buyer: making the
transaction conditional
How, then, can a lawyer retained by a buyer at the outset
help to protect the buyer’s best interests?
The information in a status certificate will be far more
useful to the buyer before an agreement becomes firm and
binding, since a fully informed decision about a purchase
can only be made with a certificate. It has therefore
become the routine, prudent practice for lawyers and real
estate agents to add a condition precedent to the OREA
condominium form of agreement, whereby the seller must
deliver a status certificate to the buyer or buyer’s lawyer
within 10 days (pursuant to s. 76(3) of the Act; for timing
see s. 89(1) of the Legislation Act, 2006). The buyer’s
solicitor will need time after receipt to review it with the
buyer, so the condition precedent usually adds an
additional two or three days. See Appendix B of
Chapter 47 (Agreement of purchase and sale) of these
Study Materials for an example of such a condition
precedent.
Having received the full disclosure provided by the status
certificate and appropriate legal advice, the buyer can
then, on the basis of the condition precedent, proceed or
decline to proceed with the transaction based upon full
knowledge of the current legal and financial status of the
condominium corporation.
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6.3 Additions to a unit’s common expenses
(“chargebacks”)
6.3.1 What is a chargeback?
The generic term “chargeback” generally refers to charges
that a condominium is entitled to recover from a unit
owner in addition to the regular monthly payments of
common expenses. A chargeback may be small or may, in
some situations, be hundreds of thousands of dollars. If a
chargeback has not been paid by the unit owner, it may
appear in a status certificate as a category of common
expenses in arrears.
Chargebacks arise from certain provisions of the Act, some
of which will be modified by Bill 106. The following are
examples:
ƒ Subsection 92(4) allows a corporation to chargeback
to the unit owners the cost of repairs that the owner
fails to carry out and that are done by the
condominium corporation as a result.
ƒ Section 98 authorizes agreements between the
corporation and unit owners that allow unit owners
to modify certain common elements.
Subsection 98(4) (or s. 98(5) in Bill 106) allows a
corporation to charge costs, charges, interest, and
expenses to an owner who fails to comply with such
an agreement.
ƒ Subsection 105(2) allows a corporation to charge
certain repair costs, or the insurance deductible
paid by the corporation, to an owner who causes
damage that is insured by the corporation’s
insurance policy.
ƒ If a corporation obtains a court order compelling a
unit owner, for example, to comply with provisions
of the condominium’s declaration, by-laws, or rules,
s. 134(5) (or s. 135.1(3) in Bill 106) authorizes
corporations to add damages awards and related
costs made against the owner to the unit’s common
expenses.
The regulations to implement Bill 106, when published,
may add further examples.
6.3.2 Enforcement of chargebacks
As regards enforcement of chargebacks by the corporation
under the current Act, s. 84(1) provides that, “Subject to
the other provisions of this Act, the owners shall
contribute to the common expenses in the proportions
specified in the declaration.” Sections 85–86 create the
condominium lien for common expenses and detail the
methods of enforcement. Until recently, a unit owner had
to resort to a court proceeding to dispute chargebacks.
However, as of October 1, 2020, chargebacks that relate to
matters that fall within the jurisdiction of the
Condominium Authority Tribunal (namely, chargebacks
arising from disputes relating to pets, parking, vehicles,
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storage of items in units or the common elements, and
nuisances or disruptions that fall under s. 117(2) of the
Act) can be challenged by a unit owner by application to
the Tribunal within 30 days of receiving notice from the
condominium corporation that the chargeback amount
has been added to the owner’s unit ledger. For
chargebacks relating to all other disputes (until the
regulations set out below to implement Bill 106 are
proclaimed), the unit owner cannot withhold payment of
the chargeback notwithstanding the commencement of
court proceedings to dispute the chargeback.
Bill 106 adds ss. 84(4)–(11) to the Act. These subsections
will create a new procedure for owners to dispute
chargebacks, which can be partly summarized as follows:
ƒ Subsection 84(4): Upon adding a chargeback (a
“prescribed addition”) to a unit’s common expenses,
the corporation gives the unit owner a prescribed
notice within 15 days.
ƒ Clause 84(5)(a): The owner has 30 days to pay the
chargeback.
ƒ Clause 84(5)(b): If the owner transfers the unit
within the 30 days, the owner must ensure that the
chargeback amount is held in escrow after the
closing and subsequently paid to the corporation.
ƒ Subsection 84(6): If the owner wants to dispute the
chargeback, the owner may bring an application to
the Superior Court of Justice or the Condominium
Authority Tribunal, as the case may be.
ƒ Subsection 84(10): An owner who does not comply
with s. 84(5)(b) shall be deemed to have been in
default of the obligation to contribute to the
common expenses payable for the owner’s unit with
respect to the amount of the addition.
The Ontario Divisional Court decision in Amlani v. YYC
473 confirms that condominium corporations have an
obligation to act reasonably when dealing with
chargebacks. In Amlani, the condominium corporation
attempted to recover the legal costs that it had incurred in
attempting to obtain a unit owner’s compliance with its
governing documents. The condominium registered a lien
on the owner’s unit, notwithstanding that it had not
obtained a court compliance order. The unit owner
commenced an application to have the lien removed and
to prevent the condominium corporation from charging
back the cost to the owner’s unit. The court found that the
interpretation advanced by the condominium corporation
of the indemnification provision in its declaration was
unreasonable and invalid, as it was contrary to s. 134(5) of
the Act because the costs that the condominium
corporation was trying to charge back related to
compliance and enforcement costs that were not
embodied in a court order. Whether the Amlani decision
prevents all chargebacks without a compliance order
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pursuant to s. 134(5) remains up for debate in the
industry, but the consensus is that condominium
corporations must act reasonably when dealing with
chargebacks and must carefully review the
indemnification provision in the declaration to determine
the costs that can be charged back to unit owners.
6.3.3 Protecting the buyer against arrears
and chargebacks
The buyer’s lawyer will need to ensure that the unit, at
closing, is not subject to a new default by the seller in
paying common expenses, nor to new chargeback claims
(including disputed chargeback claims), that arise after
the date of the buyer’s status certificate. Weeks or months
may pass between the date of the original certificate and
the closing date. How can the buyer know whether any
new arrears, chargebacks, or other issues have arisen
between the date of the original certificate and the closing
date?
(a) Rely on the registered title?
Every default in paying common expenses gives rise to a
lien under s. 85(1) of the Act; however, a certificate of lien
must be registered within three months of the date the
arrears first arise. Accordingly, the buyer cannot rely on
the registered title on the closing date to confirm that no
new default of the seller’s obligations to the corporation
has arisen since the date of the buyer’s original status
certificate.
(b) Obtain a seller’s statutory declaration?
The buyer’s lawyer should require the seller to provide at
closing a statutory declaration stating that all common
expenses have been paid in full and that the seller has not
received notice of and does not know of any new special
assessments, chargebacks, or any claims that could result
in chargebacks under s. 84. This is not a complete
solution. It is always much preferable also to obtain this
information from the condominium corporation.
(c) Order a new status certificate?
One simple solution is to order and pay for a new status
certificate well before closing, with a request that the new
certificate be dated as of the closing date and be available
to the lawyer as early as possible on that date and no later
than noon or thereabouts. Some corporations may try to
comply with this, but may want an additional fee. Others
will comply only with s. 76.
(d) Request an update of the existing status
certificate?
The common practice until now has been for the buyer’s
lawyer to contact the corporation on the morning of the
closing date, to request an “update” of the buyer’s
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certificate. Such requests are usually made orally, on a “hit
or miss” basis. The process is problematic, especially at or
near popular closing dates:
ƒ Property managers may be overwhelmed by too
many such requests at the same time.
ƒ There is no statutory obligation on the corporation
to update the certificate nor to do so in writing
except with a status certificate.
ƒ There is no certainty that up-to-date information
will be in the corporation’s records when the
request is made.
ƒ It is not clear from Bill 106 that disputed
chargeback claims will have to be disclosed by the
corporation (although hopefully the new regulations
will address this).
(e) Ask the seller’s lawyer?
If a seller’s lawyer knows about new arrears, a chargeback,
or a dispute, that lawyer appears to have no obligation to
provide it under either the current Act or Bill 106, unless
the new regulations will impose this requirement. There is
as yet no clear answer to this.
(f) Rely on title insurance?
Title insurance is an important last resort for protecting
the buyer against a seller’s unpaid obligations to the
corporation, when a default of the seller slips through
undetected by the buyer’s lawyer.
6.4 Notification of closing
In connection with the completion of the purchase of a
resale condominium unit, s. 46.1(2) of the Act requires the
new owner to notify the corporation of the owner’s name
and unit numbers as soon as reasonably possible but
within 30 days after the closing. The corporation is
required by s. 46.1(3) to maintain records of unit owners
and certain mortgagees. The best practice is for the
solicitor to send the corporation by fax or email a letter
with this information and a copy of the registered transfer
immediately after the closing. Many property managers
will not allow a buyer access to the units without this
information. The buyer may also have to obtain new
electronic access devices for the common areas and
garages.
7. New condominium homes
Statutory provisions applicable to the purchase of newly
built condominium units can be found first in the
ONHWPA and, second, in the Act.
The ONHWPA is the subject of parts of Chapter 62
(Understanding a new home agreement of purchase and
sale) of these Study Materials. The present chapter looks
in detail at the disclosure requirements and 10-day
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rescission period of ss. 72–74, parts of s. 75, and ss. 78–82
of the Act.
7.1 The disclosure statement and Ontario’s
Residential Condominium Buyers Guide
Buyers of newly built condominium units have the benefit
of s. 72 of the Act, which requires a declarant to deliver to
buyers of new residential, commercial, industrial, and
retail condominiums a copy of the “current disclosure
statement” described in ss. 72(3)–(6). In addition, as of
January 1, 2021, s. 72 of the Act requires that declarants
provide to purchasers of residential pre-construction
condominium units with a copy of the “Ontario’s
Residential Condominium Buyers’ Guide” developed by
the Condominium Authority of Ontario and the Ministry
of Public and Business Service Delivery. Under s. 72(2), a
purchase agreement for a new condominium unit is not
binding on a buyer until the current disclosure statement
and the buyers’ guide is delivered to the buyer.
7.2 The disclosure statement: the current
Act
7.2.1 Contents — s. 72(3)
Subsection 72(3) of the Act sets out what the disclosure
statement must contain. Some of the mandatory contents
are as follows:
ƒ table of contents that complies with s. 72(4).
(Bill 106 substitutes for the table of contents a
summary document intended to make financial
disclosure more prominent, thorough, and
accurate.)
ƒ name and municipal address of the declarant and
the mailing address of the property.
ƒ general description of the property, including types
and number of units, and building, recreational, and
other amenities, together with all conditions
applying to the provision of such amenities.
ƒ statement indicating whether the property, or part
of it, is or may be subject to the ONHWPA.
ƒ portion of the units that the declarant intends to
market in blocks of units to investors.
ƒ statement of the portion of units (to the nearest
anticipated 25%) that the declarant intends to lease.
ƒ if construction of the amenities is not completed, a
schedule of the proposed commencement and
completion dates.
ƒ copies of the proposed declaration, by-laws, rules,
and insurance trust agreement.
ƒ brief description of the significant features of any
agreements described in ss. 111–114 and all
agreements or proposed agreements between the
condominium corporation and any other
corporation.
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ƒ copy of the budget statement described in s. 72(6).
This refers to the budget statement for the first
fiscal year of the condominium. (This budget
statement is the subject of extensive new provisions
in Bill 106.)
7.2.2 The first year budget — s. 72(6)
Under s. 72(6) of the Act, the following information is
required to be included in the budget statement referred
to in s. 72(3):
ƒ common expenses of the condominium corporation;
ƒ proposed amount of each expense of the
corporation, including the cost of the reserve fund
study required for the year and the cost of a
performance audit of the common elements under
s. 44 of the Act;
ƒ particulars of the type, frequency, and level of the
services to be provided;
ƒ statement of the projected monthly common
expense contribution for each type of unit;
ƒ portion of common expenses to be paid into a
reserve fund;
ƒ status of any pending lawsuits material to the
property of which the declarant has actual
knowledge;
ƒ amounts of all current or expected fees, charges,
rents, or other revenue to be paid to or by the
corporation or by any of the owners for the use of
the common elements or other facilities related to
the property;
ƒ services not included in the budget but that the
declarant provides, expenses that the declarant pays
that might reasonably be expected to become a
common expense, and the projected common
expense contribution attributable to each of those
services or expenses for each type of unit;
ƒ projected amounts in all reserve funds at the end of
the current fiscal year; and
ƒ summary of the most recent reserve fund study, if
any.
7.3 The disclosure statement: changes
under Bill 106
7.3.1 Bill 106 and the first-year budget
The applicable provisions of Bill 106 will, when
proclaimed in force, make a number of changes to the
content of the disclosure statement.
Perhaps the most requested changes relate to the s. 72(6)
budget statement. In the past, developers sometimes
understated the anticipated first-year budget and
common expenses to attract more buyers. Also, new
budget items that would first appear in the second-year
budget statement were omitted entirely. After a final
closing, buyers were dismayed to learn that (a) the
LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
THE PURCHASE AND SALE OF A CONDOMINIUM UNIT
developer’s first-year budget would run a deficit, which
the buyers would have to make up (because, for example,
the declarant is assetless); and (b) in the corporation’s
second financial year, additional expenses not included in
the developer’s first-year budget would further increase
the common expenses.
Many amendments to the disclosure requirements in
Bill 106 are aimed at preventing this practice and ensuring
complete and accurate financial disclosure in the future.
Considerable emphasis in the disclosure statement will
now be placed on the many factors that may increase the
common expenses of the new building and will penalize
developers for material changes appearing in the actual
first- and subsequent-years’ budgets.
7.3.2 Additions to the contents of the
disclosure statement
Among the changes that are key to implementing the goal
of better disclosure will be additions to the disclosure
statement and a new final closing requirement.
First, under s. 72(6)(i.1), the disclosure budget statement
will require a statement, prepared in accordance with the
regulations, as to whether there will be any increases, as
may be prescribed, in the actual first-year budget over and
above what is in the original disclosure statement and
setting particulars of those increases. This s. 72(6)(i.1)
statement probably refers to reasonably foreseeable
increases. For example, a salary in the disclosure budget
statement may be expected to increase by 2% per year, so
this potential increase may appear in the s. 72(6)(i.1)
statement.
New to the disclosure statement, there will be two
statements dealing with increases after the first fiscal year
of the corporation. Under s. 72(3)(q.1), the disclosure
statement shall include a statement, prepared in
accordance with the regulations, of the circumstances, as
may be prescribed, that a declarant knows or ought to
know may result in an increase in the common expenses
mentioned in any part of s. 72(6) after the one-year
period immediately following the registration of the
declaration and description. Clause 72(3)(q.2) will also
require a statement, prepared in accordance with the
regulations, of the amount of any potential increase
mentioned in s. 72(3)(q.1) that is likely to take place as a
result of any of the circumstances mentioned therein. For
example, a building’s elevators may not be expected to
incur any maintenance costs in the first fiscal year, but a
maintenance contract that begins in the second year
would add a large annual expense to the budgets in the
second and following years.
Third, s. 72.1 appears to provide the buyer with the means
to compare the s. 72(6) disclosure budget statement to the
LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
CHAPTER 59
actual first-year budget before the final closing date. It
provides that the declarant shall deliver to the purchaser,
no later than 10 days before delivering to the purchaser a
deed to the unit being purchased that is in registerable
form, a copy of the budget mentioned in s. 83.1(3), unless
the regulations provide otherwise. The ability to compare
the s. 72(6) disclosure budget statement to the s. 83.1 final
budget statement before the final closing date will provide
the basis for some of the buyer remedies discussed below.
Developers will want to avoid potential liability for
undisclosed prescribed increases or for anything else
resembling a “material change” that buyers could rely on
before the final closing to terminate their agreements, or
after the final closing to recover damages, under the
amendments in Bill 106. With this in mind, the
ss. 72(6)(i.1), 72(3)(q.1), and 72(3)(q.2) statements will
probably try to predict every conceivable future cost
increase that the corporation might incur during the
corporation’s first two fiscal years.
7.4 Buyers’ remedies
7.4.1 Statutory rescission in the first
10 days (cooling-off period)
Under s. 73 of the current Act, a buyer may rescind an
agreement within 10 days after the buyer receives copies
of the fully signed agreement, the disclosure statement,
and the buyers’ guide by giving written notice to the
declarant or its lawyer. The Act states in s. 73(2) that the
10-day period begins on the date the buyer receives the
last of (i) a proper disclosure statement, (ii) the buyers’
guide, and (iii) the fully signed agreement of purchase and
sale between the buyer and the developer.
A buyer may rescind the agreement within 10 days of
receipt of all the documents without any obligation to
provide any reason for so doing and is entitled to a refund
of all moneys paid to the developer. If a buyer wishes to
rescind the agreement, written notice of rescission is
required to be sent to the developer or the developer’s
lawyer within the aforementioned 10-day period.
7.4.2 Statutory rescission after a material
change
Section 74 of the current Act contains the basic principles
that (a) the disclosure statement must be amended to
reflect material changes in it, (b) buyers are entitled to
receive the amended disclosure statement, and (c) buyers
may be entitled to rescind their agreements in the event of
material changes.
Under the current Act, case law has developed around the
issue of what constitutes full and accurate disclosure
under the Act. Where buyers can establish to the
satisfaction of a Superior Court of Justice judge that
787
CHAPTER 59
(a) material information is missing or misstated in the
disclosure statement, and (b) they would likely not have
proceeded with the transaction but would have rescinded
the agreement within the 10-day time period had the
correct information been provided, they may be entitled to
treat the contract as non-binding. The onus is on the buyer
to establish in court that the missing or misstated
information is “material.”
Section 74(1) states as follows:
74.—(1) Whenever there is a material change in the
information contained or required to be contained in a
disclosure statement delivered to a purchaser under
subsection 72(1) or a revised disclosure statement or a
notice delivered to a purchaser under this section, the
declarant shall deliver a revised disclosure statement or
a notice to the purchaser.
Section 74(2) defines material change. Subsection 74(3)
then states that the revised disclosure statement or notice
required under s. 74(1) shall clearly identify all changes
that in the reasonable belief of the declarant may be
material changes and summarize the particulars of them.
Note that Bill 106 strengthens the language of s. 74(3).
Subsection 74(4) deals with the timing of the revised
disclosure. The declarant shall deliver the revised
disclosure statement or notice to the purchaser within a
reasonable time after the material change mentioned in
s. 74(1) occurs and, in any event, no later than 10 days
before the final closing date.
Subsection 74(5) gives a buyer the option of letting a judge
decide whether a material change has occurred:
74.—(5) Within 10 days after receiving a revised
disclosure statement or a notice under subsection (1), a
purchaser may make an application to the Superior
Court of Justice for a determination whether a change
or a series of changes set out in the statement or notice
is a material change.
Alternatively, a buyer may simply give notice of rescission
under s. 74(6).
Whether or not the buyer applies for an order, the
declarant has a corresponding right under s. 74(8) to
make an application to the court within 10 days of
receiving a buyer’s notice of rescission under s. 74(6) for a
determination as to whether the change or the series of
changes on which the buyer’s rescission is based
constitutes a material change, if the buyer has not already
made an application for such a determination under
s. 74(5).
7.4.3 Damages after a material change
Bill 106 will add ss. 74(11)–(12), which allow a buyer to
seek damages where a declarant fails to comply with the
s. 74 requirements as to disclosure of material changes to
788
REAL ESTATE
the original disclosure statement. Subsection 74(12)
provides the following:
74.—(12) The court, if satisfied that the declarant has,
without reasonable excuse, failed to comply with
subsection (1), (3), (4), (9) or (10),
(a) shall order that the declarant pay damages to the
person for the loss that the person incurred as a result
of the declarant’s acts of non-compliance with
subsection (1), (3), (4), (9) or (10), as the case may be;
(b) shall order that the declarant pay the person’s costs
of the application;
(c) may order the declarant to pay to the person an
additional amount not to exceed $10,000; and
(d) may order the declarant to comply with
subsection (1), (3), (4), (9) or (10), as the case may be.
7.5 Bill 106 and residential condominium
conversion projects
Chapter 62 of these Study Materials explains that a “new
home” is “a home not previously occupied, that is built by
a builder … .” There is, however, a list of exceptions to this
definition. One exception has been condominium
conversion projects. These are hybrid buildings in which
existing structures are partly demolished and rebuilt as
residential condominium units.
Bill 106 introduced amendments to create a limited new
home warranty for residential condominium conversion
projects. As of January 1, 2018, residential condominium
conversion projects are required to contain new additional
statements in the disclosure statement that pertain only to
conversion projects, which are set out in s. 72(3)(f.1),
including a statement that the project is a residential
condominium conversion project, a list of the pre-existing
elements, a copy of the pre-existing elements funds study,
and a statement that the one-year warranty relating to the
construction in a workman-like manner and free of defects
in materials does not apply to the pre-existing elements.
See Chapter 62 of these Study Materials for the details of
this subsection.
7.6 The two-stage closing
Most sale agreements for new condominium units in
Ontario require a two-stage closing procedure. At the first
stage, known as the “interim closing,” possession is
delivered to the buyer; and in the second stage, “final
closing,” registration as owner is provided. In some cases,
developers decide to dispense with the interim closing and
proceed only with the usual single closing when title is
conveyed.
7.6.1 The interim closing
Certain rights and obligations of the parties at an interim
closing are regulated by s. 80 of the Act. In the first stage,
LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
THE PURCHASE AND SALE OF A CONDOMINIUM UNIT
the buyer is required to take possession of the purchased
units on the interim closing date. Before the interim
closing can proceed, the buyer must complete an
inspection and sign a certificate of completion and
possession under the ONHWPA. Some closing documents
are usually exchanged between the buyer and seller at this
time, such as an “interim occupancy agreement,” an
interim statement of adjustments, and post-dated cheques
for the monthly occupancy payments. Keys are released to
the buyer, but title cannot yet be transferred.
The period of time between the interim closing date and
the final closing date is usually called the “interim
occupancy period.”
Under s. 80(4) of the Act, the declarant is entitled to
charge the buyer of a new unit a monthly occupancy fee
commencing on the date of interim occupancy, which may
not exceed the total of
ƒ if applicable, interest at the prescribed rate
calculated on a monthly basis on the unpaid balance
of the purchase price;
ƒ an amount reasonably estimated on a monthly basis
for the municipal taxes attributable to the unit being
purchased; and
ƒ the projected monthly common expense
contribution for the unit.
7.6.2 The final closing
The second stage of the closing occurs after the
condominium’s declaration and description have been
registered in the land titles office. At this stage, payment
of the balance of the purchase price to the seller is
completed, title is transferred to the buyer, the buyer’s
mortgage is registered, and further documents, including
a status certificate, will be exchanged by the parties. The
interim occupancy agreement terminates when the final
closing is completed.
The typical statement of adjustments prepared by the
seller for the final closing contains numerous price and
HST adjustments reflecting corresponding provisions set
out in the agreement. The buyer will be required to sign an
HST new home rebate application and supporting
documents to establish the buyer’s eligibility for such
rebates. Various other closing documents are exchanged
by the parties. The electronic transfer will be provided to
the buyer in registrable form in exchange for the balance
of the purchase price.
7.6.3 Why two stages?
Why is the two-stage closing procedure required? There
can be a lengthy delay between the time that the first units
become ready for occupancy, and the date that the land
titles office is ready to begin unit registrations. The builder
LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
CHAPTER 59
will not want completed units sitting empty when they
could be occupied and generating revenue. The interim
closings therefore begin after at least some of the dwelling
units and the common elements that serve those units are
approved for occupancy. For multi-storey buildings,
interim closings take place as groups of units become
ready for occupancy on a floor-by-floor basis, beginning
with the lower units and proceeding upward.
Every unit in a condominium plan must be approved for
occupancy by the municipality based on minimum legal
occupancy standards. In addition, the units must be
completed to a certain stage of completion (on the basis
set forth in regulations) before registration of the
condominium’s declaration and description can proceed
in the land titles office. The registration process itself can
be lengthy, since the regulations contain many
requirements that must be met, particularly for the
description, before registration can take place. When the
declaration and description are approved and registered
and the unit registers have been created, final closings can
proceed.
7.7 Statutory protections before and during
the interim occupancy period
Under s. 81(1) of the Act, deposit payments by a buyer of a
new condominium unit (a “proposed unit”) to the
declarant as part of the purchase price must be held in
trust by a trustee of a prescribed class or by the declarant’s
solicitor. Deposits paid for upgraded finishes and fixtures
also constitute trust funds if those upgrades were sold by
the declarant. Within 10 days of each deposit cheque being
cashed, the declarant must provide the buyer with a notice
of receipt for that deposit, specifying the bank address and
account number where the moneys are held.
The deposits must be held in trust until they can be
disbursed either to the declarant under s. 81(7) after the
buyer has acquired title or to whichever party is entitled to
the money if the transaction is not completed. Prescribed
security, being a deposit receipt under the ONHWPA (for
the first $20,000) and delivery of an insurance policy (for
amounts in excess of $20,000), can be obtained by the
declarant pursuant to s. 81(7), in which case the deposits
may be released to the declarant from trust.
Under s. 82 of the Act, buyers will receive interest at the
“prescribed rate” on purchase money paid to the declarant
from the date that the money is paid until the date of the
interim closing. The “prescribed rate” is defined in s. 19(2)
of General and has been nil for a number of years, which
has resulted in buyers not being entitled to interest on
their deposit moneys during this period. As the Bank of
Canada minimum rate for short-term advances rises,
789
CHAPTER 59
buyers may begin to receive interest on purchase money
paid to the declarant.
Under s. 80(3) of the Act, the buyer may, during the 10­
day rescission period provided for by s. 73(2), elect to pay
in full on the date of the interim closing the full balance
(after deducting the deposits paid by the buyer) of the
purchase price before taking possession. In this way,
buyers can, if they wish and they have the financial ability
to do so, eliminate the interest component of the monthly
790
REAL ESTATE
interim occupancy fee, which can entail significant
savings. See “The interim closing,” above.
7.8 Industrial, office, and retail
condominium transactions
The disclosure requirements, trust provisions, buyers’
entitlement to interest on purchase moneys up until
interim occupancy closing, and ceiling on interim
occupancy charges apply not only to new residential unit
purchases but also to non-residential new unit purchases.
LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
THE PURCHASE AND SALE OF A CONDOMINIUM UNIT CHAPTER 59

APPENDIX A
Agreement of Purchase and Sale — Condominium Resale
OREA Standard Form 101 and the copyright therein are owned by the Ontario Real Estate Association (“OREA”). Except as
otherwise authorized by OREA, permission to use this Form is granted to members of OREA only and all unauthorized use and
reproduction of this Form is prohibited. OREA makes no representations or warranties regarding the Form, including the
completeness or accuracy thereof and/or its fitness for any particular transaction. OREA has no liability to any person under any
theory of liability (including in contract or tort or negligence) for use (or misuse) of the Form in any transaction.

LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION 791

 Agreement of Purchase and Sale
Condominium Resale
Form 101
for use in the Province of Ontario

This Agreement of Purchase and Sale dated this ........................ day of ................................................................................................... 20............

BUYER: ......................................................................................................................................................................., agrees to purchase from

(Full legal names of all Buyers)

SELLER: ......................................................................................................................................................................................, the following

(Full legal names of all Sellers)
PROPERTY:

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a unit in the condominium property known as ....................................................................................................................... No..........................

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(Apartment/Townhouse/Suite/Unit)

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located at ........................................................................................................................................................................................................

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in the ...............................................................................................................................................................................................................

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being ..................................................................................................................... Condominium Plan No ........................................................

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(Legal Name of Condominium Corporation)

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Unit Number .................................................. Level No. ....................................... Building No. ..................................... together with ownership

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or exclusive use of Parking Space(s) ...................................................................................................., together with ownership or exclusive use of

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(Number(s), Level(s))

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Locker(s) ................................................................................................., together with Seller’s proportionate undivided tenancy-in-common interest
(Number(s), Level(s)) ut
in the common elements appurtenant to the Unit as described in the Declaration and Description including the exclusive right to use such other parts of
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the common elements appurtenant to the Unit as may be specified in the Declaration and Description: the Unit, the proportionate interest in the common
elements appurtenant thereto, and the exclusive use portions of the common elements, being herein called the “Property”.
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PURCHASE PRICE: Dollars (CDN$) ..........................................

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............................................................................................................................................................................................................. Dollars
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DEPOSIT: Buyer submits ...................................................................................................................................................................................

(Herewith/Upon Acceptance/as otherwise described in this Agreement)
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..................................................................................................................................................... Dollars (CDN$) ..........................................

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by negotiable cheque payable to ............................................................................................................................. “Deposit Holder” to be held

in trust pending completion or other termination of this Agreement and to be credited toward the Purchase Price on completion. For the purposes of this
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Agreement, “Upon Acceptance” shall mean that the Buyer is required to deliver the deposit to the Deposit Holder within 24 hours of the acceptance of
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this Agreement. The parties to this Agreement hereby acknowledge that, unless otherwise provided for in this Agreement, the Deposit Holder shall place
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the deposit in trust in the Deposit Holder’s non-interest bearing Real Estate Trust Account and no interest shall be earned, received or paid on the deposit.
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Buyer agrees to pay the balance as more particularly set out in Schedule A attached.
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SCHEDULE(S) A..............................................................................................................attached hereto form(s) part of this Agreement.

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1. IRREVOCABILITY: This offer shall be irrevocable by ..................................................................... until ............................ on the ................
(Seller/Buyer) (a.m./p.m.)

day of ...................................................................................................... 20 ........., after which time, if not accepted, this offer shall be null
and void and the deposit shall be returned to the Buyer in full without interest.

2. COMPLETION DATE: This Agreement shall be completed by no later than 6:00 p.m. on the .......... day of ......................................................,

20 ............... Upon completion, vacant possession of the property shall be given to the Buyer unless otherwise provided for in this Agreement.

INITIALS OF BUYER(S): INITIALS OF SELLER(S):

The trademarks REALTOR®, REALTORS®, MLS®, Multiple Listing Services® and associated logos are owned or controlled by
The Canadian Real Estate Association (CREA) and identify the real estate professionals who are members of CREA and the
quality of services they provide. Used under license.
© 2023, Ontario Real Estate Association (“OREA”). All rights reserved. This form was developed by OREA for the use and reproduction
by its members and licensees only. Any other use or reproduction is prohibited except with prior written consent of OREA. Do not alter
when printing or reproducing the standard pre-set portion. OREA bears no liability for your use of this form. Form 101 Revised 2023 Page 1 of 6
3. NOTICES: The Seller hereby appoints the Listing Brokerage as agent for the Seller for the purpose of giving and receiving notices pursuant to this
Agreement. Where a Brokerage (Buyer’s Brokerage) has entered into a representation agreement with the Buyer, the Buyer hereby appoints the
Buyer’s Brokerage as agent for the purpose of giving and receiving notices pursuant to this Agreement. Where a Brokerage represents both
the Seller and the Buyer (multiple representation), the Brokerage shall not be appointed or authorized to be agent for
either the Buyer or the Seller for the purpose of giving and receiving notices. Any notice relating hereto or provided for herein shall
be in writing. In addition to any provision contained herein and in any Schedule hereto, this offer, any counter-offer, notice of acceptance thereof
or any notice to be given or received pursuant to this Agreement or any Schedule hereto (any of them, “Document”) shall be deemed given and
received when delivered personally or hand delivered to the Address for Service provided in the Acknowledgement below, or where a facsimile
number or email address is provided herein, when transmitted electronically to that facsimile number or email address, respectively, in which case,
the signature(s) of the party (parties) shall be deemed to be original.

FAX No.: ...................................................................................... FAX No.: ..........................................................................................

(For delivery of Documents to Seller) (For delivery of Documents to Buyer)

d.
Email Address: .............................................................................. Email Address: ..................................................................................
(For delivery of Documents to Seller) (For delivery of Documents to Buyer)

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4. CHATTELS INCLUDED:.............................................................................................................................................................................

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Unless otherwise stated in this Agreement or any Schedule hereto, Seller agrees to convey all fixtures and chattels included in the Purchase Price free

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from all liens, encumbrances or claims affecting the said fixtures and chattels.
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5. FIXTURES EXCLUDED:.............................................................................................................................................................................
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6. RENTAL ITEMS (Including Lease, Lease to Own): The following equipment is rented and not included in the Purchase Price. The Buyer ` agrees
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to assume the rental contract(s), if assumable:

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The Buyer agrees to co-operate and execute such documentation as may be required to facilitate such assumption.
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7. COMMON EXPENSES: Seller warrants to Buyer that the common expenses presently payable to the Condominium Corporation in respect of the
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Property are approximately $ ............................... per month, which amount includes the following: ................................................................
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................................................................................................................................................................................................................

................................................................................................................................................................................................................

8. PARKING AND LOCKERS: Parking and Lockers are as described above or assigned as follows: .....................................................................

....................................................................................... at an additional cost of: ......................................................................................

INITIALS OF BUYER(S): INITIALS OF SELLER(S):

The trademarks REALTOR®, REALTORS®, MLS®, Multiple Listing Services® and associated logos are owned or controlled by
The Canadian Real Estate Association (CREA) and identify the real estate professionals who are members of CREA and the
quality of services they provide. Used under license.
© 2023, Ontario Real Estate Association (“OREA”). All rights reserved. This form was developed by OREA for the use and reproduction
by its members and licensees only. Any other use or reproduction is prohibited except with prior written consent of OREA. Do not alter
when printing or reproducing the standard pre-set portion. OREA bears no liability for your use of this form. Form 101 Revised 2023 Page 2 of 6
9. HST: If the sale of the Property (Real Property as described above) is subject to Harmonized Sales Tax (HST), then such tax shall be

............................................................... the Purchase Price. If the sale of the Property is not subject to HST, Seller agrees to certify on or before
(included in/in addition to)
closing, that the sale of the Property is not subject to HST. Any HST on chattels, if applicable, is not included in the Purchase Price.

10. TITLE SEARCH: Buyer shall be allowed until 6:00 p.m. on the .............. day of ......................................................., 20......., (Requisition Date)
to examine the title to the Property at Buyer’s own expense and until the earlier of: (i) thirty days from the later of the Requisition Date or the date
on which the conditions in this Agreement are fulfilled or otherwise waived or; (ii) five days prior to completion, to satisfy Buyer that there are no

outstanding work orders or deficiency notices affecting the Property, and that its present use (.............................................................................)
may be lawfully continued. If within that time any valid objection to title or to any outstanding work order or deficiency notice, or to the fact the said
present use may not lawfully be continued, is made in writing to Seller and which Seller is unable or unwilling to remove, remedy or satisfy or obtain
insurance save and except against risk of fire (Title Insurance) in favour of the Buyer and any mortgagee, (with all related costs at the expense of the
Seller), and which Buyer will not waive, this Agreement notwithstanding any intermediate acts or negotiations in respect of such objections, shall be

d.
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

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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 the title, Buyer
shall be conclusively deemed to have accepted Seller’s title to the Property. Seller hereby consents to the municipality or other governmental agencies

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releasing to Buyer details of all outstanding work orders and deficiency notices affecting the Property, and Seller agrees to execute and deliver such

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further authorizations in this regard as Buyer may reasonably require.

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11. TITLE: Buyer agrees to accept title to the Property subject to all rights and easements registered against title for the supply and installation of
telecommunication services, electricity, gas, sewers, water, television cable facilities and other related services; provided that title to the Property is

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otherwise good and free from all encumbrances except: (a) as herein expressly provided; (b) any registered restrictions, conditions or covenants that

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run with the land provided such have been complied with; (c) the provisions of the Condominium Act and its Regulations and the terms, conditions
and provisions of the Declaration, Description and By-laws, Occupancy Standards By-laws, including the Common Element Rules and other Rules and

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Regulations; and (d) any existing municipal agreements, zoning by-laws and/or regulations and utilities or service contracts.

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12. CLOSING ARRANGEMENTS: Where each of the Seller and Buyer retain a lawyer to complete the Agreement of Purchase and Sale of the Property,

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and where the transaction will be completed by electronic registration pursuant to Part III of the Land Registration Reform Act, R.S.O. 1990, Chapter
L4 and the Electronic Registration Act, S.O. 1991, Chapter 44, and any amendments thereto, the Seller and Buyer acknowledge and agree that
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the exchange of closing funds, nonregistrable documents and other items (the “Requisite Deliveries”) and the release thereof to the Seller and Buyer
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will (a) not occur at the same time as the registration of the transfer/deed (and any other documents intended to be registered in connection with the
completion of this transaction) and (b) be subject to conditions whereby the lawyer(s) receiving any of the Requisite Deliveries will be required to hold
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same in trust and not release same except in accordance with the terms of a document registration agreement between the said lawyers. The Seller
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and Buyer irrevocably instruct the said lawyers to be bound by the document registration agreement which is recommended from time to time by the
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Law Society of Ontario. Unless otherwise agreed to by the lawyers, such exchange of Requisite Deliveries shall occur by the delivery of the Requisite
Deliveries of each party to the office of the lawyer for the other party or such other location agreeable to both lawyers.
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13. STATUS CERTIFICATE AND MANAGEMENT OF CONDOMINIUM: Seller represents and warrants to Buyer that there are no special assessments
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contemplated by the Condominium Corporation, and there are no legal actions pending by or against or contemplated by the Condominium
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Corporation. The Seller consents to a request by the Buyer or the Buyer’s authorized representative for a Status Certificate from the Condominium
Corporation. Buyer acknowledges that the Condominium Corporation may have entered into a Management Agreement for the management of the
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condominium property.
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14. DOCUMENTS AND DISCHARGE: Buyer shall not call for the production of any title deed, abstract, survey or other evidence of title to the Property
except such as are in the possession or control of Seller. Seller agrees to deliver to Buyer, if it is possible without incurring any costs in so doing,
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copies of all current condominium documentation of the Condominium Corporation, including the Declaration, Description, By-laws, Common Element
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Rules and Regulations and the most recent financial statements of the Condominium Corporation. If a discharge of any Charge/Mortgage held by a
corporation incorporated pursuant to the Trust And Loan Companies Act (Canada), Chartered Bank, Trust Company, Credit Union, Caisse Populaire
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or Insurance Company and which is not to be assumed by Buyer on completion, is not available in registrable form on completion, Buyer agrees to
or

accept Seller’s lawyer’s personal undertaking to obtain, out of the closing funds, a discharge in registrable form and to register same, or cause same
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to be registered, on title within a reasonable period of time after completion, provided that on or before completion Seller shall provide to Buyer a
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mortgage statement prepared by the mortgagee setting out the balance required to obtain the discharge, and, where a real-time electronic cleared
funds transfer system is not being used, a direction executed by Seller directing payment to the mortgagee of the amount required to obtain the
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discharge out of the balance due on completion.

15. MEETINGS: Seller represents and warrants to Buyer that at the time of the acceptance of this Offer the Seller has not received a notice convening
a special or general meeting of the Condominium Corporation respecting; (a) the termination of the government of the condominium property; (b)
any substantial alteration in or substantial addition to the common elements or the renovation thereof; OR (c) any substantial change in the assets or
liabilities of the Condominium Corporation; and Seller covenants that if Seller receives any such notice prior to the date of completion Seller shall
forthwith notify Buyer in writing and Buyer may thereupon at Buyer’s option declare this Agreement to be null and void and all monies paid by Buyer
shall be refunded without interest or deduction.

INITIALS OF BUYER(S): INITIALS OF SELLER(S):

The trademarks REALTOR®, REALTORS®, MLS®, Multiple Listing Services® and associated logos are owned or controlled by
The Canadian Real Estate Association (CREA) and identify the real estate professionals who are members of CREA and the
quality of services they provide. Used under license.
© 2023, Ontario Real Estate Association (“OREA”). All rights reserved. This form was developed by OREA for the use and reproduction
by its members and licensees only. Any other use or reproduction is prohibited except with prior written consent of OREA. Do not alter
when printing or reproducing the standard pre-set portion. OREA bears no liability for your use of this form. Form 101 Revised 2023 Page 3 of 6
16. INSPECTION: Buyer acknowledges having had the opportunity to inspect the Property and understands that upon acceptance of this offer there shall
be a binding agreement of purchase and sale between Buyer and Seller. The Buyer acknowledges having the opportunity to include a
requirement for a property inspection report in this Agreement and agrees that except as may be specifically provided for in
this Agreement, the Buyer will not be obtaining a property inspection or property inspection report regarding the Property.

17. APPROVAL OF THE AGREEMENT: In the event that consent to this sale is required to be given by the Condominium Corporation or the Board of
Directors, the Seller will apply forthwith for the requisite consent, and if such consent is refused, then this Agreement shall be null and void and the
deposit monies paid hereunder shall be refunded without interest or other penalty to the Buyer.

18. INSURANCE: The Unit and all other things being purchased shall be and remain at the risk of the Seller until completion. In the event of substantial
damage to the Property Buyer may at Buyer’s option either permit the proceeds of insurance to be used for repair of such damage in accordance
with the provisions of the Insurance Trust Agreement, or terminate this Agreement and all deposit monies paid by Buyer hereunder shall be refunded
without interest or deduction. If Seller is taking back a Charge/Mortgage, or Buyer is assuming a Charge/Mortgage, Buyer shall supply Seller with
reasonable evidence of adequate insurance to protect Seller’s or other mortgagee’s interest on completion.

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19. DOCUMENT PREPARATION: The Transfer/Deed shall, save for the Land Transfer Tax Affidavit, be prepared in registrable form at the expense of

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Seller, and any Charge/Mortgage to be given back by the Buyer to Seller at the expense of the Buyer.

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20. RESIDENCY: (a) Subject to (b) below, the Seller represents and warrants that the Seller is not and on completion will not be a non-resident under the

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non-residency provisions of the Income Tax Act which representation and warranty shall survive and not merge upon the completion of this transaction
and the Seller shall deliver to the Buyer a statutory declaration that Seller is not then a non-resident of Canada; (b) provided that if the Seller is a

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non-resident under the non-residency provisions of the Income Tax Act, the Buyer shall be credited towards the Purchase Price with the amount, if any,
necessary for Buyer to pay to the Minister of National Revenue to satisfy Buyer’s liability in respect of tax payable by Seller under the non-residency

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provisions of the Income Tax Act by reason of this sale. Buyer shall not claim such credit if Seller delivers on completion the prescribed certificate.

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21. ADJUSTMENTS: Common Expenses; realty taxes, including local improvement rates; mortgage interest; rentals; unmetered public or private utilities

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and fuel where billed to the Unit and not the Condominium Corporation; are to be apportioned and allowed to the day of completion, the day of
completion itself to be apportioned to the Buyer. There shall be no adjustment for the Seller’s share of any assets or liabilities of the Condominium

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Corporation including any reserve or contingency fund to which Seller may have contributed prior to the date of completion.

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22. PROPERTY ASSESSMENT: The Buyer and Seller hereby acknowledge that the Province of Ontario has implemented current value assessment
and properties may be re-assessed on an annual basis. The Buyer and Seller agree that no claim will be made against the Buyer or Seller, or any
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Brokerage, Broker or Salesperson, for any changes in property tax as a result of a re-assessment of the Property, save and except any property taxes
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that accrued prior to the completion of this transaction.
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23. TIME LIMITS: Time shall in all respects be of the essence hereof provided that the time for doing or completing of any matter provided for herein may be
extended or abridged by an agreement in writing signed by Seller and Buyer or by their respective lawyers who may be specifically authorized in that regard.
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24. TENDER: Any tender of documents or money hereunder may be made upon Seller or Buyer or their respective lawyers on the day set for completion.
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Money shall be tendered with funds drawn on a lawyer’s trust account in the form of a bank draft, certified cheque or wire transfer using the Lynx
high value payment system as set out and prescribed by the Canadian Payments Act (R.S.C., 1985, c. C-21), as amended from time to time.
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25. FAMILY LAW ACT: Seller warrants that spousal consent is not necessary to this transaction under the provisions of the Family Law Act, R.S.O. 1990
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unless the spouse of the Seller has executed the consent hereinafter provided.
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26. UFFI: Seller represents and warrants to Buyer that during the time Seller has owned the Property, Seller has not caused any building on the Property
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to be insulated with insulation containing urea formaldehyde, and that to the best of Seller’s knowledge no building on the Property contains or has
ever contained insulation that contains urea formaldehyde. This warranty shall survive and not merge on the completion of this transaction, and if the
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building is part of a multiple unit building, this warranty shall only apply to that part of the building which is the subject of this transaction.
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27. LEGAL, ACCOUNTING AND ENVIRONMENTAL ADVICE: The parties acknowledge that any information provided by the brokerage is not
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legal, tax or environmental advice.

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28. CONSUMER REPORTS: The Buyer is hereby notified that a consumer report containing credit and/or
or

personal information may be referred to in connection with this transaction.

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29. AGREEMENT IN WRITING: If there is conflict or discrepancy between any provision added to this Agreement (including any Schedule attached
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hereto) and any provision in the standard pre-set portion hereof, the added provision shall supersede the standard pre-set provision to the extent of such
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conflict or discrepancy. This Agreement including any Schedule attached hereto, shall constitute the entire Agreement between Buyer and Seller. There
is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein. For the purposes of this
Agreement, Seller means vendor and Buyer means purchaser. This Agreement shall be read with all changes of gender or number required by the context.

30. ELECTRONIC SIGNATURES: The parties hereto consent and agree to the use of electronic signatures pursuant to the Electronic Commerce Act,
2000, S.O. 2000, c17 as amended from time to time with respect to this Agreement and any other documents respecting this transaction.

31. TIME AND DATE: Any reference to a time and date in this Agreement shall mean the time and date where the Property is located.

INITIALS OF BUYER(S): INITIALS OF SELLER(S):

The trademarks REALTOR®, REALTORS®, MLS®, Multiple Listing Services® and associated logos are owned or controlled by
The Canadian Real Estate Association (CREA) and identify the real estate professionals who are members of CREA and the
quality of services they provide. Used under license.
© 2023, Ontario Real Estate Association (“OREA”). All rights reserved. This form was developed by OREA for the use and reproduction
by its members and licensees only. Any other use or reproduction is prohibited except with prior written consent of OREA. Do not alter
when printing or reproducing the standard pre-set portion. OREA bears no liability for your use of this form. Form 101 Revised 2023 Page 4 of 6
32. SUCCESSORS AND ASSIGNS: The heirs, executors, administrators, successors and assigns of the undersigned are bound by the terms herein.
SIGNED, SEALED AND DELIVERED in the presence of: IN WITNESS whereof I have hereunto set my hand and seal:

............................................................................... .......................................................................... .........................................

(Witness) (Buyer) (Seal) (Date)

............................................................................... ........................................................................... .........................................

(Witness) (Buyer) (Seal) (Date)

I, the Undersigned Seller, agree to the above offer. I hereby irrevocably instruct my lawyer to pay directly to the brokerage(s) with whom I have agreed
to pay commission, the unpaid balance of the commission together with applicable Harmonized Sales Tax (and any other taxes as may hereafter be
applicable), from the proceeds of the sale prior to any payment to the undersigned on completion, as advised by the brokerage(s) to my lawyer.
SIGNED, SEALED AND DELIVERED in the presence of: IN WITNESS whereof I have hereunto set my hand and seal:

............................................................................... ........................................................................... ..........................................

(Witness) (Seller) (Seal) (Date)

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............................................................................... ........................................................................... ..........................................

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(Witness) (Seller) (Seal) (Date)

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SPOUSAL CONSENT: The undersigned spouse of the Seller hereby consents to the disposition evidenced herein pursuant to the provisions of the Family
Law Act, R.S.O.1990, and hereby agrees to execute all necessary or incidental documents to give full force and effect to the sale evidenced herein.

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............................................................................... ........................................................................... ..........................................
(Witness) (Spouse) (Seal) (Date)

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CONFIRMATION OF ACCEPTANCE: Notwithstanding anything contained herein to the contrary, I confirm this Agreement with all changes both typed

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and written was finally accepted by all parties at .......................................... this ................. day of....................................................., 20...........
(a.m./p.m.)

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..................................................................................................
(Signature of Seller or Buyer)

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INFORMATION ON BROKERAGE(S)

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Listing Brokerage ....................................................................................................................... ...........................................................
ut (Tel.No.)
...............................................................................................................................................................................................................
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(Salesperson/Broker/Broker of Record Name)

Co-op/Buyer Brokerage ............................................................................................................. ...........................................................

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(Tel.No.)
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...............................................................................................................................................................................................................
(Salesperson/Broker/Broker of Record Name)
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Property Manager: ...................................................................................................................................................................................

(Name) (Address) (Tel. No., Fax. No.)
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ACKNOWLEDGEMENT
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I acknowledge receipt of my signed copy of this accepted Agreement of I acknowledge receipt of my signed copy of this accepted Agreement of
Purchase and Sale and I authorize the Brokerage to forward a copy to my lawyer. Purchase and Sale and I authorize the Brokerage to forward a copy to my lawyer.
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.......................................................................... ............................ ........................................................................ ...............................

(Seller) (Date) (Buyer) (Date)
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.......................................................................... ............................ ........................................................................ ...............................

(Seller) (Date) (Buyer) (Date)
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Address for Service ............................................................................ Address for Service ............................................................................

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........................................................ ............................................. ........................................................ .............................................

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(Tel. No.) (Tel. No.)

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Seller’s Lawyer ................................................................................... Buyer’s Lawyer ...................................................................................

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Address ............................................................................................ Address .............................................................................................

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Email ................................................................................................ Email ................................................................................................

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....................................................... .............................................. ....................................................... ........... ...................................

(Tel. No.) (Fax. No.) (Tel. No.) (Fax. No.)

FOR OFFICE USE ONLY COMMISSION TRUST AGREEMENT

To: Co-operating Brokerage shown on the foregoing Agreement of Purchase and Sale:
In consideration for the Co-operating Brokerage procuring the foregoing Agreement of Purchase and Sale, I hereby declare that all moneys received or receivable by me in
connection with the Transaction as contemplated in the MLS® Rules and Regulations of my Real Estate Board shall be receivable and held in trust. This agreement shall constitute
a Commission Trust Agreement as defined in the MLS® Rules and shall be subject to and governed by the MLS® Rules pertaining to Commission Trust.
DATED as of the date and time of the acceptance of the foregoing Agreement of Purchase and Sale. Acknowledged by:

....................................................................................................................... .............................................................................................
(Authorized to bind the Listing Brokerage) (Authorized to bind the Co-operating Brokerage)

The trademarks REALTOR®, REALTORS®, MLS®, Multiple Listing Services® and associated logos are owned or controlled by
The Canadian Real Estate Association (CREA) and identify the real estate professionals who are members of CREA and the
quality of services they provide. Used under license.
© 2023, Ontario Real Estate Association (“OREA”). All rights reserved. This form was developed by OREA for the use and reproduction
by its members and licensees only. Any other use or reproduction is prohibited except with prior written consent of OREA. Do not alter
when printing or reproducing the standard pre-set portion. OREA bears no liability for your use of this form. Form 101 Revised 2023 Page 5 of 6
 Schedule A
Agreement of Purchase and Sale –
Form 101 Condominium Resale
for use in the Province of Ontario

This Schedule is attached to and forms part of the Agreement of Purchase and Sale between:

BUYER: ..................................................................................................................................................................................................., and

SELLER: .........................................................................................................................................................................................................

for the purchase and sale of ..............................................................................................................................................................................

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........................................................................ dated the ................. day of .............................................................................., 20 ...............

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Buyer agrees to pay the balance as follows:

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This form must be initialled by all parties to the Agreement of Purchase and Sale.

INITIALS OF BUYER(S): INITIALS OF SELLER(S):

The trademarks REALTOR®, REALTORS®, MLS®, Multiple Listing Services® and associated logos are owned or controlled by
The Canadian Real Estate Association (CREA) and identify the real estate professionals who are members of CREA and the
quality of services they provide. Used under license.
© 2023, Ontario Real Estate Association (“OREA”). All rights reserved. This form was developed by OREA for the use and reproduction
by its members and licensees only. Any other use or reproduction is prohibited except with prior written consent of OREA. Do not alter
when printing or reproducing the standard pre-set portion. OREA bears no liability for your use of this form. Form 101 Revised 2023 Page 6 of 6

This chapter deals with real property owned by a deceased
person. We examine administrative issues, third-party
rights and claims to the real estate, professional
obligations of the lawyer for the estate trustee on a
conveyance of the real property, real estate issues under
the Family Law Act (FLA), conveyancing issues upon the
death of a joint tenant, and conveyancing where the
deceased dies with a will and without a will.
It is strongly recommended that you read all statutory
provisions referred to in this chapter.
1. Preliminary concerns
1.1 Terminology
 Estate trustee: Traditionally, an executor was a
personal representative of a deceased person who
was appointed in the will of the deceased. An
administrator was a court-appointed personal
representative of a deceased who died intestate. In
1995, RR. 74–75 of the Rules of Civil Procedure
(Rules) took effect and created the term “estate
trustee” to encompass an executor and
administrator. Various statutes and regulations,
however, continue to use all of these terms,
including the generic term “personal
representative.” And wills themselves are often
drafted to refer to the executors as “my trustees.”
These terms are, in practice, often used
interchangeably.
 Devise and bequest: “Devise” refers to a gift of real
property, and “bequest” to a gift of personal
property. In practice they are often used
interchangeably.
 Purchaser for value: This term is used as an
abridged version of the equitable concept of a bona
fide third party purchaser for value without notice,
that is, an innocent third party who purchases
personal or real property at market value without
constructive or actual notice of any other party’s
claim to the title.
 Spouse: Part II (matrimonial home) of the FLA
deals with spousal rights in certain real property.
“Spouse” is defined in s. 1(1) to include one of two
persons who are married to each other, but omits
persons who are not married to each other.
 Testate and intestate: A person dies “testate” if the
person dies leaving a will; but if there is no will, the
person dies “intestate.”
 Trustees and beneficial owners: An owner of real
property can transfer the legal (registered) title to a
“trustee” under an agreement or by will, whereby
Chapter 60
Estate conveyancing
the trustee will hold and manage the property for
the benefit of the owner or another person (the
“beneficial owner”). This divides the title into the
legal (registered) title held by the trustee and the
beneficial ownership (the underlying rights,
including the equity and obligations attaching to the
real property) held by the unregistered beneficial
owner. In a trust will, this division occurs when the
testator dies: the legal title to the deceased’s assets
is vested in the estate trustee, in trust for the
beneficiaries.
 Trust will and non-trust will: Wills are drafted in
one of two ways: as a trust will or as a non-trust will.
Trust wills are the subject of ss. 29 and 30 of the
Succession Law Reform Act (SLRA). In a trust will,
the testator transfers the entire estate to the estate
trustee in trust upon certain defined trusts. This
form of will vests in the estate trustee, as owner, the
legal title of all of the property that the testator had
power to dispose of by will. Professionally drafted
modern wills in Ontario are usually trust wills.
Non-trust wills leave gifts and other dispositions
directly to the beneficiaries. Under the will, there is
no vesting in the estate trustee. Title to assets,
unless specifically stated otherwise, vests in the
beneficiaries under the will, subject to payment of
debts, spousal rights, and other third-party claims.
Lay people often prepare non-trust wills, which are
generally simpler in form and substance.
 Vesting: The terms “vest” and “vesting” refer to
obtaining immediate ownership. Typically, vesting
occurs by operation of law, from the language of a
trust will, or pursuant to a court order.
1.2 Proof of death
Before a lawyer gives advice about or handles the
conveyance of real property of a person who is now
deceased, proof of death is required. For conveyancing
purposes, any of the following will be acceptable to a
solicitor as proof of death:
 a death certificate issued by the Office of the
Registrar General under the Vital Statistics Act;
 a certificate issued by the funeral home that handled
the funeral arrangements;
 if the death is recited in a document (including one
registered on title) more than 20 years old and there
is no issue as to veracity, the recital (Vendors and
Purchasers Act, s. 1); and
 a certificate of appointment of estate trustee
(formerly a “grant of probate”).
799
CHAPTER 60
1.3 Proof of ownership
Where the lawyer is told that the deceased is a registered
owner of a parcel of real property, a subsearch of the title
will confirm whether that is the case and the nature of the
ownership as of the date of death. It will also disclose
encumbrances that are liabilities of the deceased.
2. Third-party claims against the estate
2.1 Spousal rights from the past
2.1.1 Dower
If a married man died prior to March 31, 1978, the widow
may have been entitled to a dower right in the lands if the
deceased husband, during marriage, was the registered
owner. The Family Law Reform Act, 1978 abolished the
widow’s common-law right of dower but did not abolish
any dower rights that had vested prior to March 31, 1978.
Dower rights used to be an important matter in estate
conveyancing, and they remain registrable under s. 119.1
of the Land Titles Act. In rare circumstances, dower rights
may still be noted on a registered title.
2.1.2 Family Law Reform Act, 1978
Under the Family Law Reform Act, 1978, certain rights in
the matrimonial home, including a right to possession,
were created under Part III for the benefit of a surviving
spouse. These rights applied in respect of persons who
died on and after March 31, 1978, and before March 1,
1986. Again, such rights may occasionally still appear on a
registered title.
2.2 The Family Law Act and estate
conveyancing
Where a deceased has died on or after March 1, 1986,
spousal rights to the matrimonial home arising under
Part II of the FLA must be considered. “Matrimonial
home” is defined in s. 18. In most cases, a matrimonial
home is a property in which a person has an interest and
that is ordinarily occupied by the person and the person’s
spouse as their family residence.
Spousal rights must be addressed in any transfer of real
property of a deceased person. The FLA is primarily of
concern if, at the date of death, the deceased was a spouse
who owned real property that constituted a matrimonial
home. Transactions after death involving such
matrimonial home may be affected in one or more of the
three circumstances described below.
2.2.1 Deemed severance of a joint
tenancy
Subsection 26(1) of the FLA states as follows:
800
REAL ESTATE
If a spouse dies owning an interest in a matrimonial
home as a joint tenant with a third person and not with
the other spouse, the joint tenancy shall be deemed to
have been severed immediately before the time of death.
For example, A and B are spouses of each other under
Part II of the FLA. A and A’s mother, X, own as joint
tenants a house occupied by A and B as their matrimonial
home. Without s. 26(1), if A dies, then X becomes the sole
owner of the property by right of survivorship, and A’s
spouse is left with no legal interest in what was A’s
matrimonial home.
The effect of s. 26(1) is to sever the joint tenancy of A and
X upon A’s death. A and X become tenants in common,
each as to a 50% interest. X does not become the sole
owner by right of survivorship. A’s 50% interest as tenant
in common becomes an asset of A’s estate, will be dealt
with either by A’s will or under the SLRA intestacy
provisions, and will be subject to B’s spousal rights under
the FLA.
Such statutory severance will not occur if one of the
following statements is true:
ƒ The deceased and one of the surviving joint tenants
were spouses of each other when the deceased
died—as where A, B, and X are the joint tenants
when A dies.
ƒ The deceased was not a spouse under Part II at the
time the deceased died.
ƒ The property was not a matrimonial home of the
deceased when the deceased died. If the property is
not a matrimonial home, then the FLA (and
therefore s. 26(1)) is not applicable.
Joint tenancy is further discussed in “Joint tenancy—the
survivorship application,” below.
2.2.2 Right to occupy matrimonial home
The basic rule about possession of a matrimonial home in
s. 19(1) of the FLA is that “[b]oth spouses have an equal
right to possession of a matrimonial home.”
Subsection 26(2) of the FLA allows a surviving spouse
“who has no interest in a matrimonial home but is
occupying it at the time of the other spouse’s death,
whether under an order for exclusive possession or
otherwise, … to retain possession against the spouse’s
estate, rent free, for sixty days after the spouse’s death.” If
before death the deceased enters into an agreement to sell
such property and the closing date is scheduled within 60
days after the date of death of the deceased, the
transaction and the purchasers’ rights to possession may
be subject to this spousal right of possession.
LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
ESTATE CONVEYANCING
2.2.3 Surviving spouse’s rights of election
Section 6 of the FLA provides certain rights of the
surviving spouse to make elections. Until these provisions
have been dealt with, no distribution to beneficiaries of the
deceased’s estate may be made within six months of the
spouse’s death (FLA, s. 6(14)–(15) and (19)).
The prohibition against distribution in s. 6 does not
prohibit the sale of the property of the deceased to third
parties, only distribution to beneficiaries of the property
itself or of its proceeds of sale, those being two instances
where the conveyance of real property may constitute a
distribution. In certain cases (see “Conveying real
property under an express or implied power of sale” and
“Conveying under s. 17 of the EAA,” below), pursuant to
s. 17 of the Estates Administration Act (EAA), the
personal representative may convey for the purpose of
(1) distributing the proceeds of a sale among persons
beneficially entitled, or (2) transferring the real property
itself to persons beneficially entitled. In either case, there
is a distribution, and the following will be required under
s. 6 of the FLA:
ƒ if the conveyance takes place within six months
after death:
— evidence that the deceased had no surviving
spouse;
— a court order authorizing such conveyance; or
— the consent of the surviving spouse;
ƒ if the conveyance takes place six or more months
after the time of death:
— evidence that the deceased had no surviving
spouse;
— a court order authorizing the transaction;
— satisfactory evidence that no election has been
made and no application under Part I of the
FLA has been received;
— where an application has been made under
Part I, the consent of such applicant
(presumably the surviving spouse); or
— satisfactory evidence that an election has been
filed, what that election is, and that there is no
application under Part I of the FLA by the
surviving spouse.
2.3 Creditors’ rights to the real property
Because of ss. 2(1), 17, and others of the EAA, the debts of
the deceased are effectively a charge on the assets of the
deceased, including real property, even though a charge
may not actually be registered. Before being able to sell or
distribute the real property of the deceased, the estate
trustee will have to make a statement that the debts of the
deceased have been paid.
LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
CHAPTER 60
Accordingly, if the deceased had been engaged in business
and in other appropriate circumstances, the personal
representative should advertise for creditors of the
deceased. A search for writs of execution wherever the
deceased owned real property and a search of the registry
under the Personal Property Security Act for secured
loans should be made at the outset after the solicitor is
retained. In some cases, bankruptcy-related and litigation
searches may also be needed.
2.4 Rights of children born outside
marriage — EAA, s. 24
The appropriate inquiries and searches should be made to
discover the identity of any such persons if it is believed
that they may exist.
3. General conveyancing issues
3.1 Electronic registration — the lawyer’s
duty to obtain and retain documents
Electronic Registration, O. Reg. 19/99, made under the
Land Registration Reform Act (LRRA), sets out both the
general and specific requirements for electronic
registration, including details of the contents of all
electronic documents.
Compliance with law statements made by solicitors via
electronic registration replace many of the affidavits,
certificates, and other supporting evidence that used to be
registered before electronic registration came into being;
however, all law statements must be supported by
evidence. As a result, affidavits, certificates, or other
supporting documents that used to be registered are still
required but are now held in the lawyer’s file.
Guideline 6 of the Law Society of Ontario’s Electronic Title
Registration Practice Guidelines requires the following:
Lawyers should obtain and retain in their files the
evidence upon which compliance with law statements
are based, or alternatively, ensure that publicly
available information to fully support the statements is
and remains available. ... The copies retained in the
lawyer’s file may be the only source of such supporting
evidence. This may be particularly important where a
claim is made against the lawyer in consequence of any
such statements.
3.2 Land transfer tax on a conveyance to a
beneficiary
Generally, because of s. 3(1)(d) of the Land Transfer Tax
Act, land transfer tax is not payable on a conveyance of
real property by an estate trustee to a person beneficially
entitled under a will or by statute, as long as no money or
other consideration is paid and no encumbrance is
assumed by the beneficiary. This is never the case in a sale
by the personal representative to a purchaser for value. In
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CHAPTER 60
the latter case, land transfer tax is payable on the full value
of the consideration.
3.3 Conveyancing forms
There are now effectively two sets of land registration
forms, consisting of electronic forms within the meaning
of s. 17 of the LRRA and Electronic Registration and non-
electronic forms under Procedures and Records, R.R.O.
1990, Reg. 690, made under the Land Titles Act. For most
purposes, the substance of the electronic forms and of the
corresponding non-electronic (paper) forms are the same.
In this chapter, the legal requirements of various estate
conveyancing procedures will not distinguish between the
two sets of forms.
4. Joint tenancy — the survivorship
application and severance
4.1 Implementing the right of survivorship
When two or more persons own real property as joint
tenants and one joint tenant dies, the real property vests
automatically in the surviving joint tenant(s) by operation
of law, subject to s. 26(1) of the FLA discussed above.
Documenting such vesting requires the following:
ƒ Under the land titles system, removal of the name of
the deceased from the parcel record pursuant to
s. 123 of the Land Titles Act is carried out by way of
a survivorship application. In addition to the
information to be provided pursuant to other
sections of O. Reg. 19/99, s. 13 thereof requires that
a survivorship application contain the following:
— the name of the deceased joint tenant;
— proof of death of the deceased satisfactory to
the land registrar; and
— a statement by the applicant that the land
affected by the application is not subject to any
spousal right under the FLA with respect to the
deceased.
ƒ Under the registry system, registration of
satisfactory evidence of the death of the deceased
joint tenant occurs typically by way of a registered
deposit under Part II of the Registry Act. There is
no formal “survivorship application” under that Act.
Survivorship applications are not subject to land transfer
tax under the Land Transfer Tax Act.
4.2 Severing a joint tenancy before death
The right of survivorship that occurs on the death of a joint
tenant is not irrevocable or absolute in nature. It can be
terminated during the lifetime of the joint tenant by a
procedure known as “severing the joint tenancy.”
Essentially, a joint tenancy is severed by terminating one
or more of the four essential unities of the joint tenancy:
time, title, interest, and possession.
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Examples occur when one joint tenant acting alone
transfers to himself or herself, or mortgages to a third
party, the joint tenant’s undivided interest in jointly
owned real property. Such unilateral action removes two
of the four essential unities of a joint tenancy: time and
title. The joint tenancy is thereby severed by operation of
law, becoming a tenancy in common, and the right of
survivorship ceases. At death, the interest of the former
joint tenant as tenant in common becomes an asset of the
person’s estate.
4.3 Deemed joint tenancy of multiple
trustees
While alive, the deceased person may, as settlor, have
transferred real property to one or more trustees pursuant
to an inter vivos trust agreement or declaration. Under
s. 62(3) of the Land Titles Act, where title is registered in
the names of two or more trustees and one of them dies,
the trustees are deemed to have held title as joint tenants
unless specifically stated otherwise in the transfer to them.
5. Overview of conveyancing by the estate
trustee
The previous section concerns estate conveyancing where
the deceased held title to real property with one or more
other persons as joint tenants. We now deal with the
remaining situations, in which the deceased owns real
property either as sole owner or as a tenant in common
with other owners. In these situations, the interest of the
deceased in real property passes at death to the deceased’s
estate, and therefore its transfer or sale must be carried
out by an estate trustee. In most (but not all)
circumstances, this requires that the estate trustee first
obtain a certificate of appointment of estate trustee under
R. 74 or 75 of the Rules of Civil Procedure.
5.1 The common-law foundation and the
power of sale
Many estate trustees assume that simply by virtue of their
office, they have the right to sell the real property of the
deceased. This is not correct.
The overriding common-law principle is that if a person
dies owning real property, the land should prima facie
remain the property of the beneficiaries of the deceased
and not be sold unless
ƒ the deceased in a valid will authorized the sale of the
land by the estate trustee; or
ƒ there is some other good reason for which the land
should be sold.
As explained below, authorization in a will to sell real
property, known as a “power of sale,” is a central issue for
estate trustees.
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5.2 Overview of transferring title
Conveying the real property of the deceased has two
stages:
(1) The real property is transferred from the name of
the deceased to either (a) the estate trustee in a
representative capacity, or (b) less commonly,
directly to the beneficiaries, who become the owners
in their personal capacities. This is discussed in
“Transferring title from the deceased,” below.
(2) The real property can then be sold by the estate
trustee empowered to do so, or by beneficiaries who
wish to sell, to a purchaser for value.
The sale of the deceased’s real property is discussed below
in “Conveying real property under an express or implied
power of sale;” and in “Conveying title under s. 17 of the
EAA.
6. Transferring title from the deceased
Generally, ownership is transferred from the name of the
deceased to the estate trustee or, in some cases, the
beneficiaries as follows:
ƒ In the registry system, the estate trustee registers as
a deposit under Part II of the Registry Act
satisfactory evidence of (i) the death of the
deceased, (ii) the spousal status of the deceased, and
(iii) the appointment of the estate trustee. A deposit
may also be registered by beneficiaries if they
become the owners by automatic statutory vesting
under s. 9 of the EAA (discussed in “Automatic
statutory vesting,” below). There is no formal
transmission application under the Registry Act.
ƒ In the land titles system, this is achieved by
registering a transmission application under
ss. 120–127 of the Land Titles Act. This may be
registered by the estate trustee in either a testacy or
intestacy. Automatic statutory vesting in the
beneficiaries is documented with a transmission
application by the beneficiaries.
6.1 Registry system: notice of the right of
the estate trustee to sell the property
In the registry system, where an estate trustee wishes to
register notice of its interest in the real property of the
deceased, there is no transmission application; instead, a
certified or notarial copy of the certificate of appointment
of estate trustee, together with the prescribed statements
and other documents required by s. 53(1)(b) of the
Registry Act, is registered using a “deposit.”
Alternatively, under s. 53(1)(a), if a valid will exists and
there is no other reason for obtaining a certificate of
appointment, the original or a notarial copy of the will may
be deposited instead of a certificate of appointment. This
avoids the need to apply for the certificate and its inherent
expenses (see also “The first-dealing exception,” below).
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Depositing the will and supporting documents under
s. 53(1) places evidence on title as to the death of the
owner and the right of the estate trustee or other entitled
party to deal with the real property, fulfilling the
prerequisites for a conveyance to a third party.
6.2 Land titles system: the transmission
application
Under the Land Titles Act, before any transfer or sale can
take place, real property must be transferred from the
deceased owner to the estate trustee (ss. 120–122 and 124
of the Land Titles Act) or to beneficiaries in certain
situations (s. 127).
In most estates where there is a valid trust will, title to real
property will be transferred into the name of the estate
trustee in preparation for its sale. Where there is a non-
trust will or no valid will, title will also be transferred to
the estate trustee unless automatic vesting occurs first
under s. 9 of the EAA. In both cases, title is transferred to
the estate trustee with a transmission application. Like
survivorship applications, transmission applications are
not subject to land transfer tax.
In addition to the requirements of other sections of
O. Reg. 19/99, s. 14 thereof requires that a transmission
application contain the following:
ƒ the name and date of death of the owner;
ƒ a statement that the applicant as estate trustee is
entitled by law to be registered as owner;
ƒ a statement that the lands are not subject to debts of
the deceased; and
ƒ one of the following:
— the certificate of appointment;
— the date and court file number of the
certificate; or
— proof that the value of the estate is less than
$50,000.
The solicitor for the estate must obtain and retain all
documentation required, including consents, certificates,
and affidavits, as applicable, to support the foregoing
statements and must retain them for future reference.
6.3 Where a transmission application does
not require a certificate of appointment
In three situations, a transmission application can be
registered without a certificate of appointment:
(a) by an estate trustee if the value of the estate does
not exceed $50,000 (O. Reg. 19/99, s. 14(2));
(b) by an estate trustee if the transmission application
is the “first dealing” with real property of any value
where (i) it was converted from the registry to the
land titles system with a LTCQ qualifier, (ii) a
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certificate of appointment of estate trustee has not
been applied for, and (iii) certain other criteria are
met (s. 14(3)); and
(c) by a beneficiary (under s. 15) if
— real property is gifted to a beneficiary in a non-
trust will;
— in an intestacy, the beneficiary is entitled to the
land under Part II of the SLRA; or
— in either of these cases, automatic vesting in
the beneficiary has occurred.
In each of these three situations ((b) and (c) are elaborated
on below), a certificate of appointment can be dispensed
with, and the estate can thereby avoid major expenses,
such as Ontario estate administration tax and legal fees.
6.3.1 The first-dealing exception
The rationale for the first-dealing exception for LTCQ
properties is that if Ontario had not administratively
converted the property from the registry to the land titles
system (a procedure to which the landowner was not
asked to consent), the property would still be in the
registry system and might have been transferred in similar
circumstances using the will of the deceased instead of a
certificate of appointment (see “Registry system: notice of
the right of the estate trustee to sell the property,” above).
If it were only necessary to register the will and
supplementary documents, the estate would have avoided
the major expense of obtaining a certificate of
appointment. The conversion deprived the estate of this
opportunity, so the first-dealing exception is provided.
This is not a trivial or esoteric point. Suppose the sole asset
of an estate is the $1,000,000 home of the deceased,
which has an LTCQ title qualifier. The cost of obtaining
the certificate of appointment would include estate
administration tax ($14,250 in this example) and the legal
costs of obtaining the certificate. If the application is a first
dealing, the estate trustee can register a transmission
application without a certificate of appointment, thereby
avoiding such expenses. Solicitors who fail to use this
exception when applicable may be liable to the estate for
the expenses incurred as a result of such an oversight.
In the case of a first-dealing application, under s. 14 of
O. Reg. 19/99, a transmission application must contain
the following:
ƒ the name and date of death of the owner;
ƒ a statement that the applicant as estate trustee is
entitled by law to be registered as owner;
ƒ a statement that the lands are not subject to debts of
the deceased;
ƒ a statement that no application for a certificate of
appointment of estate trustee has been made;
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ƒ a statement that the transmission application is the
first dealing with the land affected by the
application since the title to the land was converted
from the Registry Act to the Land Titles Act;
ƒ a statement of the value of the estate; and
ƒ confirmation of information about the will that is
relevant to the transmission application and that
the Director requires.
6.3.2 Transmission application by
beneficiary
If a beneficiary is entitled to real property other than by a
trust will (which vests title in the estate trustee), then the
beneficiary makes the transmission application. This
entitlement occurs in a non-trust will that gifts the real
property to the beneficiary and, in an intestacy, if the
beneficiary is entitled to the land under Part II of the
SLRA. Also note that this is the case whether or not
automatic vesting in the beneficiary has occurred. This
transmission application is also registered without a
certificate of appointment.
In addition, with either a non-trust will or intestacy, if
automatic vesting in the beneficiary has occurred under
s. 9 of the EAA, the estate trustee has no interest to deal
with, and thus, again, the beneficiary will make the
transmission application.
In these situations, s. 15 of O. Reg. 19/99 requires that a
transmission application made by a beneficiary include
the following:
ƒ the name and proof of death of the owner
satisfactory to the land registrar; and
ƒ the following statements by the applicant:
— that the land is not subject to any spousal right
under the FLA with respect to the deceased;
— that the land is not subject to debts of the
deceased, if that is the case;
— that the land has vested in the beneficiary
applicant (which is the case if the land is gifted
to the beneficiary, as well as with automatic
vesting); and
— that the applicant is entitled to be owner as
devisee or heir-at-law.
7. Conveying real property under an
express or implied power of sale
After the land has been registered in the name of an estate
trustee with a transmission application, one must
determine the authority of the estate trustee to sell the
land to a purchaser for value. The essential pre-requisites
for an estate trustee to sell are, first, that the estate trustee
is not prevented from selling by an explicit gift of the real
property in a will to a beneficiary or beneficiaries; and,
second, that the estate trustee has a power of sale.
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7.1 Gifts of real property to a beneficiary
An estate trustee cannot sell real property of the deceased
if the real property is gifted to a beneficiary in the will
unless either the estate lacks sufficient cash and other
assets to pay its debts or the beneficiary consents to the
sale.
7.2 The estate trustee’s powers of sale
Based on common law, an estate trustee may only sell real
property of the deceased if the estate trustee is authorized
to do so. Such authorization takes the form of a “power of
sale.” A power of sale must consist of one of the following:
ƒ a power of sale expressed in the will;
ƒ a power of sale implied in the will; or
ƒ the statutory power of sale in ss. 16 and 17 of the
EAA.
An express or implied power of sale refers, generally, to
language in the will that, explicitly or by implication,
authorizes an estate trustee to sell the real property of the
deceased. If there is a will, the statutory power of sale is
usually only needed if the will contains no express or
implied power of sale. In an intestacy, by definition, only
the statutory power of sale is available.
7.2.1 Will contains an express power of
sale
Sales under an express power of sale are common
outcomes in estate conveyancing. Professionally drafted
wills often contain an express power of sale even if the
testator does not own real property since the testator may
purchase real property after the will is made.
Where there is an express power of sale in a will and there
is no specific gift of the deceased’s real property to a
beneficiary, the estate trustee may sell the land without
the consent of any beneficiary, and a purchaser for value
(without actual or constructive notice of debts) will take
the property free from the deceased’s debts. If the
deceased is survived by a spouse and the property is a
matrimonial home under Part II of the FLA, then the
spouse must consent to the sale.
7.2.2 Will contains an implied power of
sale
Where there is no express power of sale in the will, the will
may imply a power of sale. Specifically, s. 44 of the Trustee
Act implies a power of sale where the will is a trust will
which charges the land with payment of debts or with
payment of a specific cash gift to a beneficiary. The
charging of the land is an unregistered lien contained in
the will. A power of sale is implied if the will charges the
land and, due to insufficient cash in the estate, the land
must be sold to raise the money for the payment.
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Nothing in s. 44 appears to prevent a power of sale being
implied where the will is a non-trust will or in other
situations outside its ambit. However, inferring a power of
sale is often a matter of judgment, and the belief that an
implied power of sale exists may be wrong. The best
practice therefore is to infer a power of sale only where the
facts fall squarely within the letter or intent of s. 44. If
there is any doubt, the statutory power of sale under s. 17
of the EAA is available and should be used in many cases
instead of relying on an implied power of sale. The
following examples provide some guidelines.
Example 1
Assume that an estate consists of $100,000 cash and the
testator’s home is valued at $300,000. The testator leaves
two children as sole heirs. Debts including taxes and
professional expenses are $175,000. The will leaves a cash
gift of $75,000 to the first child and the residue (in this
case, $150,000) to the second. The will is a trust will that
does not contain an express power of sale, but does state
that payment of the debts and cash gift is to be a charge
against the testator’s real property. This situation
complies with the requirements of s. 44 of the Trustee Act.
Since the expenses and cash gift totalling $250,000 can
only be paid if the real estate is sold, we can infer that a
power of sale exists.
Example 2
Suppose in Example 1 that the will does not state that
payment of the debts and cash gift is to be a charge against
the testator’s property. This leaves the will outside the
ambit of s. 44. A power of sale can still probably be
inferred since the estate still lacks the cash to pay the
expenses and gift unless the real estate is sold and there is
no specific gift of the real property to a beneficiary.
However, inferring a power of sale in this situation creates
a risk because we cannot rely on s. 44 of the Trustee Act.
Since a sale is required in order to pay debts, a safer choice
is to rely on s. 17 of the EAA, which among other things,
authorizes a sale if the purpose of the sale is to raise money
to pay debts.
7.2.3 A will contains no power of sale —
the statutory power of sale
The EAA is an awkward statute that originated in the 19th
century. As you will see from reading it, its language can
be vague and subject to interpretation. Among other
things, it describes an alternative framework for estate
administration where a deceased leaves no will or where a
will does not authorize the estate trustee to sell the real
property of the deceased. It contains no clear statement of
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these purposes; rather, it is necessary to tease its intent
and meaning out of its language.
Where there is no express or implied power of sale in a
will, or where there is an intestacy, the estate trustee has
limited rights to sell the property, consisting of the
statutory power provided by ss. 16 and 17 of the EAA.
Section 16 contains the power of sale, while s. 17 describes
how it may be exercised. Under s. 17, the estate trustee will
only be able to sell for the purposes set out therein:
(a) payment of debts, or (b) distribution of the sale
proceeds to the beneficiaries.
In the case of a will without a power of sale, the statutory
power of sale is available whether or not the will is a trust
will. The role of the statutory power is to enable the estate
trustee to sell real property where there is no other power
of sale.
Once the statutory power is relied on, a non-trust will as
well as an intestacy become subject to potential automatic
vesting under s. 9 of the EAA unless, within three years
after the date of death, the estate trustee has sold the
property or has registered a caution under s. 9. However,
a trust will without a power of sale is not subject to s. 9
because the will has already vested title in the estate
trustee.
The use of the statutory power can become problematic in
some circumstances. The issues are reviewed in detail in
“The issues,” below.
7.3 Preparation of the transfer to a third
party
7.3.1 The parties to the conveyance
If the will contains a power of sale and no specific bequest
of the land, the sale and the transfer to a purchaser for
value are made by the estate trustee. If such will devises
the land to a beneficiary, the release of that beneficiary
must be obtained if the estate trustee wishes to convey
such land to any other party; otherwise the estate trustee
can convey it only to such beneficiary.
7.3.2 Documentation for the transfer to a
third party by the estate trustee
After determining the necessary parties in a conveyance to
the purchaser, the following should be prepared:
ƒ a transmission application, if not already registered;
ƒ for retention in the solicitor’s file, a certified or
notarial copy of the certificate of appointment of
estate trustee (unless an exception applies—see
“Where a transmission application does not require
a certificate of appointment,” above);
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ƒ a “transfer by personal representative,” which
includes the following statements required under
s. 16 of O. Reg. 19/99:
— that the transferor is entitled to transfer the
land under the terms of the will, if any, the
EAA, and the SLRA;
— that the land is not subject to rights of the
spouse of the deceased;
— that the transferor has obtained the consent of
all required parties or that no consents are
required; and
— that the land is not subject to the debts of the
deceased, if that is the case.
Again, the solicitor acting for the estate must, when
registering electronically, obtain and retain all
documentation required, including consents, certificates,
and affidavits, as applicable, to support the foregoing
statements and must retain them for future reference.
8. Conveying title under s. 17 of the EAA
8.1 The issues
This section examines the sale of real property by an estate
trustee where the deceased has died either (a) intestate, or
(b) leaving a will that does not contain a power of sale. In
these circumstances, the powers of the estate trustee to
convey real property derive from ss. 16 and 17 of the EAA
and are also subject to ss. 5, 9, and sometimes other
sections of that statute.
In the case of an intestacy, there is no estate trustee and
thus no one to exercise the statutory powers under the
EAA until a certificate of appointment of estate trustee has
been obtained under R. 74 or 75. For a will with no power
of sale, the estate trustee named therein may not exercise
the statutory powers until a certificate of appointment has
been obtained (EAA, s. 17(7)).
Estate trustees, beneficiaries, and purchasers for value all
face certain issues where real property is to be conveyed
by an estate trustee under s. 17:
ƒ Unless the party making the conveyance can
correctly state that all of the debts of the deceased
have been paid, the conveyance will be registered as
being subject to those debts—in effect creating a lien
on the land. In practice, as long as it is certain that
the sale proceeds will be sufficient to pay every debt
of the estate, the estate trustee will make the
statement that all of the debts of the deceased have
been paid.
ƒ Under s. 17(2), the estate trustee cannot transfer
any real property to a purchaser for value solely for
the purpose of distributing the sale proceeds
among the beneficiaries of the estate, except with
the “approval of the majority of the persons
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beneficially entitled thereto representing together
not less than one-half of all the interests therein.”
 If any beneficiary whose consent is required is a
minor with no guardian, is an incapable person with
no attorney for property, or cannot be located, or if
it is “inconvenient” to obtain a consent from such
beneficiary, then the consent of the Children’s
Lawyer and/or Public Guardian and Trustee on the
beneficiary’s behalf or a court order authorizing the
sale must be obtained.
 A transfer of the real property to the beneficiaries
can only be carried out with the consent of each
proposed transferee, again including the consent of
the Children’s Lawyer and/or Public Guardian and
Trustee if required. Registered title cannot be
imposed on anyone: it requires the person’s
consent, and each transferee will have to sign an
acknowledgement and direction authorizing the
registration.
 If more than three years have passed since the date
of death and a caution has not been registered,
automatic vesting will have occurred under s. 9 of
the EAA, title will have vested in the beneficiaries,
and the estate trustee will no longer have power to
convey.
 The sections following describe strict legal
requirements under the EAA. However, as a matter
of policy, the Children’s Lawyer and the Public
Guardian and Trustee will in many cases not
consent on behalf of any party unless there is a
court order, so proceeding without a court order is
often only useful when they are not involved.
For the above reasons, close attention must be paid to
those statutory powers being exercised by the estate
trustee to ensure that (a) the estate trustee has the power
to sell under the EAA, (b) all necessary parties have
consented, (c) the sale will not be subject to the debts of
the deceased, and (d) automatic vesting has not occurred.
8.2 Three types of real property transfers
The issues described above affect three different situations
involving transfers of real property:
 sales for the purpose of paying debts;
 sales for the purpose of distributing the sale
proceeds among the beneficiaries where all debts
were (or presumably could have been) paid from
money on hand before the sale; and
 transfers of the real property to the beneficiaries.
Because the statutory powers of sale are limited and
depend on the purpose of the sale, the purpose of the sale
must be considered. In doing so, keep in mind the
common-law position that prima facie the land of the
deceased remains the property of the beneficiaries and
may not be sold unless there is a will with a power of sale
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or some other good reason for allowing the estate trustee
to sell.
8.2.1 Statutory powers under s. 17(1):
sale for the purpose of paying debts
Subsection 17(1) reads as follows:
The powers of sale conferred by this Act on a personal
representative may be exercised for the purpose not
only of paying debts but also of distributing or dividing
the estate among the persons beneficially entitled
thereto, whether there are or are not debts, and in no
case is it necessary that the persons beneficially entitled
concur in any such sale except where it is made for the
purpose of distribution only. [Emphasis added.]
That is a round-about way of saying that if the estate
trustee needs to sell the real property entirely or partly
for the purpose of paying debts, the estate trustee may sell
within three years after the death of the deceased (due to
s. 9, or longer if a caution has been registered) without the
concurrence of any beneficiaries. The rationale for this is
that creditors have priority (under ss. 2 and 5 of the EAA)
over the claims of beneficiaries. This is the outcome that
sellers’ lawyers hope for when acting for any party in a sale
by an estate trustee under s. 17 because it simplifies
considerably the prerequisites for completing the sale. In
these circumstances, a purchaser for value will take title
free of the debts of the deceased.
The transfer from the estate trustee to the third-party
purchaser will include statements that the sale is for the
purpose of paying debts and as to the spousal status of the
deceased. A surviving spouse will need to consent to the
sale if the property is a matrimonial home. In the case of
electronic registration, the solicitor for the estate must
obtain and retain for future reference all documentation
required, including consents, certificates, and affidavits,
as applicable, to support the foregoing statements.
8.2.2 Statutory powers under s. 17(2):
sale for the purpose of distributing
the sale proceeds among
beneficiaries — be careful
If the purpose of the sale occurring within three years after
death (or longer if a caution has been registered) is only to
distribute the proceeds of sale among the beneficiaries of
the estate, then unless the required consents and
authorizations are obtained, a purchaser for value will
take title subject to the claims of the beneficiaries as well
as the debts of the deceased. A solicitor representing a
purchaser for value must not allow this to happen since
the client would be purchasing, its mortgagee charging,
and its title insurer insuring an encumbered title, which
may be problematic for the purchaser’s lawyer to repair at
a later date.
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The required consents and authorizations are set out at
length in ss. 17(2) and (4)–(6) of the EAA. As a
prerequisite to a sale, the concurrence of a majority of
those beneficiaries representing together not less than
one-half of all the interests in the estate is required in all
sales intended only for the purpose of distributing the sale
proceeds among the beneficiaries.
(a) Consents of minors and incapable
persons
If any of the beneficiaries are minors without a guardian
or incapable persons without an attorney for property,
then the approvals of the Children’s Lawyer or the Public
Guardian and Trustee must be obtained.
If the only persons interested in the real property being
sold are minors, then the proper procedure is for an
application to be made to a judge for authorization under
the Children’s Law Reform Act. When the estate has not
yet been fully administered, the Children’s Lawyer may
concur on their behalf under s. 17(2) of the EAA.
Under s. 17(2), if a beneficiary is
ƒ a mentally incapable person who has no guardian or
attorney for property;
ƒ an adult whose consent cannot be obtained because
the adult’s place of residence is unknown;
ƒ an adult of whom it would be “inconvenient” to
require concurrence; or
ƒ a patient in a psychiatric facility under the Mental
Health Act and the Public Guardian and Trustee is
the patient’s guardian of property (under s. 17(4)),
then the Public Guardian and Trustee may concur on
behalf of such person.
(b) Parameters for consents
As a matter of practice, the Children’s Lawyer or the Public
Guardian and Trustee must be convinced that all efforts to
locate beneficiaries have been made before approving on
behalf of unfound beneficiaries. For incapable persons,
they will only approve if the consent of that incapable
person is required to complete the majority of the
beneficiaries. With respect to those beneficiaries whose
consent it would be inconvenient to obtain, they will
generally only consent after a court has determined that it
would in fact be inconvenient to obtain the consent: public
officials, like lawyers, are generally unwilling to accept
responsibility for determining whether something is
“inconvenient.”
Where any beneficiaries are minors, incapable persons, or
persons under any other mental disability, different
limitation periods apply depending on the circumstances
(see ss. 36–39 of the Real Property Limitations Act).
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Where the required consents of beneficiaries have been
obtained, a purchaser for value will always get good title
free of the debts of the deceased, save and except those of
which the purchaser has actual notice.
(c) Protecting the estate trustee
Although the concurrence of a majority of the
beneficiaries’ and the consent of the Children’s Lawyer or
Public Guardian and Trustee will protect a purchaser for
value, the estate trustee may still be liable to those
beneficiaries who did not consent. For this reason, it
would be advisable from the point of view of the estate
trustee to obtain the concurrence of all beneficiaries and,
if that is not possible, to obtain a court order dispensing
with the consent of those beneficiaries who for one reason
or another will not consent. While the foregoing may not
be of particular concern to a purchaser, it is, of course, of
serious concern to the estate trustee.
8.2.3 Statutory powers: transfer for the
purpose of distributing the real
property to beneficiaries
The estate trustee may within three years after death (or
longer if a caution has been registered) convey the
property directly to the beneficiaries either with or
without a court order.
(a) Without a court order — be careful
When the conveyance to beneficiaries is made without a
court order, the concurrence of all beneficiaries together
with the approvals of the Children’s Lawyer on behalf of
minors and the Public Guardian and Trustee on behalf of
incapable persons are required because title cannot be
registered in someone’s name without their agreement.
However, such a conveyance does not free the property
from the debts of the deceased owner due to s. 17(8)(a) of
the EAA. This can have serious consequences for a
purchaser for value of the land from the beneficiaries. See
“Statutory powers: conveyances by beneficiaries,” below.
(b) With a court order
Under s. 17(5) of the EAA, the personal representative or
a beneficiary, before the expiration of three years from the
death of the deceased, may apply for an order dividing or
distributing the estate among the beneficiaries. As a
practical matter, a court order will generally be required
by a purchaser for value buying the property from
beneficiaries within three years after the date of death. By
operation of s. 21(1), a purchaser for value from such
beneficiaries receives the property free of any debts of the
deceased owner, except for debts specifically charged
against the property (other than by will only)—in other
words, except for registered encumbrances.
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8.3 Automatic statutory vesting
Automatic vesting under s. 9 of the EAA may occur in the
context of an intestacy or certain trust and non-trust wills.
There can be no statutory vesting in the case of a trust or
non-trust will if it contains an express or implied power of
sale, including the power to defer the sale of real property.
Automatic vesting occurs if, within three years after the
date of death, the estate trustee has not (a) sold the land
to a third party under s. 17 of the EAA, (b) transferred it to
the beneficiaries, or (c) registered a caution against the
land under s. 9 of the EAA.
Once automatic statutory vesting takes place, the estate
trustee no longer owns the land in a representative
capacity, and only the beneficiaries can convey it.
However, s. 11 of the EAA (registration of caution after
three years from death of testator) allows registration of a
caution after three years in specified circumstances if all
affected parties consent.
8.4 Transfers of title by the estate trustee
In the case of non-trust wills without a power of sale and
intestacies, after the estate trustee has become the
registered owner by way of a transmission application, in
most common situations, the estate trustee will then take
steps to sell to a purchaser for value. A transfer by personal
representative is the electronic form used for this. In
addition to the requirements of other sections of
O. Reg. 19/99, s. 16 thereof requires that this transfer
include the following statements by the transferor (the
estate trustee):
ƒ that the transferor is entitled to transfer the land
affected by the document under the terms of the
will, if any, the EAA, and the SLRA;
ƒ that the land is not subject to any spousal right
under the FLA with respect to the deceased;
ƒ that the transferor has obtained the consent of all
required parties or that no consents are required;
and
ƒ that the land is not subject to debts of the deceased,
if that is the case.
If a court order has been obtained in place of consents, this
will have to be set out in a schedule to the transfer.
The solicitor for the estate must obtain and retain all
documentation required, including consents, certificates,
and affidavits, as applicable, to substantiate these
statements and must retain them for future reference.
8.5 Statutory powers: conveyances by
beneficiaries
In addition to an estate trustee selling or conveying real
property within three years from the death of the deceased
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to third parties (or longer if a caution has been registered),
pursuant to the provisions of the EAA, the beneficiaries
may convey the property to third parties (provided there
are no minors involved) after either
ƒ the real property has been conveyed to the
beneficiaries by the estate trustee; or
ƒ the real property has vested in them pursuant to s. 9
of the EAA.
8.5.1 Conveyance under EAA, s. 17(8)(a)
— be careful
Under s. 17(8)(a) of the EAA, if real property is conveyed
to a beneficiary by an estate trustee without a court order
within three years after the death of the deceased and
such beneficiary in turn conveys it to a purchaser for value,
that purchaser takes the property subject to the debts of
the deceased. The parcel register will state “subject to
debts” in its thumbnail description. This is the only title
such beneficiaries can provide within the first three years
without a court order.
The liability of the purchaser for value for such debts will
end after the three years unless proceedings have been
instituted by a creditor and a certificate of pending
litigation or a caution has been registered against the real
property (EAA, s. 17(8)(b)). If a purchaser is required to
pay debts, that purchaser has the right to claim relief over
against the beneficiaries and in certain circumstances also
against the personal representative.
This is another example of a transaction that a solicitor
should never allow to happen. An agreement of purchase
and sale between a purchaser for value and a beneficiary
who acquired title under s. 17(8)(a) should only be entered
into conditional upon the vendor obtaining a court order
under s. 17(5) of the EAA. Such an order will provide the
purchaser with the protection of s. 21(1) thereof. The
purchaser should never accept a situation where it must
rely on s. 17(8)(b). Never accept title from a beneficiary
where the beneficiary received title from the estate trustee
unless (a) the title is unencumbered by debts of the
deceased owner and more than three years have passed
from the date of death, or (b) a court order authorizing a
debt-free transfer has been obtained.
8.5.2 Conveyance pursuant to court order
If the conveyance to the beneficiaries is made free of debts
pursuant to a court order, a purchaser obtaining a
conveyance from such beneficiaries takes the property
free from the debts of the deceased (EAA, s. 21(1)).
8.5.3 Conveyance under EAA, s. 23
When real property vests in beneficiaries pursuant to
s. 9(1) of the EAA, the real property continues to be
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charged with the debts of the deceased owner so long as it
remains vested in the beneficiaries. A sale by such
beneficiaries to a purchaser for value will be free of the
debts of the deceased pursuant to s. 23 of the EAA.
8.5.4 The transfer by the beneficiary
If beneficiaries become the registered owners by way of a
transmission application where s. 17(8)(a) of the EAA
does not apply and they wish to sell to a third party, then
in addition to the statements required by other sections of
O. Reg. 19/99, the transfer by the beneficiaries must
contain the following statements:
ƒ that title has vested in all the beneficiaries of the
estate of the deceased owner under the provisions of
the EAA, SLRA, and FLA;
ƒ that the land is not subject to any spousal right
under the FLA with respect to the deceased;
ƒ that the land affected by the transfer is not subject
to debts of the deceased, if that is the case; and
ƒ from the transferee, that the transferee is not aware
of any specific debts of the deceased, if that is the
case.
The solicitor for the estate must obtain and retain all
documentation required, including consents, certificates,
and affidavits, as applicable, to substantiate these
statements and must retain them for future reference.
8.6 The conveyance under the registry
system
Subsection 5(1) of the LRRA, sets out the implied
covenants of a personal representative. These implied
covenants would apply to transfers made under the
Registry Act unless they are expressly amended. In this
regard, it is suggested that the first implied covenant be
amended by adding the words “except as the records of the
land registry office disclose” so that the first implied
covenant would read as follows:
That the transferor has not done, omitted, or permitted
anything whereby the land is or may be encumbered or
whereby the transferor is hindered from giving the
transfer except as the records of the land registry office
disclose.
Where the conveyance is by the persons beneficially
entitled, the foregoing implied covenants would not apply.
In their place, the usual covenants, also set out in s. 5(1) of
the LRRA, would apply. After having determined the
necessary parties to the conveyance in preparing the
transfer, there should be included as a schedule all
necessary recitals dealing, where applicable, with the
following points:
ƒ the date of death of the deceased and the interest of
the deceased in the real property being conveyed;
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ƒ the registration particulars of the certificate of
appointment of estate trustee;
ƒ the registration particulars of the caution (if any)
pursuant to s. 9 of the EAA;
ƒ the spousal status of the deceased at death; and
ƒ the purpose of the sale.
If the sale is for the purpose of paying debts, no further
recital should normally be required.
If the purpose of the sale is to distribute the proceeds of
sale among persons beneficially entitled, the following
additional recitals should be included:
ƒ the listing of all surviving heirs-at-law and next of
kin, their relationship to the deceased, and
specification as to any minors or mentally incapable
persons;
ƒ the consent and approval of the Children’s Lawyer
on behalf of specified minors and the Public
Guardian and Trustee on behalf of mentally
incapable persons;
ƒ a statement that all debts have been paid; and
ƒ where there is a surviving spouse, the appropriate
recitals.
Where the purpose of the sale is to distribute the real
property to those persons beneficially entitled, all of the
foregoing recitals may be applicable and the following
additional one:
ƒ the registration particulars of the court order
authorizing the distribution.
Where the sale is by the persons beneficially entitled, all of
the foregoing recitals may be applicable.
From a conveyancing point of view, it is advisable to have
the recitals attested to by the personal representative or by
one of the beneficiaries. Accordingly, it is suggested that a
declaration or an affidavit by the person giving the
conveyance be prepared and deposited under the Registry
Act and that the registration particulars of that deposit be
recited in the schedule to the Transfer/Deed of Land or
electronic transfer.
8.7 Agreements of purchase and sale where
consents to the sale are required
We have seen several situations in which consents to a sale
by an estate trustee are required. Consenting parties may
include a spouse, one or more beneficiaries, and the
Children’s Lawyer and/or the Public Guardian and
Trustee. Whenever a consent to a third-party sale by an
estate trustee is required, the estate trustee must obtain
such consent in writing before a firm and binding
agreement is signed by the estate. If the consenting party
wants to approve the terms of the agreement, then either
the consenting party should be a party to the agreement,
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or the agreement should be made conditional (using a
condition precedent) upon such party consenting before
the agreement becomes firm. Failure to deal in advance
with this issue can result in the estate trustee being unable
to convey clear title if a consent is later refused, leading to
default under the agreement, which exposes the estate to
a purchaser’s claim for damages for breach of contract
along with considerable legal expenses.
9. Use of powers of attorney by an estate
trustee
Although generally an estate trustee cannot appoint an
attorney by power of attorney to deal with the estate of a
deceased, it is possible for the estate trustee to do so in
very limited circumstances. For example, if the estate
trustee has negotiated and signed the agreement of
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purchase and sale for real property but will not be
available to sign the transmission application and/or the
transfer to a purchaser for value, the estate trustee may
appoint an attorney by a power of attorney specifically
worded to permit the signing of documents related to the
sale of real property, as long as that attorney is not
exercising any discretionary powers or performing any
fiduciary duties on behalf of the estate trustee and is
simply signing documents in an administrative capacity
that requires no decision making on the attorney’s part.
Before closing, the power of attorney will have to be
registered in the land registration system with statements
to substantiate the foregoing facts.
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Cottage and rural conveyancing
1. Introduction
The characteristics of a cottage or rural property, from a
solicitor’s perspective, are quite different from those of a
fully serviced lot in an urban subdivision. “Cottage” and
“rural” refer generally to properties outside built-up areas
and encompass farms, cottages, vacant lots, and other
relatively isolated country properties. Property values in
some of these areas have increased to the point where they
equal or exceed values in urban areas.
This chapter will highlight the major differences and
describe the underlying legal issues. The matters
considered in this chapter are
ƒ Crown patent reservations and exceptions;
ƒ Crown survey matters;
ƒ public highways and road allowances;
ƒ access including water access;
ƒ navigable waterways;
ƒ shoreline ownership;
ƒ water systems;
ƒ sewage systems;
ƒ unregistered hydro easements;
ƒ zoning issues;
ƒ co-ownership agreements; and
ƒ miscellaneous issues.
1.1 Surveys, title insurance, and zoning
reports
There are many references in this chapter to land surveys.
In the case of rural properties not within a registered plan
of subdivision, there are many potential problems that a
title search may not reveal. Some of these are identified at
various points in this chapter.
Experienced lawyers attest to the fact that when acting for
a buyer of rural property, a reasonably up-to-date survey
and a municipal zoning report are practical necessities. A
recent survey will disclose whether there are
encroachments by buildings, septic systems, barns, and
various other auxiliary structures onto abutting lands
including conservation lands, Crown lands, municipal
road allowances, private easements, rights of way, and so
forth. A survey may also disclose illegal structures such as
buildings in isolated areas built without building permits
and private docks and boat houses built illegally along
shorelines.
Chapter 61
Title insurance may offer compensation for damages
incurred as a result of some of these matters, but it does
not necessarily resolve the actual problems. A survey and
municipal zoning report may disclose the existence of such
problems so that the problems can be the subject of title,
zoning, and building compliance requisitions that will
place the onus on the seller to resolve them at its expense.
Buyers should be advised that the costs of a new survey
and a zoning report are simply another form of insurance
against existing and future problems that may seriously
affect their use and enjoyment of their properties. Note
that completing a new survey during the winter outside of
urban areas is often impractical. Also, it can require up to
a few months in some areas of the province to have a new
survey completed, so closing and requisition dates should
be scheduled accordingly.
Title insurance is often available to insure over title defects
discovered. If the lawyer discovers problems with the
property’s title, survey, zoning, or shoreline, or if other
matters are not easily discoverable, the lawyer should
request that the title insurer provide coverage with an
“insure over” request. Such coverage may be provided
with a policy endorsement, which must be confirmed in
writing before closing. The clients should be made aware
of any limitations on coverage.
2. The Crown patent
Our property system assumes that land is originally owned
by the Crown, after being acquired by conquest, treaty,
discovery, or other recognized means. The Crown
subsequently transfers the land into private ownership by
letters patent, often referred to as a Crown patent. Such
properties may be subject to reservations of rights
reserved by the Crown in the original Crown patent. These
will directly affect buyers of such properties and therefore
need to be investigated by the buyer’s solicitor during the
title search process.
In many instances, rural and cottage properties are not on
a registered plan of subdivision under the Planning Act;
instead, the property’s legal description still consists of
part of a lot on a concession as laid out and surveyed for
the purpose of the original Crown patent. Alternatively,
the property may be part of a registered plan of
subdivision that may also be subject to limitations
originally attached to the Crown patent.
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2.1 Limitations in Crown patents
Many early Crown patents contained few limitations. By
the second quarter of the 19th century, the Crown had a
considerable interest in protecting existing Crown
privileges (such as protecting public highways, reserving
profitable resources, and disposing of the remainder as
farmland). In order to advise a client as to what is being
purchased, it is necessary to look at the exceptions and
reservations in the Crown patent.
If the Crown patent has been registered, the title searcher
should review it. If not, the searcher should at least
confirm the date of issuance of the Crown patent and the
name of the patentee, since the absence of a patent may
mean that the owner has no title. A copy of the Crown
patent can be obtained from the provincial Ministry of
Natural Resources and Forestry if it is not registered.
2.1.1 Exceptions and reservations
A Crown patent may exclude from a patent a specific
parcel of land retained by the Crown. In addition, the
Crown patent may contain a reservation, which is a
privilege retained by the Crown in land transferred by
patent.
The most common exclusions are for public or
colonization roads crossing the land at the date of the
Crown patent. A “colonization road” is a highway laid out
by the Crown surveyors to provide access to an area being
opened up for settlement (see also ss. 64 and 65 of the
Public Lands Act). In some cases, the Crown excluded a
strip of land along the edge of a waterway; this should not
be confused with an original shore road allowance shown
on an original Crown survey, which is outside the lot and
concession to which the Crown patent refers.
The most common reservations are the free use and
passage of navigable waters; the right of access to the
shore for all vessels, boats, and persons; mines and
minerals; timber and trees; the right to use 66 feet from
the water’s edge for fishery purposes; the right to float saw
logs and build dams and similar works; and the right to
take a percentage (usually 5% to 10%) of the property for
a road without compensation, plus materials for road
construction. Many of these reservations obviously relate
to the main commercial activities of the 19th century.
Some of these reservations can be released on application
to the Crown. Others may be void under statutory
provisions enacted after the Crown patent was given.
2.1.2 Possessory and prescriptive claims
against the Crown
Crystallized rights and claims of adverse possession and
prescription against the Crown are generally included in
the rights brought forward from the registry system to
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REAL ESTATE
parcels of land having Land Titles Conversion Qualified
(LTCQ) estate qualifiers. Otherwise, they are precluded by
s. 51 of the Land Titles Act. Chapter 48 (Land registration
in Ontario) of these Study Materials explains these
concepts in detail.
Section 3 of the Real Property Limitations Act impliedly
permits adverse possession against the Crown on proving
60 years’ occupation, but by s. 16, it does not apply to
vacant Crown land. A second drawback is that proof of
adverse possession or prescription sufficient to establish a
fee simple title in the name of the claimant may require a
court application.
2.2 Mining and forests
For many years, the underlying purpose of the Mining Act
was to regulate and encourage extraction of minerals, not
to protect landowners. However, amendments to s. 29 of
the Act, which took effect on April 1, 2013, have moderated
this purpose considerably. The consent of the Minister of
Mines is required in order to stake or record a mining
claim, inter alia,
(a) on any land that is a lot within a registered plan of
subdivision;
(b) on any land for which the surface rights have been
subdivided, surveyed or sold or otherwise disposed of by
the Ministry of Natural Resources for summer resort
purposes;
(c) on any land that is a residential or cottage lot smaller
than one hectare in area;
(d) where a residential or cottage lot is one hectare in
area or larger, on any land that is,
(i) within 100 metres of a residential or cottage
dwelling on the lot, and
(ii) within the property boundary line;
…
Subject to these limitations and the prohibitions set out in
s. 30, the Mining Act allows prospectors to register claims
on any land in Ontario where the Crown holds mineral
rights. On April 10, 2018, Ontario converted its manual
system of ground and paper staking and its maintenance
of unpatented mining claims to an online system. All
active, unpatented claims were converted to a cell-based
provincial grid, identified by GPS coordinates. The
prospector is required to notify the landowner before
taking physical steps to explore the claim and must
register an exploration plan prior to bringing equipment
onto the land and beginning work. Thousands of new
claims are staked every year in Ontario. There is much
more to know about the process, but suffice it to say that
it is fundamental that the solicitor be aware of the
consequences of the reservation of mining rights by the
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COTTAGE AND RURAL CONVEYANCING
Crown and advise the client accordingly in appropriate
situations.
Generally, unless the Crown patent was issued under the
Mining Act or the mining rights were disposed of
beforehand, the reservation of mines and minerals in a
patent issued before May 6th, 1913, is void by statute.
There are many properties for which Crown patents have
been issued under the Mining Act. Some of these conveyed
the surface rights only, reserving the mining rights to the
Crown. Others included the sub-surface rights, subject to
forfeiture to the Crown if the annual mining tax under
Part XIII of the Mining Act was not paid. The terms
“mining rights” and “surface rights” are defined in the
Conveyancing and Law of Property Act.
As to other Crown rights, there are several statutes that
deal with timber rights and reservations of trees, including
the Mining Act, the Public Lands Act, and the
Conveyancing and Law of Property Act, among others.
Most timber rights and reservations of trees are now void
by statute.
3. Crown survey matters
Just as the Crown patent should be examined, so should
the available Crown survey information. The original
Crown surveys that divided the province into counties,
townships, concessions, and (most commonly) 200-acre
lots are held by the Ontario Surveyor General’s Office,
with copies available in some registry offices. This is
somewhat akin to obtaining a copy of a registered plan of
subdivision when searching title to lots on the registered
plan. The limits of the land to be conveyed are often
defined by original road allowances between lots and
concessions and by original shore road allowances along
waterways. These are original allowances only if shown on
the original Crown surveys. Crown surveys also often show
colonization roads and portages (the public right to which
is protected by s. 65(4) of the Public Lands Act).
Land surveys made after the original Crown survey may
conflict with the original Crown survey, causing gaps or
overlaps in measured boundaries. Natural boundaries,
monuments, and lines of occupation, such as fences, may
be more important in determining the correct legal
boundary of a property than the measurements and
bearings in a land description. The improvement of
surveying techniques over rough terrain frequently results
in a different set of bearings and distances from one point
to another, but if the points are the same, then the
boundary is the same.
4. Access and public highways
After the purchase of a cottage or other rural property is
closed, how will the buyers get from the cottage-country
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highway to their new home? Buyers of real property and
their mortgage lenders need assurance that the land being
purchased has legal access to a public highway. Most
buyers expect to have land access to their new property. If
there is no legal land access, the property is said to be
“land-locked,” and the only access may be by water or air
travel. In such a case, unless the buyers bargained for this,
they may have overpaid for the property based on their
having presumed land access. Their lawyer will have
erred, and the buyers will be very unhappy.
Verifying access is a necessary part of every title search,
but is particularly important in the case of cottage and
rural properties, where legal access to a public highway is
not always certain.
The ideal means of access to any property, and the most
common in urban areas, is directly from a maintained
“public highway.” The fact that the highway abuts the
property does not guarantee access, however, since
governments often require an entrance permit in order to
physically access a highway. If a proposed entrance (with
a “curb cut”) is in a location that might cause a traffic
hazard, a permit may be refused. Occasionally, an existing
curb cut is illegal. An inquiry with the municipality can
confirm whether a curb cut has been or can be authorized.
The best way to determine access to a property is to
examine a plan of survey of the property. Alternatively,
plans of subdivision, municipal zoning maps, Teranet
maps, and maps issued by government ministries,
including the Ontario Base Maps, may be useful.
4.1 Public highways
The legal term “highway” covers much more than a high-
speed roadway. The public highways of Ontario came into
existence by statute and common law. Today, what
constitutes a highway is outlined in s. 26 of the Municipal
Act, 2001 as the following unless they have been closed:
ƒ all highways that existed on December 31, 2002
ƒ all highways established by a by-law of the
municipality on or after January 1, 2003;
ƒ all highways transferred to a municipality under the
Public Transportation and Highway Improvement
Act;
ƒ all road allowances made by Crown surveyors that
are located in municipalities; and
ƒ all road allowances, highways, streets, and lanes
shown on a registered plan of subdivision.
The Crown owns the highways in unorganized
(unincorporated) townships.
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4.2 The paramount right of passage over
public highways
At common law, the public has a paramount right of
passage along every public highway, and owners of land
abutting public highways have a right of access to them.
These rights cannot be interfered with except by the
clearest legislation unequivocally expressed. By s. 35 of
the Municipal Act, 2001, municipalities may pass by-laws
to remove or restrict these rights. The closing of highways
abutting Crown land requires the consent of the
Government of Canada (s. 34(2)). The general rule is
therefore “once a highway always a highway,” until it is
properly closed or such a by-law is enacted. The case law
indicates that it requires clear action to create a highway
and even clearer action to close one. Unused highways do
not lose their status by abandonment. They are also not
subject to adverse possession, unless one can prove 60
years’ possession prior to 1913 and s. 51 of the Land Titles
Act does not vitiate such a claim.
4.3 Maintenance of public highways
There is a difference between the status of a piece of land
as a highway and the obligation of a public body to
maintain the surface. Until a municipality has assumed
responsibility for maintaining the surface, it has no
obligation to maintain any of the many highways that it
owns (Municipal Act, 2001, ss. 31(4)–(5)).
Where a municipality has jurisdiction over a highway or
bridge, it shall keep it in a state of repair that is reasonable
in the circumstances, including the character and location
of the highway or bridge (s. 44). It must maintain the state
of repair to an extent sufficient to serve the actual use
made of the highway by the public—from year-round,
high-quality maintenance to the spreading of a load of
gravel every few years. Most municipalities will advise on
request whether a property abuts a municipally
maintained public highway and whether maintenance is
seasonal (no snowplowing, garbage pickup, or other
services) or year-round. Some official plans or zoning by­
laws do not permit further development unless the
property abuts a year-round maintained highway. A
buyer’s intentions, as expressed in the agreement of
purchase and sale, should be checked against the highway
access available.
4.4 Highways without registered municipal
ownership
A number of highways have existed and have been publicly
maintained for decades but have not been recorded as
municipally owned in the land titles offices. These
“trespass roads” are nevertheless public highways,
although there is often a question as to their actual width.
Identifying the highway boundary is critical to a
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REAL ESTATE
determination of whether the buyer’s property actually
abuts the highway (a question of access) and whether the
seller will retain some land between the property sold and
the highway edge (a potential contravention of the
Planning Act). These problems are solved by transferring
the full width of the trespass road to the municipality.
Every title is subject to any existing public highway,
whether or not recorded on the title.
5. Other means of access
The following are various alternative means of gaining
land access to rural and cottage properties.
5.1 Roads across Crown land
Part II of the Public Lands Act provides for certain public
rights of passage over Crown land. If there is a parcel of
Crown land between the subject property and the nearest
municipal highway, there may be an existing developed
road access across the Crown land. It is Crown policy that
the road is available for use by the general public,
including nearby property owners. Upon application, the
Crown can issue a work permit that allows a person to
make improvements to the surface at that person’s own
expense. The improvements then belong to the Crown and
are available to the public.
5.2 Rights of way across private property
5.2.1 How rights of way originate
A right of way is a particular type of easement over one or
more properties for the purpose of gaining access to
another property. It may arise by express transfer,
implication, reservation, estoppel, or operation of law
such as prescription. The following are examples.
Most commonly, there will be a registered transfer or deed
of a right of way, often many decades old. The right of way
will be included in the property’s legal description in the
form of a long metes and bounds legal description or as a
reference plan.
A reserved right of way is one “reserved” by the seller in an
old deed or transfer and should also therefore appear in
the legal description.
Implied rights of way and those arising from estoppel or
prescription may or may not appear in the legal
description so that other means of establishing their
existence may be required.
“Prescription” is the acquiring of an easement or right of
way by open, continuous, and exclusive use of land (but
not possession, which is the subject of adverse
possession), with or without permission but with the
owner’s express or implied consent, for an uninterrupted
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period of 20 or 40 years (Real Property Limitations Act
s. 31). Where a property’s estate qualifier is Land Titles
Absolute or Absolute Plus, rights created solely by
prescription cannot exist. For LTCQ qualifiers, only
prescriptive rights that had crystallized (arguably, come
into existence) before the conversion to LTCQ can
attach to the title. Title to any lands still under the
Registry Actremain subject to both accruing and
crystallized prescriptive rights, if any.
A right of way may expressly limit when or how it may
be used. Care must be taken to ensure that the easement
has not been overburdened, by either using it for a purpose
not permitted by the transfer or extending it to
serve a property to which it is not appurtenant.
5.2.2 Rights of way: legal issues
Where, as is common, the only access to a property is
across a right of way, its existence must be verified by the
solicitor, preferably with an up-to-date survey and a
careful examination of land registry office records.
Purported access across apparently public property such
as a beach may in fact not exist if the beach is privately
owned (typically where the 66-foot municipal shore road
allowance has been closed by by-law), and in such a case,
obtaining a right of way may not be possible. Title
insurance may compensate the buyer in respect of right­
of-way access issues, but this must be verified with the title
insurer (which may impose search prerequisites before
providing access coverage) and a review of the insurance
policy. It can never be assumed that such special coverage
will be available. Most importantly, such compensation is
monetary and may not provide the buyer with actual
access.
There may be a right of way over a private road running
for several kilometres in length, servicing and crossing
numerous cottage lots around a lake and leading to the
nearest travelled public highway. The longer the right of
way and the larger the number of users, the more likely
that there is a cottage owners’ association that collects
money from users to improve, maintain, and repair the
surface. The seller should be able to advise whether there
is such an association. If there is no such group, a lack of
surface maintenance of the private road (including winter
snow removal) can create seasonal access problems or can
indicate that automobile access may not be practical. In
addition, buyers of cottages located on roads not
maintained by the municipality should be advised to
obtain liability insurance against claims by third parties
using the road. One possible source of such insurance is
the Federation of Ontario Cottagers’ Associations.
In long-established farming regions, registered and
unregistered rights of way may exist for a variety of
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reasons, some of which may now be obsolete or no longer
in use, for example, to allow cattle and other animals
access to water resources.
5.3 The Road Access Act
The Road Access Act defines an “access road” as a strip of
land that has been used for the purpose of vehicular access
to the property. It also defines a “common road” as an
access road upon which public money has been spent. By
definition, neither an access road nor a common road can
be a public highway. The access roads are fairly common
in cottage areas. They must have been established with the
permission or acquiescence of the owner of the underlying
property in the first place.
No person may obstruct an access road or a common road
without a court order. The judge may grant the order if the
closure is reasonably necessary to prevent substantial
injury or damage to the owner’s interests or if the person
using the access or common road has no legal right to do
so. A person having the use of an access road has not
acquired any interest in the underlying land but is simply
not a trespasser. There is, therefore, no legal interest that
a seller can convey to a buyer, and there is no guarantee
that the facts needed to sustain an access road will
continue indefinitely into the future. The privilege is also
strictly limited to vehicular access and not pedestrian
access or access on horseback.
The Court of Appeal for Ontario in the case of 992275
Ontario Inc. v. Krawczyk considered access roads and
orders to close such roads. Among its many rulings, the
court held that a finding that a road is an access road does
not give persons whose properties are served by the road
a legal right to use it within the meaning of s. 3(1)(b) of the
Road Access Act.
5.4 Water access
All island properties and many shoreline properties with
no adjacent right of way, access road, or highway gain
access solely by water. Most larger lakes have marinas,
which provide parking and boat launching facilities. A
buyer of such a property relies on these facilities being
available.
Some municipal planning regimes permit the
establishment of a waterfront landing, basically a parking
area and dock, on smaller parcels of land that are not
suitable for other development and that abut highways.
Others permit boat launching from original road
allowances that lead to water. Several have policies that
prohibit the use of public docks as water access facilities
for private properties. Enquiries should be made of the
seller, the marina (if any), and the municipality to
determine what is permitted locally and what is available.
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6. Road allowances
6.1 What is an unopened road allowance
Typically, solicitors encounter two varieties of unopened
road allowances: those between concessions and between
the lots on concessions, and the 66-foot-wide municipal
shore road allowances around most lakes in Ontario. This
section deals with the first variety, here called concession
road allowances. The second, referred to as shore road
allowances, are discussed in “Unopened shore road
allowances,” below.
Concessions are large divisions of the original townships
laid out by Crown surveyors. Concession lots are large
subdivisions of concessions, typically 200 acres in area.
When these lots and concessions were laid out, concession
road allowances were created between the lots, usually
66 feet wide. Today, all such concession road allowances
are owned by the municipalities in which they are located
(see ss. 26, 28(2), and 31(4) of the Municipal Act, 2001)
unless the municipality has closed the road allowance and
transferred its title. Many concession road allowances are
now major public roads. Others, called “unopened” road
allowances, have never been improved for travel and may
be covered with trees, smaller vegetation, and various
other obstacles. Whether a road allowance is open or not,
if it still exists, then the public has the right to travel over
it even where it crosses otherwise private property.
6.2 Encroachments onto road allowances
Where such an unopened road allowance abuts a cottage
or other rural property, it is not unusual to find that part
of a residence, sewage system, fence, or other structure
encroaches onto the road allowance. The municipality can
require the structure to be removed. A mortgagee may
refuse to advance funds where the main building or
sewage system encroaches onto a road allowance.
Without a recent land survey, a solicitor may not know
that such a road allowance encroachment exists.
Assuming a survey is available, the solicitor must discuss
with the client the survey information including the
location of any road allowance if there is an encroachment,
the advisability of further survey work, and the availability
and usefulness of title insurance to deal with the problem.
Always bear in mind that title insurance compensates for
monetary loss but may not resolve an actual legal problem.
The client’s input from an inspection of the property is as
important as the solicitor’s input. It should be clear from
this alone that the purchase of cottage property without a
recent survey is inadvisable.
Many municipalities are prepared to close and sell
portions of concession road allowances to abutting
landowners or to lease or license the area of an
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encroachment to such an owner. By ss. 66–67 of the
Municipal Act, 2001, a private property owner may
terminate the paramount public right of passage over an
adjacent unopened original road allowance on meeting
specific criteria, which are strictly interpreted by the
courts. Note that portions of a highway that are under
water, while they can be closed, cannot be transferred into
private ownership without the approval of the Ministry of
Natural Resources and Forestry.
6.3 Maintenance of unopened road
allowances and subdivision roads
Some concession road allowances are used for access to
property but are not maintained by the municipality.
Municipal permission is necessary before doing any work
to improve the surface. The municipality may, on
application, permit the improvement of the surface of an
unopened road allowance so that it can serve as access to
a property. Municipalities are reluctant to do this except
over short distances with easy access onto a maintained
highway. Any improvement will be available to the general
public, not just to the person who paid for it. Even if the
surface is brought up to municipal standards, the
municipality has no obligation to assume the
responsibility for maintenance.
Under s. 57 of the Surveys Act, every “road allowance,
highway, street, lane, walk and common shown on a plan
of subdivision” shall be deemed to be public. Occasionally,
such a public “road” is not maintained. The municipality
may permit the improvement of the surface; however, if
the road serves a significant number of properties, the
municipality may require upgrade to full municipal
standards as a local improvement charged against all of
the lots abutting the road.
6.4 Unopened shore road allowances
Where land fronted on a lake, the original Crown patent
reserved to the Crown a 66-foot-wide shore road
allowance between the then high-water mark of the lake
and the lots that were the subject of the Crown patents.
These lots were created beginning over 200 years ago, so
the shore road allowances may now be under water, or dry
land may now exist between them and the lake. As
described in “What is an unopened road allowance,”
above, all shore road allowances and any beaches situated
on them are also owned by the municipalities in which
they are located unless the municipality has closed the
road allowance and transferred its title.
A major issue for buyers of lakefront cottage property is
ownership of a beach or other land lying between the
property and the water. Where the buyer believes lake
frontage to be private, such buyer may be willing to pay
more for the property than would be the case with a
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publicly owned beach; or the buyer might not buy the
property at all if the beach is public.
If the shore road allowance has not been closed, the buyer
will not be able to exclude the public from using the beach
and may encounter a great deal of unexpected activity and
noise during the summer. This issue should therefore
always be dealt with in the agreement, and ownership of
the shore road allowance must be investigated by the
buyer’s lawyer if the agreement provides for private lake
frontage.
Where a shore road allowance has not been closed, the
municipality is the riparian owner (see “Shoreline
ownership,” below). The adjacent private property owner
has the right to cross the road allowance (using the
paramount public right of passage), but not the right to
install shoreline structures such as a dock or boathouse
nor the right to run water pipes across the road allowance
from the waterway except with municipal permission.
For these reasons, and for privacy, many cottage owners
decide to apply to close and purchase the road allowance
in front of their properties where the municipality will
agree to this. This requires the municipal council to pass a
by-law closing that section of the road allowance;
however, if the general public already uses the road
allowance as a travelled road, walkway, or public beach,
there is little chance of closing the road allowance.
7. Navigable waters and shoreline
ownership
7.1 Navigable waterway
A navigable waterway is one capable of being traversed by
small craft, whether for recreational or commercial
purposes, or that is used to float logs, log rafts, and booms.
Most lakes, rivers, and many streams are therefore
navigable. Under the Beds of Navigable Waters Act, the
Crown owns the bed of every navigable waterway (with a
few statutory exceptions). Under common law, the public
has a paramount right of navigation over every such
waterway that can only be interfered with by the clearest
legislation. Common law also governs other rights and
obligations in respect of navigable waters. The federal
government has jurisdiction over navigation under the
Canadian Constitution.
More than 100 major navigable waterways in Ontario are
protected from works that risk a substantial interference
with navigation by s. 3 of the Canadian Navigable Waters
Act.
The responsibility for determining whether a particular
waterway is navigable is usually left to a surveyor. As
navigability is a question of fact, in many cases there is no
resolution without litigation.
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7.2 Shoreline ownership
Where a property owner’s land extends to the water’s
edge, that owner has certain additional rights and
privileges referred to as riparian rights. It is necessary that
the ownership touch the water. If there is an unopened
original shore road allowance or a Crown reserve of land
between private property and the water’s edge, the private
property owner would not enjoy riparian rights.
An owner’s riparian rights include
ƒ the right of access to the water;
ƒ the right of drainage into the water;
ƒ the right to receive the flow undiminished from
properties upstream and to use the flow to power
equipment;
ƒ the right not to have the water polluted;
ƒ the right to use the water (without materially
reducing the flow); and
ƒ the right to accretion of land from silt washing
downstream.
Riparian rights are subject to environmental regulation.
Such rights are not often privately litigated, but droughts
and pollution spills may bring them to the fore.
7.3 Limits of shoreline ownership
The bed of a waterway is the land normally covered by
water. Plans of survey often show the high water mark or
the low water mark, but these terms were adapted from
English law on tidal waters, and Ontario’s waterways are
not considered tidal. The surveyor’s job is to determine,
from an examination of the shoreline, the normal level of
the water when the original Crown survey was prepared.
The water’s edge is the limit of the bed. The shore is the
area between high and low water, so for non-tidal
waterways, it is the line of the water’s edge.
The water’s edge is also the legal limit of the ownership of
the adjacent dry land. Such land may be privately owned,
an original shore road allowance, or a beach in public
ownership. If the water’s edge moves imperceptibly from
year to year, adding dry land by way of accretion or
removing it by way of erosion or rising levels, then the
legal boundary moves as well. A property owner on a
slowly eroding shoreline or where the advance of the
water’s edge is encroaching onto the land is losing
property because the other boundaries of that property do
not move in concert with the water’s edge. Conversely, the
slow and permanent recession of the water adds to the
property.
If the water’s edge moves suddenly, as a result of a heavy
storm water flow, shoreline construction, or the raising of
the water level by the installation of a dam on the
waterway, this does not change the legal boundary of the
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bed of the waterway or of the adjacent dry land property.
Where property in private ownership has been flooded in
this fashion, although it remains in private ownership, it
becomes subject to the paramount public right of
navigation.
A water lot is a parcel of land in the bed of a waterway that
the Crown has patented into private ownership. While the
private owner has all the usual rights of ownership, those
rights are subject to a number of other rights that take
priority, including the paramount public right of
navigation, riparian rights, and various statutory
privileges.
The bed of a waterway that is not navigable is in private
ownership. If a stream is a property boundary, then unless
the land description indicates otherwise, the adjacent
owners on either side own the land to the middle thread of
the channel.
7.4 Shoreline structures
Shoreline structures, such as boathouses and docks, are
usually located mostly on the bed of the waterway and
therefore on Crown land. The Crown has generally
tolerated this, sometimes requiring that the adjacent land
owner obtain a lease, licence, or land-use permit for the
privilege. Municipalities regulate shoreline construction
where an unopened shore road allowance exists. Where a
shoreline structure has been in place for more than 60
years, an application can be made to the Crown for a
transfer or title of the footprint of the structure that sits on
the bed.
Before any construction can take place at the water’s edge
or on the bed of a waterway, it is necessary to obtain
approvals from the Ministry of Natural Resources and
Forestry as owner, Fisheries and Oceans Canada as to
protection of fish habitat, the Coast Guard as to navigation
hazards, and of course, the local municipality as to zoning
and building requirements.
Where the water’s edge recedes gradually from its original
high-water mark over many years, resulting in a growing
parcel of land where the water used to be (accretion), the
issue will also arise as to who owns the accreted land. The
considerations in adjudicating the consequent conflicting
claims were illustrated in a decision of the Court of Appeal
of Alberta in Andriet v. County of Strathcona.
Properties adjacent to rivers may also be subject to flood
plain regulations. Engineers have determined the extent
to which the river would flood in the worst storm that
could be statistically predicted in a 100-year period. From
this, the flood plain, which would be under water in such
a storm, and the flood fringe, which would be less
seriously affected but nevertheless very wet, are
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determined. The results are incorporated in local
municipal zoning by-laws and should therefore be
discovered by the zoning search. Existing structures on the
flood plain are usually permitted to continue but new
construction must take place above a certain elevation. A
surveyor can establish where this elevation is on the
property, prior to any construction.
The availability of insurance for a structure on a flood
plain must always be verified. Where insurance is not
available, the buyer of the property may have the right to
terminate the agreement. See “Consequences of
unresolvable requisition” in Chapter 47 (Agreement of
purchase and sale) of these Study Materials and paras. 8
and 10 of the Ontario Real Estate Association’s form of
agreement of purchase and sale.
The Crown and certain hydro electric companies have
reserved flooding rights, up to a specified elevation, along
some waterways. Since such flooding can take place
without compensation, it should be determined whether
the present water level is the flood level (most likely) or
whether flooding to the permitted level might further
affect the client’s property. A surveyor’s assistance is
essential.
8. Water systems
Wells are regulated by Wells, R.R.O. 1990, Reg. 903, made
under the Ontario Water Resources Act. The regulations
deal with every facet of wells, from licensing and
continuing education to reporting requirements.
Cottage properties are normally served by wells or by
drawing water from a nearby waterway. If a well is
installed by a professional, that person must be licensed
by the Ministry of the Environment, Conservation and
Parks. Among many other things, the installer must send
to the Ministry a report showing the recovery rate (how
quickly the well replenishes water). A copy may be
obtained on enquiry. Private owners may also personally
install their own wells, in which case there is no record at
the Ministry; but all well owners are subject to ongoing
maintenance regulations.
The issues related to any water source are quantity and
quality. Title insurance may insure well licensing and
government work orders, but will generally not provide
coverage for potability, capacity, or quality issues.
Water quantity is a function of the user’s habits (showers,
lawn watering, appliances, etc.). Quantity is usually not an
issue if water is taken from a nearby waterway for private
use only. However, quantity will be an issue if the water
source is a well. In such cases, buyers are advised to
include before the agreement of purchase and sale
becomes firm and binding an appropriate condition
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COTTAGE AND RURAL CONVEYANCING
precedent in the agreement of purchase and sale so that a
professional inspection of the well can be made to assure
that there is sufficient water flow. Where water flow is
insufficient, one solution is to arrange for periodic
deliveries of large tanks of water to the property.
Water quality is a question of bacterial content and
chemical content. One problem to watch for is cross-
contamination between a sewage system and a well on the
same property. Buyers should always include a condition
precedent in the agreement of purchase and sale regarding
the obtaining of a satisfactory water quality test from an
authorized laboratory. Water samples can be submitted to
the local public health laboratory for testing. Coliform
bacteria are often found in wells, particularly if animals
and birds leave feces near the well. The well can be
sanitized with bleach or other forms of chlorination (with
or without a buyer’s knowledge, the latter possibly being
fraudulent) and then retested. Buyers should be aware
that this procedure may only conceal the quality issue
temporarily and may over-chlorinate the water, with
possible health consequences.
The presence of toxic chemicals requires a test at a private
laboratory. A distinct colour or residue in the water is
often a chemical problem. A well located near a road may
be contaminated by road salt and other chemicals. Lake
water can also show bacteria and chemicals, although tests
may vary as contaminants are moved by wind and
currents.
9. Sewage systems
9.1 Terminology
A sewage system (also known as a septic or septage
system) is a private, small (limited to a maximum of
10,000 litres per day), subsurface sewage disposal system,
located entirely inside the boundaries of the single parcel
of land that it serves. It generally services a single family
residence such as a cottage that does not have access to a
municipal sewer system.
The definition of “sewage system” in the Building Code,
O. Reg. 332/12, made under the Building Code Act, 1992,
is all-encompassing, including
ƒ a chemical toilet, an incinerating toilet, a
recirculating toilet, a self-contained portable toilet,
all forms of privy, and a composting toilet system;
ƒ a greywater system;
ƒ a cesspool;
ƒ a leaching bed system; and
ƒ a system that requires or uses a holding tank for the
retention of hauled sewage
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in each case with design capacities of no more than 10,000
litres per day.
Italicized words are further defined in the Building Code.
9.2 Jurisdiction
Jurisdiction over sewage systems has varied. The
Environmental Protection Act applied from 1974 to 1998.
Enforcement has passed from public health units to the
Ministry of the Environment, Conservation and Parks and
now back to municipalities or their contractors pursuant
to the Building Code Act, 1992.
Information on approvals for small sewage systems can be
obtained from municipal building departments. In
unorganized (unincorporated) areas of northern, central,
and eastern Ontario, much of the land is Crown land under
the jurisdiction of the Ministry of Natural Resources and
Forestry on behalf of the Crown. The Ministry may sell or
lease parcels in these areas and will be responsible for
approvals and inspections. Other lands owned or
managed by conservation authorities and other non-
government organizations are also leased to cottagers
under lease agreements containing specific requirements
including provisions for sewage systems and wells.
9.3 Licensing and inspections
Sewage system contractors and subcontractors must be
licensed under the Building Code.
Part 8 of the Building Code provides for mandatory
maintenance inspection programs of sewage systems in
defined areas of the province. In 2010, such a mandatory
program was created for certain areas bordering on Lake
Simcoe and its watershed under the Lake Simcoe
Protection Act, 2008. Similar mandatory requirements
may in the future be imposed on other areas of the
province where a threat to water quality exists. Where a
cottage property is located in such an area, a compliance
report should be obtained from the local municipality
(often the health department) to confirm that no
municipal orders or requirements are outstanding. Title
insurance may also provide coverage, but this needs to be
confirmed with the insurer.
9.4 Class 4 sewage systems
Five classes of private sewage systems are defined in
Part 8 of the Building Code. The most common sewage
systems affecting cottage and similar properties are a
Class 1 pit privy and a Class 4 septic tank and tile bed.
A Class 4 system, the most common type, must be
installed by a licensed installer. An initial inspection is
done and a building permit is issued. The system is
installed and left open for a final inspection and
certification. A search should be made to ensure that a use
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permit or a final inspection letter was issued when the
system was constructed. Records from 25 years ago and
more were often filed under the installer’s name, not the
property description or the property owner’s name, so a
search may not be successful. Some records no longer
exist.
The Class 4 system is said to have been designed to work
for 20 to 30 years before it needs to be replaced. Many
systems have successfully operated for much longer. The
main issues for a buyer are whether the system has
malfunctioned in the past, whether it is presently working
properly, and its remaining life expectancy.
The tile bed part of the system is buried and can be
inspected by a sewage system installer using a specially
designed camera. The tank can be pumped out and
inspected by a licensed inspector. A visual inspection
around the boundaries of the system, pools of liquid and
odd coloured vegetation, and the frequency of the
necessity to pump out the septic tank may assist in
determining its present operation. A tile bed over which
motor vehicles, snow machines, or other heavy items have
travelled, or on which they have been stored, may
malfunction because the drainage tiles have been crushed.
Over time, the size of a Class 4 system has been
determined by the number of bedrooms or the number of
water fixtures or fixture equivalents. If a major addition
was made to a small building, the adequacy of the sewage
system should have been reviewed at that time and the
system expanded or replaced if necessary. An addition to
a dwelling does not automatically require an addition to
the system, but this should be verified with the
appropriate authority.
A warranty from the seller is usually all that is available
with respect to the past. A buyer of a property containing
a Class 4 system should therefore always include a
condition precedent in the agreement of purchase and sale
as to the completion to the buyer’s sole satisfaction of an
inspection and report on the system by a licensed
inspector.
10. Unregistered hydro easements
Hydro One Inc. is the owner and operator of the
transmission lines providing electricity to many Ontario
municipalities. Under the previous s. 48(2) of the Power
Corporation Act, the predecessor of Hydro One Inc. held
and continued to acquire by agreement unregistered
easements for its transmission lines across many private
properties in Ontario, typically in rural areas. That Act was
replaced by the Electricity Act, 1998 on October 30, 1998.
Under s. 46 of the Electricity Act, 1998, Hydro One Inc.
retains all such easements that existed before October 30,
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1998, until they expire or are released. Such easements
normally require that no structures or major vegetation
are to be installed within 15–33 feet from the centre line
of the easement. In most cases, the installation of poles or
wires across the property will be apparent; however, a
written search should nonetheless be sent to the regional
office of Hydro One Networks Inc. Alternatively, a search
may now be performed online on the Hydro One website.
11. Zoning and conservation issues
The zoning of a rural or cottage property can be of critical
importance to a buyer. Zoning and conservation
restrictions may allow seasonal use only and/or restrict
municipal services available during the winter, reflect
environmental considerations, affect the size and type of
structures (including boathouses and docks) that may be
built or enlarged, impose sewage-system requirements,
and deal with many other matters.
Where seasonal use zoning is in place, the municipality
may not supply services such as garbage collection and
snow clearing during winter months, and services such as
school bus and mail delivery may not be available. While
the municipality may not object if an owner decides to use
a seasonally zoned property on a year-round basis, that
person should expect access difficulties if certain roads are
not cleared of snow and ice.
Accordingly, zoning reports should always be obtained
from municipalities for rural and cottage properties.
Reliance on title insurance alone is far from sufficient.
Similarly, local conservation authorities will provide
separate reports on their areas of jurisdiction.
The best practice is for sellers or their brokers or lawyers
to obtain the zoning and conservation reports before a
property is offered for sale and make the information
available to prospective buyers. Alternatively, buyers can
obtain the information themselves before submitting an
offer. Once all zoning details are known, the buyer can be
advised as to how zoning may affect the buyer’s intended
use or proposed construction, and the seller can warrant
in the agreement whether, for instance, zoning is for
seasonal use only.
Alternatively, if details are not available before an offer is
submitted, the buyer’s lawyer should include a condition
precedent requiring confirmation that the property is
zoned for all-year residential use if that zoning is what the
buyer is expecting. Conditions precedent can also be used
where a buyer wants to add, expand, or rebuild a cottage,
boathouse, or dock and for other similar buyer
expectations.
Many cottage buyers contemplate future additions or
accessory structures, such as boathouses and docks.
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COTTAGE AND RURAL CONVEYANCING
Clients should be made aware of any zoning and
environmental restrictions and the impact on the existing
sewage system and well serving the property.
Most cottage areas have a strong aesthetic and
environmental protection system in their official plans
and zoning by-laws. Similarly, agricultural regions and
other rural areas may have environmental protection
zoning that restrict the uses to which properties may be
put, as well as the intensity of such usages. For cottages,
setbacks of 50 feet and more from the water’s edge,
requirements to preserve existing mature trees, and
requirements of larger lot sizes for steeply sloped
properties and narrow water bodies are common. Swampy
areas and areas with significant wildlife habitat are zoned
to prevent most construction. Conservation authorities
impose regulations near significant conservation areas.
For the foregoing reasons, when dealing with rural and
cottage properties, the use of title insurance does not
obviate the need for zoning and conservation searches.
12. Co-ownership of a cottage
An issue that frequently arises in connection with the
estate of a deceased cottage owner is the inheritance of the
family cottage by the children of the deceased. Typically,
the will of the deceased bequeaths ownership of the
cottage to the children of the deceased in equal shares.
When the estate conveys title to them, the children
become the owners of the cottage as tenants in common,
with each child owning an equal fractional interest. This
arrangement contains the seed of what more than
occasionally becomes a serious family quarrel.
The solution to these potential problems lies in the
negotiation of a comprehensive co-ownership agreement
among the heirs, hopefully before the registered title of the
cottage is transferred to them. The lawyer retained by the
estate trustee should not prepare the agreement since
there are potentially multiple conflicts of interest. Ideally,
each co-owner should have separate legal representation
in the negotiation and drafting of the agreement. At the
very least, each co-owner must have independent legal
advice. Such an agreement can anticipate the various
issues and provide procedures by which the parties agree
to resolve each such issue. For more information, see
“Multiple buyers and co-ownership” of Chapter 47 of these
Study Materials.
13. Other issues
The following is a non-exhaustive list of additional issues
that may arise:
ƒ Access across Aboriginal lands: A cottage that
is accessed by a road across a reserve may be the
subject of an access permit issued by the Minister
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with a consent of the band. It does not give fishing
and hunting rights on the reserve.
ƒ Dump sites: These must be dealt with in
accordance with the Environmental Protection Act.
The Ministry of the Environment, Conservation and
Parks and local government authorities should
always be contacted if it is known that such a site is
on the property being purchased. Alternatively,
sellers can be asked to warrant that no such sites
have existed on the property.
ƒ Grave sites and abandoned cemeteries: The
local municipality should be asked to accept and
assume responsibility for these. Under the Funeral,
Burial and Cremation Services Act, 2002, a site
disposition agreement is required.
ƒ Heating fuels: Rural homes and cottages are
commonly heated using fuel oil or propane. The
handling and storage of these fuels and of their
storage tanks are among the matters regulated by
the Technical Standards and Safety Act, 2000
(TSSA), and by Liquid Fuels, O. Reg. 217/01, Fuel
Oil, O. Reg. 213/01, and Propane Storage and
Handling, O. Reg. 211/01, all made under the TSSA.
Owner-installed storage tanks and old ones are
particularly problematic for buyers and fuel
suppliers, as both of them assume legal obligations
for any storage tank on a property. Include in any
offer a seller’s warranty as to compliance with the
applicable regulation and recommend that the client
have the tank inspected for compliance before
closing.
ƒ Old gasoline and oil tanks: For gasoline tanks,
see the Liquid Fuels Handling Code, 2007 (under
Liquid Fuels). Domestic underground oil tanks
must be inspected and approved pursuant to the
Fuel Oil Code, which is referenced in Fuel Oil.
Depending on the age of the tank and whether it is
in use, upgrading or removal is required. If there is
any suspicion that contamination from an
underground tank may exist on the property being
purchased, a condition precedent requiring a
satisfactory Phase II environmental site assessment
under the Environmental Protection Act should be
added to the agreement and the seller asked to pay
part of the cost. The cost of a cleanup of such
contamination can be very expensive, and leakage
onto adjacent land can result in liability claims.
ƒ Unorganized townships: Although there is no
municipality to collect municipal taxes, taxes are
payable in any event under the Local Roads Boards
Act, the Education Act, and the Provincial Land
Tax Act, 2006.
ƒ Gas and oil pipelines: The interprovincial
pipelines are regulated under the Canadian Energy
Regulator Act. No structure may be erected and no
vehicle operated across a pipeline without the
appropriate permission.
ƒ Livestock facilities: The provincial policy
statements issued under the Planning Act require
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livestock facilities, including animals and manure

storage, to be protected. Residences must be more
than the minimum prescribed distance from such
facilities. See also the Nutrient Management Act,
2002 and regulations.

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Understanding a new home agreement
of purchase and sale
1. Introduction
This chapter deals with the purchase and sale of new
homes in Ontario. The new-home construction industry is
primarily regulated by the Ontario New Home
Warranties Plan Act (ONHWPA) and its regulations.
Every new home is subject to the ONHWPA, unless it falls
within an exception in the ONHWPA that excludes it. Both
regulated and non-regulated new homes are commonly
encountered.
Any new home agreement of purchase and sale
(agreement) can be expected to be much longer than the
Ontario Real Estate Association (OREA) resale agreement
form discussed in Chapter 47 (Agreement of purchase and
sale) of these Study Materials, and such an agreement
raises many more issues for a buyer. Regulated and non-
regulated new homes have many of these “new homes”
issues in common, but each category also has its own
specific issues. In addition, there is no standard form of
agreement for new homes, except for certain prescribed
schedules that are required by Tarion Warranty
Corporation (TARION) and/or the Home Construction
Regulatory Authority (HCRA). As a result, the nature of
the legal advice a client receives always has to be tailored
to the specific circumstances.
Particularly demanding in terms of advice are new houses
that are not protected under the ONHWPA and therefore
may require an extensive schedule of provisions to protect
the buyer. These are generally new houses built partly on
the foundation of a demolished home.
Sometimes a contractual provision may create risks so
contrary to the buyer’s best interests that the buyer should
be advised not to proceed with the transaction.
Buyers of new homes frequently seek legal advice before
signing an offer to purchase, and in the case of new
condominium homes, they may seek advice during the 10­
day statutory right of rescission provided by s. 73 of the
Condominium Act, 1998. The lawyer must be prepared to
review the entire, lengthy agreement (and the disclosure
statement in the case of condominiums) to identify
accurately and explain all of the issues the client needs to
understand. This is a time-consuming but necessary
process. This chapter covers only some of these issues.
Chapter 62
2. Ontario New Home Warranties Plan
Under s. 11 of the ONHWPA, the Ontario New Home
Warranties Plan (Plan) “is comprised of the warranties
and the guarantee fund and compensation provided for by
this Act.”
Designation of Corporation, O. Reg. 273/04, made under
the ONHWPA, designates TARION as the corporation that
administers the ONHWPA and therefore the Plan.
TARION is a not-for-profit corporation established in
1976 by the Ontario government for the purpose of
administering the ONHWPA. Its objects are set out in
s. 2(2) of the ONHWPA, including the administration of
the Ontario New Home Warranties Plan, the
establishment and administration of a guarantee fund
providing for the payment of compensation to purchasers,
assisting in the conciliation of construction-related
disputes between vendors and purchasers, and engaging
in undertakings for the purpose of improving
communications between vendors and owners.
In general terms, the Plan provides new home buyers with
limited deposit protection and protection against defects
in work and materials, unauthorized substitution of
materials, and delayed occupancy or closing without
proper notice.
2.1 Regulation of the vendor and the
builder
Effective February 1, 2021, the Government of Ontario
introduced the HCRA as the new regulatory authority
under the New Home Construction Licensing Act, 2017
(Licensing Act). Historically, in addition to administering
the Plan as noted above, TARION was also delegated
administrative authority responsible for licensing new
home builders and vendors in Ontario. However, pursuant
to Bill 166, the Strengthening Protection for Ontario
Consumers Act, 2017, the regulation and licensing of new
home builders and vendors in Ontario are the
responsibility of the HCRA.
Section 37 of the Licensing Act prohibits any person from
acting as a vendor or a builder unless the person is
registered under the Licensing Act. The criteria for
registration are listed at length in s. 38. These registration
requirements for the vendor, the builder, and the home
give HCRA the basis for regulating much of the home
construction industry, including jurisdiction to regulate
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new home agreements of purchase and sale, while
TARION’s role has now been limited to deal specifically
with matters relating to the statutory warranties under the
Plan. These regulations and warranties will be discussed
in detail later in this chapter.
This chapter will refer frequently to the following three
regulations:
ƒ General, O. Reg. 626/20, made under the Licensing
Act, provides for
— the conditions of registration for vendors and
builders; and
— the financial and other obligations to HCRA of
all registrants with respect to construction and
various other matters.
ƒ Administration of the Plan, R.R.O. 1990, Reg. 892,
made under the ONHWPA, covers
— enrolment of each home;
— warranty-related documentation that the
vendor must provide to the buyer; and
— the new home warranty and its enforcement.
ƒ Warranty for Delayed Closing or Delayed
Occupancy, O. Reg. 165/08, made under the
ONHWPA,
— contains provisions that were detached from
Reg. 894, made under the ONHWPA, in 2008
and significantly expanded; and
— prescribes the form of addendum that must be
appended to every new home agreement of
purchase and sale (there are also addenda that
are prescribed in Addenda to Agreements
Between Vendors and Purchasers, O. Reg.
629/20, made under the Licensing Act).
2.1.1 Bill 166
Bill 166 received Royal Assent on December 14, 2017. It is
an amending statute and is being proclaimed in parts. At
a date to be determined by proclamation, Bill 166 will
repeal the ONHWPA and replace it with two new pieces of
legislation that will regulate the new-home construction
industry: the above-referenced Licensing Act (now in
force) and the Protection for Owners and Purchasers of
New Homes Act, 2017 (Protection Act). As noted above,
the Licensing Act designates the HCRA to oversee the
regulation of new home builders and vendors, while the
Protection Act will designate a separate not-for-profit
corporation to serve as the warranty authority and
administer the warranty program.
2.2 Terminology
2.2.1 What is a “new home”
Neither the ONHWPA nor the Licensing Act explicitly
defines the term “new home”; however, the meaning of the
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REAL ESTATE
term can be inferred from the definitions, together with
the regulations made under the ONHWPA.
2.2.2 “Home,” “vendor,” and “builder”
Section 1 of the ONHWPA defines “home” as including:
(a) a self-contained one-family dwelling, detached or
attached to one or more others by one or more common
walls,
(b) a building composed of more than one and not more
than two self-contained, one-family dwellings under
one ownership,
(c) a condominium unit that is a residential dwelling,
including the common elements in respect of which the
unit has an appurtenant common interest as described
in the condominium declaration of the condominium
corporation, or
(d) any other dwelling of a class prescribed by the
regulations as a home to which this Act applies ...
Section 1 defines “vendor” as:
(a) except in relation to a residential condominium
conversion project, a person who, on the person’s own
behalf, sells a home not previously occupied to an
owner and includes a builder, as defined in clause (a) of
the definition of “builder”, who acts as such under a
contract with the owner, or
(b) in relation to a residential condominium conversion
project, a person who, on the person’s own behalf, sells
a home in the project to an owner and includes a
builder, as defined in clause (b) of the definition of
“builder”, who acts as such under a contract with the
owner … [Emphasis added.]
Section 1 defines “builder” as:
(a) except in relation to a residential condominium
conversion project, a person who undertakes the
performance of all the work and supply of all the
materials necessary to construct a completed home,
whether for the purpose of sale by the person or under
a contract with a vendor or owner, or
(b) in relation to a residential condominium conversion
project, a person who undertakes the performance of all
the work and supply of all the materials necessary to
construct a completed home in the project, whether for
the purpose of sale by the person or under a contract
with a vendor or owner …
This definition of “builder” effectively excludes a person
who constructs a home for the person’s own use, even if
contracting out much of the work to various
subcontractors.
Therefore, in effect, a “new home” is, in general terms, a
home not previously occupied that is built by a builder and
sold by a vendor (who may or may not also be the builder).
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UNDERSTANDING A NEW HOME AGREEMENT OF PURCHASE AND SALE
2.2.3 Owner, builder, or both?
From the definitions in the ONHWPA, two possibilities
arise:
ƒ The builder is the pre-construction owner and, thus,
will be the vendor when the property is sold.
ƒ The builder is not the pre-construction owner, but
builds at least one home, and possibly many more,
under a contract with such owner. The ONHWPA
and the Licensing Act consider such a builder to be
a vendor along with the party who ultimately
contracts as vendor to sell the home.
Since “vendor” encompasses the builder, the ONHWPA
and the Licensing Act, as well as their regulations, use
terminology that imposes obligations on the “vendor” for
the most part.
In this chapter, therefore, references to the “vendor” of a
new home include both the builder and, if a different
party, the actual vendor.
2.2.4 What is “freehold”?
In simple terms, “freehold” in this chapter refers to real
property that is owned in fee simple, is not part of a
condominium plan, and is not leasehold land held by the
owner under a long-term lease.
2.3 Non-qualifying new homes
Certain new homes are not subject to the ONHWPA and
therefore do not qualify for TARION warranty coverage.
The following is a non-exclusive list of new homes that do
not qualify for coverage:
ƒ Previously occupied homes: new dwellings that
typically have been occupied by or rented to tenants
by the vendor, or possibly occupied by the vendor.
ƒ Owner-built homes: a home where the landowner
rather than a contractor (1) exercises significant
control over the construction of a new dwelling,
and/or (2) is responsible for contributing one or
more “essential elements” to it. The owner has acted
as the owner’s own general contractor, hiring
individual subcontractors to perform work (such as
the excavation, foundation, plumbing, and wiring)
and lives in the house for even a limited period of
time. In such a case, there is no “builder” as defined
under the ONHWPA.
ƒ Homes built on existing foundations: situations in
which part of the “foundation” (which has a
complex definition) of a home is pre-existing and
exceeds 40% of the foundation footings as
determined by linear measurements. This also
covers condominium conversion projects in which
an existing building is converted to a condominium,
but that is changing (see “Residential condominium
conversion projects,” below).
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CHAPTER 62
ƒ Modular homes: a complete home composed of
finished sections usually built in a factory. Such a
home is only subject to the ONHWPA if the
assembled sections are placed on a permanent
foundation that complies with Part 9 of the Building
Code, O. Reg. 332/12, made under the Building
Code Act, 1992, and was installed by the same
vendor as sold the home to the buyer.
ƒ Mobile homes: transportable, single or multi-
section, self-contained homes built off-site. They are
only subject to the ONHWPA if the mobile home is
placed on a permanent foundation that complies
with Part 9 of the Building Code and was installed
by the same vendor as sold the home to the buyer.
ƒ Seasonal homes: a home that does not meet the
requirements of Part 9 of the Building Code and is
therefore not built for year-round occupancy.
2.3.1 Residential condominium conversion
projects
Recent amendments to the ONHWPA centre on
“residential condominium conversion projects” and
extend the deposit protection, delayed occupancy, and
most of the construction warranties to residential
condominium conversion projects that went to market on
or after January 1, 2018. There is an exception, however,
since “pre-existing elements” of a residential
condominium conversion project will not have the first-
year warranty coverage relating to construction in a
workmanlike manner or the warranty relating to the
materials being free of defects.
A “residential condominium conversion project” is
defined at s. 17.1(1) as a project that
ƒ includes or is proposed to include residential units
for year-round occupancy; and
ƒ contains pre-existing elements.
“Pre-existing elements” in most cases means all or part of
an existing building that will be incorporated into a new
condominium project, such that some parts of the
conversion project will be pre-existing while others will be
new.
Not all residential condominium conversion projects are
covered. Only conversions from non-residential uses
(such as office, commercial, institutional, and hotel) to
residential units are eligible for coverage. There are
specific exemptions that extend coverage for group
homes, dormitories, and prisons that are converted to
residential condominiums, but conversions of residential
apartment buildings are not eligible for warranty
coverage.
Section 17.3 requires the vendor to provide with respect to
the pre-existing elements
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ƒ a property assessment report (a detailed assessment
of the physical condition of the pre-existing portions
of the project);
ƒ a capital replacement plan consisting of
— a projection of when the pre-existing portions
will require repair or replacement;
— what repairs or replacements will be required
at that time; and
— an estimate of costs;
ƒ a pre-existing elements fund study, which will list
the pre-existing elements that will be incorporated
into the residential condominium and estimate the
amount required to be contributed by the developer
at the outset towards the pre-existing elements
fund; and
ƒ the establishment and funding by the vendor of a
separate trust escrow account, called a pre-existing
elements fund, to be set up with a trust company or
lawyer prior to the vendor/developer entering into
any agreements of purchase and sale for units in the
project.
The amount that the developer is required to contribute
towards the pre-existing elements fund is determined by
the pre-existing elements fund study referenced above.
The developer is not allowed to obtain reimbursement by
unit purchasers for the amount that the developer is
required to contribute towards the fund (s. 17.5(1)), which
would have been done by way of a closing adjustment (see
“New home price adjustments at closing,” below). In
effect, the developer has to include this cost in the actual
price of the units.
There are also very specific regulations relating to how and
when funds can be released from the pre-existing
elements fund, depending on when the funds are
requested. If the developer wishes to use funds from the
pre-existing elements fund in order to carry out work to
pre-existing elements, the written consent of TARION is
required to authorize the release of such funds. Upon
registration of the condominium corporation and prior to
final closing on any unit in the residential condominium
conversion project, those funds remaining in the pre­
existing elements fund that relate to common element
components, including accrued interest, must be
transferred and deposited into a separate, segregated
account for the benefit of and controlled by the
condominium corporation. The regulations contain
specific rules relating to the manner that the
condominium corporation may use such funds.
If there are any funds in the pre-existing elements fund
that were intended for repairs to a specific dwelling unit,
upon registration of the condominium corporation, such
funds must be disbursed to the purchaser of the unit to
which the funds apply, save and except that, if the amount
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REAL ESTATE
is greater than $10,000, the funds will continue to be held
in trust for a period of up to 7 years and will be disbursed
to the applicable unit owner on the earlier of the date that
the intended repairs are undertaken and the date that is
7 years after the date of registration/creation of the
condominium corporation.
In addition, the disclosure requirements applicable to
residential condominium conversion projects have been
enhanced and must contain the following additional
documents and information:
ƒ a statement that the project is a residential
condominium conversion project;
ƒ a list of the pre-existing elements as identified in the
pre-existing elements fund study;
ƒ a copy of the pre-existing elements fund study;
ƒ a statement that the workmanship and defects-in­
materials warranties do not apply to the pre­
existing elements of the condominium, as well as a
copy of the provision from the ONHWPA relating to
the foregoing; and
ƒ a statement that the builder and vendor are
registered with TARION and the units in the project
have been enrolled in the TARION warranty
program.
2.4 The TARION/HCRA addendum
The TARION/HCRA addendum (discussed in detail in
“The TARION delayed closing warranty,” below) consists
of a series of clauses and disclosures that must be included
in every new house and new condominium agreement.
For agreements entered into before July 1, 2008, Reg. 894
required all vendors of new freehold homes to attach the
addendum to, or incorporate it into, all agreements of
purchase and sale made before that date. The addendum
served to inform the buyer of certain contractual rights
and conditions that may alter its expectations regarding
the completion of the transaction and provides for certain
rights in the buyer’s favour that cannot be altered by
private contract. Reg. 894 was revoked as of February 1,
2021, and the addendum is now regulated by
O. Reg. 629/20.
The form of the TARION/HCRA addendum was updated
on February 1, 2021, primarily to reflect the introduction
of the HCRA, and the content of the addendum has
remained unchanged since October 1, 2012. Nevertheless,
any agreement of purchase and sale for a new home signed
on or after February 1, 2021, must contain the most recent
version of the addendum. It is anticipated that further and
more substantive changes to the addendum may be
introduced in the fall of 2021.
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UNDERSTANDING A NEW HOME AGREEMENT OF PURCHASE AND SALE
2.5 Supplementary documents required by
TARION and HCRA
Effective January 1, 2020, vendors of new residential
condominium units are also required to append to the
front of each agreement an “Information for Buyers of Pre-
Construction Condominium Homes About The Possible
Termination of Purchase Agreement” sheet. This
information sheet highlights certain cautions and
disclosures that are found in the addendum, including
ƒ the risk that the condominium and unit will never
be completed;
ƒ the early termination conditions that would allow
the vendor/developer to cancel the project;
ƒ information about the status of the development;
ƒ information about any title restrictions that may
prevent the project from going forward;
ƒ the expected date when the purchaser can take
occupancy of the unit; and
ƒ the importance of having the purchase agreement
reviewed by a lawyer familiar with condominium
transactions.
In addition, the Rebuilding Consumer Confidence Act,
2020, which was passed on July 14, 2020, grants TARION
authority to create a legislative obligation that
supplementary documents be attached to every
agreement. Effective February 1, 2021, TARION requires
a “Warranty Information Sheet” to accompany every
agreement, which provides a summary to purchasers at
the point of sale concerning the statutory warranties given
by vendors and guaranteed by TARION pursuant to the
ONHWPA.
3. The new home agreement of purchase
and sale
This section discusses some major components of new
home agreements of purchase and sale. While the focus at
first is on issues surrounding the HCRA and vendor
licensing under the Licensing Act, many other issues are
discussed as well.
3.1 Large and small vendors and builders
The Licensing Act does not distinguish between different
types or sizes of vendors and builders, but as a practical
matter, vendors and builders fall into two categories:
ƒ those who build homes under the umbrella of a
large project, such as a registered plan of
subdivision or a registered condominium plan; and
ƒ those who build homes either one at a time or in
small numbers.
There is no legal distinction between these types of
builders; there may be overlap, and there is no legal reason
why a registered builder cannot operate within both
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categories. What is important to understand is that certain
issues unique to one category or the other may be
encountered from time to time.
3.2 Where the vendor is not the owner
From the time a new home agreement is being negotiated
until closing, the party named as vendor in the agreement
may not be the registered owner of the land on which the
new home is to be constructed. For instance, the named
vendor may be the builder, not the owner; or the vendor
may be the beneficial, but not the legal, owner of the
underlying land. A registered owner of the land may be
ƒ the party actually named as the vendor in the new
home agreement;
ƒ the land developer who prepares and develops a
proposed new subdivision or condominium plan
before construction of homes begins (the
subdivider); or
ƒ a company affiliated with the vendor or the
subdivider.
Where the owner and vendor are different, there will
usually be an underlying agreement between the owner
and vendor in which the owner will agree to convey title to
the buyer (or otherwise) as instructed by the vendor.
There are many reasons for this kind of business
arrangement. For the purposes of this chapter, it is simply
necessary to understand that such arrangements exist and
are quite common.
Whenever the vendor is not the registered owner, the
buyer will want proof that the vendor will be able to convey
the land to the buyer when the transaction closes. At
common law, a vendor is bound, at the very least, to prove
that it is in a position to convey title on closing, failing
which a claim for anticipatory breach of contract will arise.
The buyer should require at the outset a written
acknowledgement by the registered owner that such
owner will convey registered title to the buyer when the
vendor is ready to close the transaction.
In these circumstances, the agreement may also require
the buyer to sign at closing an acknowledgement that the
registered owner, who will be transferring title to the
buyer, is not the vendor and that it will have no liability to
the buyer whatsoever with respect to the transaction. The
buyer will have to rely solely on the representations,
warranties, and covenants as to title and various other
issues provided by the named vendor in the agreement.
The vendor will be the party responsible for compliance
with the ONHWPA, and the owner, not being either the
vendor or the builder, will have no such obligation.
One further consequence of having a different owner and
vendor is that the HCRA will require that the owner and
the vendor both register as “vendors” under the Licensing
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Act, as s. 37 of the Licensing Act provides that a vendor agreement is entered into has a responsibility to bring
license is required in order to offer to sell or transfer a new these issues to the buyer’s attention and to assist with the
home. In addition, the HCRA no longer grants a deposit drafting of the agreement unless such work is explicitly
trust agreement in such a scenario, and as a result, the outside the scope of the solicitor’s retainer.
vendor will need to post other forms of security, such as a
A buyer of a non-qualifying home from its builder will
surety bond or letter of credit, prior to the vendor entering
probably use the OREA resale agreement and will have to
into agreements of purchase and sale.
draft additional contractual covenants and warranties that
3.3 Confirming registration under the must be negotiated with the builder and included in a
Licensing Act schedule. It is important that the buyer’s solicitor draft
thorough builder and/or vendor warranties, covenants,
All builders and vendors of newly built homes must be
and other necessary clauses to protect the buyer. It is also
registered with the HCRA (Licensing Act, s. 37), and all
important for the buyer to verify a builder’s abilities,
qualifying new homes must be enrolled (Reg. 892, s. 1.1).
reputation, and financial solvency before entering into the
Builders and vendors are not automatically registered
agreement since there is no protection for the buyer under
under the HCRA, but must pass a risk assessment based
the ONHWPA. Finally, buyers should consider requiring
on financial solvency, building experience, and technical
in the agreement that their own professional inspection
expertise. The typical builder’s agreement states the
take place before closing and that the vendor rectify all
TARION enrolment number for the dwelling and the
deficiencies identified by the inspector’s report.
HCRA licence number of the vendor.
The fact that a new home is built as part of a large project
At the outset, the buyer’s lawyer must confirm that the
or is built singly or in small numbers says nothing about
vendor (as well as the declarant and the builder if not the
whether such a home is subject to the ONHWPA. For
same party) is registered with the HCRA and that the
example, some new condominium projects are and some
home is enrolled with TARION. The vendor, declarant (if
(containing seasonal homes, for example) are not subject
different), builder (if different), and home will each have
to the ONHWPA. Some of the many custom-built freehold
its own licence or enrolment number, which can be
homes built every year by small builders in existing
verified directly with the HCRA or TARION. This will
neighbourhoods are built on existing foundations, are
assure the buyer that
occupied for a short time after construction, or are “owner
ƒ the parties the buyer is dealing with have satisfied built” and so are not subject to the ONHWPA, while others
the HCRA’s approval criteria for registration; outside those categories are subject to the ONHWPA.
ƒ the house will be constructed under the mandatory
legal framework; and A vendor’s representation that the home does not qualify
for warranty coverage should always be expressly stated in
ƒ the buyer will have the benefit of the statutory new
the agreement and should state the legal basis for the
home warranty, deposit protection, and other
statutory safeguards afforded by the ONHWPA. assertion. Vendors have been known to falsify certain facts
to avoid the registration requirements of the ONHWPA
The HCRA registration process provides a reasonable level
and the cost of compliance. In each case, whether a new
of comfort for buyers in the marketplace, inasmuch as the
home is subject to the ONHWPA is a question of fact. The
vendor and builder will have had to pass the HCRA’s
buyer and buyer’s solicitor should try to independently
screening process for business integrity, technical
verify the correctness of such a representation.
construction proficiency, competency, and financial
solvency, which together should be sufficient to sustain 3.5 Non-compliant builders and vendors
compliance with the statutory warranties TARION
Subject to the non-qualifying exceptions, it is illegal for a
provides to all new home buyers.
builder or vendor to enter into an agreement of purchase
3.4 If the new home is not subject to the and sale or a construction contract with a buyer for a new
ONHWPA home that is subject to the ONHWPA and Licensing Act if
the builder or vendor is not registered with the HCRA. It
New homes in any of the categories listed in “Non­
is also illegal to begin construction of a new home without
qualifying new homes,” above, may not be eligible for
first enrolling it with TARION. It is not illegal for a
enrolment under TARION, in which case no statutory
registered builder or vendor to sell a house from plans and
warranty coverage will be provided. A buyer buying a non-
later enrol it prior to construction.
qualifying home should bargain for and will have to rely
on private contractual warranties and covenants from the Unregistered vendors and unenrolled homes have been an
vendor or builder or preferably both if they are different ongoing problem for the industry. Under s. 1.3.1 of
parties. A solicitor retained by such a buyer before the Division C of the Building Code, municipalities must send

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UNDERSTANDING A NEW HOME AGREEMENT OF PURCHASE AND SALE
to TARION prescribed information on most residential
building permits issued. TARION regularly prosecutes
numerous unregistered vendors, and it is expected that
the HCRA will continue to do the same. It is not surprising
that vendors and builders who fail to register with the
HCRA or enrol their homes in the mandatory warranty
program usually do not inform buyers of their right to
statutory warranty coverage. In some cases, they falsify
information pertaining, for instance, to the foundation of
the new home to “prove” that the new home is not subject
to the ONHWPA (see “Non-qualifying new homes,”
above). Or a builder may claim to have lived in the home
so that it is no longer “new.” Solicitors and buyers can
verify that a new home builder is registered with the
HCRA and can review lists of prosecuted builders and
revoked licences via the HCRA’s builder directory found
on its website or by contacting the HCRA.
In the case of a new home subject to the ONHWPA that
has not been enrolled with TARION, the buyer, by
contacting TARION before or after closing, may still be
entitled to the TARION warranty. However, this is not a
desirable outcome for a new-home buyer. By the time such
buyer discovers entitlement to the warranty coverage, part
of the warranty period may have already expired, and
more time will pass until TARION eventually undertakes
warranty repairs.
Therefore, if the vendor does not produce documented
proof of its registration and of the home’s enrolment
number before the agreement is entered into, a buyer’s
lawyer should include in the agreement a condition
precedent requiring the vendor to produce such
documentation within a short time period. Registrations
can be verified by TARION and the HCRA. Also, the
recipient of deposits paid this early will have to be
addressed where the home is not yet registered with
TARION. All deposits at this stage must go to the vendor’s
lawyer in trust.
Coverage by TARION is a prerequisite for the buyer of a
qualifying new home subject to the ONHWPA to receive
the First-Time Home Purchaser Land Transfer Tax Rebate
offered by the Ontario Ministry of Finance (and the City of
Toronto, where applicable). The buyer must provide the
builder’s HCRA licence number on the rebate application
to receive the rebate. First-time buyers of resale and non-
qualifying homes are eligible for the rebate without
supplying a builder’s registration number.
Finally, the buyer’s mortgagee will almost always rely
contractually on the lawyer to confirm the HCRA
registration and TARION enrolment and will often require
a signed copy of the TARION certificate of completion and
possession.
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3.6 Assignments and limits on the buyer’s
ability to assign the agreement
Other than custom-home builders constructing one house
at a time, most vendors of new homes are generally
involved in constructing multiple dwellings in subdivision
or condominium development projects and will not want
to face any competition in the marketplace for their unsold
inventory of homes. Accordingly, the agreement will
typically restrict or prohibit any assignment of the
agreement and any resale of the new home by the original
buyer before the closing date (the final closing date for
condominiums).
When reviewing a new home agreement, the buyer’s
solicitor should explain to the client the clauses in the
agreement dealing with assignment. If the agreement
allows a resale at the vendor’s discretion, a fee may be
payable to the vendor in return for the vendor’s consent.
If so instructed, the lawyer should delete or revise the
resale restriction to permit an assignment or further sale
by the buyer and should try to reduce or eliminate the fee.
If the buyer’s financial or other circumstances change
during the (often lengthy) period before construction is
completed, being able to resell the new home and close on
or before the builder closing date may be the only way such
buyer can avoid defaulting under the builder agreement.
See “Financing risk for the buyer,” below.
There are two ways for an original buyer to resell a new
home. The original buyer can assign the agreement using
an “assignment agreement” or can resell the unfinished
home using a second agreement of purchase and sale.
Differences in the financial outcomes of the two types of
resale are critical.
Both cases will result in two contracts, but an assignment
agreement must close before the builder agreement, while
a second agreement of purchase and sale must close after
the builder agreement.
There will be financial consequences involving closing
adjustments, land transfer tax, and the Harmonized Sales
Tax (HST) new housing rebate, among other things, which
can affect both sides, either favourably or unfavourably.
It is therefore crucial, whether acting for the first buyer or
the second, that the lawyer understand and be able to
explain how the closings of the two transactions will take
place; when various payments will be due; and the
documentation, tax implications, and price adjustments
that will be part of each transaction.
Finally, with either form of resale, the second buyer’s
solicitor should include a condition precedent requiring
the reseller to deliver promptly the written consent of the
builder to such assignment or resale (in form and
substance satisfactory to the second buyer) and requiring
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the reseller to pay all fees payable to the builder for its
consent.
3.7 Description of the property
New homes are often purchased before they are built, on
the basis of plans and diagrams hopefully contained in the
agreement. Sometimes the plan of subdivision has not yet
been approved and registered. The buyer’s lawyer must
ensure that both the legal description of the property
being acquired and the type, size, model, and elevation of
the home intended to be constructed on it are accurately
reflected and identified in the agreement of purchase and
sale.
The typical new home agreement specifies the dwelling
type, elevation, lot number, and civic address of the home
(if available). The buyer’s lawyer should verify with the
buyer that the lot number set out in the agreement
coincides with the purchased lot depicted in the vendor’s
brochure or subdivision plan, and a sketch, survey, or copy
of the proposed plan of subdivision (if not yet registered)
should be attached to the agreement, with the specific lot
highlighted and initialled by the buyer and the vendor.
Subsection 52(1) of the Planning Act prohibits the sale of
land by reference to an unregistered plan of subdivision
unless draft plan approval has been issued under s. 51.
One of the forms of addendum mandated by the
ONHWPA requires the vendor of a new home to disclose
the current planning status of the land at the time the
agreement is entered into. If the plan of subdivision
encompassing the new home has not yet been registered
but is in draft form awaiting finalization, the buyer’s
solicitor should require, by way of condition precedent,
written documentation from the vendor verifying the
status of the draft plan of subdivision.
3.8 Deposits
Typical new home agreements of purchase and sale may
have deposit provisions that differ significantly from the
OREA agreement deposits clause.
3.8.1 Deposits on TARION-registered new
freehold homes
Deposits on new freehold homes fall into two categories:
deposits for new homes that qualify for the TARION
warranty, and deposits for non-qualifying new homes.
In the case of a qualifying new freehold home, the
ONHWPA protects a buyer’s deposit to a maximum of
$40,000 for agreements of purchase and sale entered into
prior to January 1, 2018. For agreements of purchase and
sale entered into on or after January 1, 2018, the deposit
coverage depends on the sale price of the freehold home.
Where the sale price is $600,000 or less, the maximum
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protection is $60,000; where the sale price is over
$600,000, the maximum protection is 10% of the
purchase price, up to a maximum of $100,000. Qualifying
homes have an HCRA licence number for the builder and
a TARION enrolment number for the home, which should
both always be verified (see “Confirming registration
under the Licensing Act,” above). The agreement forms
used by new home builders therefore usually require that
all deposit moneys up to the aforementioned capped
amounts in the case of a freehold property, and up to
$20,000 in the case of condominium units (see “Deposits
on condominium purchases,” below), be paid directly to
the vendor and that amounts exceeding those limits be
paid to the vendor’s solicitor in trust to be held until
completion or termination of the agreement.
The lawyer for the buyer of a new freehold home should
carefully review deposit clauses to verify that all deposit
moneys in excess of the applicable TARION warranty limit
are payable to and held by the vendor’s lawyer in trust, to
be released only after closing. Alternatively, the vendor
may provide security for the deposits similar to the
prescribed security for deposit moneys referred to in s. 81
of the Condominium Act, 1998.
If the agreement for such a new home requires that all
deposits, including amounts in excess of the warranty
limit, be paid directly to the vendor, such excess deposit
moneys will be at risk if the vendor fails to complete the
contract and either absconds or becomes insolvent. Such
a requirement should raise serious questions about the
intentions of the vendor.
From about 2012 to 2015, a large Toronto builder received
deposits in excess of the warranty limits, some exceeding
$100,000, from many unwary freehold home buyers who
paid all of their deposits directly to the vendor. The builder
became insolvent before finishing construction. In some
cases, no work at all was done. The deposits were diverted
for other purposes. These buyers will probably lose all of
their deposits in excess of the limits insured by TARION
under the ONHWPA.
3.8.2 Deposits on non-qualifying freehold
homes
New freehold homes that do not qualify for the TARION
warranty (see “Non-qualifying new homes,” above) have
no deposit insurance. In these cases, all deposits should be
held in trust by the vendor’s lawyer until completion.
Some small builders of non-qualifying new homes will in
good faith want to use the deposits to finance the
construction (in place of bank financing) and may not
agree to have the deposits held in trust. The buyer’s lawyer
must assure that clients intending to buy a new home from
such a builder understand the serious risks of entering
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UNDERSTANDING A NEW HOME AGREEMENT OF PURCHASE AND SALE
into such an agreement and should require the clients’
written acknowledgment of the lawyer’s advice.
3.8.3 Deposits on condominium purchases
TARION’s deposit protection for new residential
condominium units is set at a maximum of $20,000 per
dwelling unit. Pursuant ss. 17.1–17.5 and related
provisions of the ONHWPA, this also applies to residential
condominium conversion projects where the first
agreement of purchase and sale for the project is signed on
or after January 1, 2018. However, there is no TARION
deposit protection for those residential condominium
conversion projects where the first agreement of purchase
and sale in the project was signed prior to January 1, 2018,
and buyers of units in such projects bear the same deposit-
related risks as those buying non-qualifying new homes,
subject to the protection below.
Deposits above the maximum $20,000 TARION deposit
protection (or deposits not covered by TARION) are
protected separately by the trust and excess deposit
provisions of the Condominium Act, 1998. Specifically,
pursuant to s. 81 of the Condominium Act, 1998, all
deposit moneys paid on account of the purchase of a new
condominium unit must be held in trust by a trustee of a
prescribed class or by the declarant’s lawyer, pending the
final closing of the transaction or the provision of
prescribed security for such deposit moneys. Further, the
buyer is entitled to any interest accruing on the deposit
moneys at the rate prescribed by the Condominium Act,
1998. Effective January 1, 2023, under General,
O. Reg. 48/01, made under the Condominium Act, a new
prescribed interest rate is applicable to terminations of
agreements of purchase and sale, including in those
instances where a condominium project has been
cancelled or terminated by the vendor, in relation to
condominium projects that start selling on or after
January 1, 2023. This new prescribed interest rate will
generally result in more interest being paid to purchasers
in those instances where the vendor cancels or terminates
a condominium project and the related sale agreements.
3.8.4 Deposits and construction liens
On a final note, the aggregate of all deposits paid for the
purchase of a new freehold home prior to closing should
not exceed 30% of the purchase price (excluding money
held in trust under s. 81 of the Condominium Act, 1998).
Otherwise, the buyer will cease to have the protections
afforded to a “home buyer” (as defined in s. 1(1) of the
Construction Act), and thereafter, the buyer will be an
“owner” under that statute, may be responsible for any
construction lien claims registered after closing against
the new home, and may be subject to statutory holdback
liabilities with respect to such claims.
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3.9 Payment of the balance of the purchase
price
New home agreements are no different from the resale
OREA agreement in at least one way: all require payment
of the balance of the purchase price at closing.
3.9.1 Proof of available funds
Most vendors want documented confirmation that either
the buyer has received preapproval for a mortgage loan in
the amount needed to complete the transaction or the
buyer will be able to pay the balance of the price out of its
own resources. A condition precedent will typically appear
in the agreement requiring such documentation within a
few days after the agreement is entered into, failing which
the agreement automatically terminates. Alternatively,
the agreement may require the buyer to pay 30% of the
price by deposits up front, with the vendor relying on the
large deposit being forfeited if the buyer later fails to close.
3.9.2 Financing the purchase
The main payment choices for the buyer are as follows:
ƒ The buyer has the funds to pay the balance of the
price without a loan. In this case, the agreement
states that the balance due on closing is payable by
certified cheque or similar means (in cash).
ƒ The buyer has already received approval for a
mortgage loan from the buyer’s own bank. In this
case too, no mention of financing is needed, and the
balance due on closing will be payable in cash.
ƒ The buyer wishes to arrange a mortgage loan from
its own bank but has not yet done so. A condition
precedent as to approval by the bank is required in
the agreement. The agreement provides for the
balance due on closing to be payable in cash.
ƒ The vendor may be involved in arranging the
financing with a third-party lender such as a bank.
The vendor may have arranged on a “wholesale”
basis with an institutional lender an optional,
attractive loan facility for buyers, encompassing its
entire project. Builders use such financing as a
marketing attraction. Buyers who accept it will
presumably receive the benefit of attractive interest
rates and other terms. Language in the agreement
will state whether the buyer has accepted such
financing, and if so, the acceptance must as always
be subject to a condition precedent as to the buyer
qualifying for the loan.
ƒ A buyer who is declined for financing may have
second thoughts about proceeding with the
purchase. In the case of the vendor-arranged
financing, if the third-party lender does not approve
the buyer, usually the buyer will be able to
terminate the agreement; however, the agreement
may instead require the buyer to give a first
mortgage with a one-year term and perhaps
unfavourable terms to the vendor at closing. In this
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latter case, the buyer will have to find another
lender before the one year is over and may not be
successful. If the buyer defaults on the mortgage,
the vendor will enforce the mortgage and sell the
property. The buyer could lose much or all of the
deposits and other funds it paid for the home.
The financing clauses of new home agreements often are
lengthy and contain details that may not be in the buyer’s
best interests. The solicitor must review such clauses
carefully and thoroughly in order to be able to advise the
buyer what will be required by the financing arrangement.
Where the buyer does not want vendor-assisted financing,
all clauses dealing with such financing must be deleted
from the agreement.
3.9.3 Financing risk for the buyer
Financing a new home purchase raises another special risk
for the buyer. Some new home agreements schedule
closing within a few weeks or months, but more commonly
and especially with new condominiums not yet under
construction, the closing date (or dates for
condominiums) may be years away. During that time, a
buyer may become unemployed, have moved to another
city, or have other serious problems such that, by the time
the closing arrives, the mortgage commitment will no
longer be honoured by the lender. This is a risk that most
new home agreements implicitly expect the buyer to bear.
The consequences of refusing or not being financially able
to close include loss of deposits and liability for damages.
The buyer must understand this risk before entering into
the agreement with the builder. In such an event,
assigning the agreement or reselling the property to
another buyer may be the client’s only recourse in order to
avoid default.
3.9.4 Completing vendor-assisted
financing
Financing arranged with a bank through the vendor may
be completed at the closing in one of two ways:
ƒ The buyer assumes (takes over) at closing an
existing registered first mortgage previously given
by the builder to the lender. Usually, with this
arrangement, the builder will be released by the
bank from any ongoing obligations under the
mortgage, once the mortgage is assumed.
ƒ Alternatively, a new first mortgage signed by the
buyer is registered by the lender at closing.
3.9.5 Interest rates in vendor-assisted
financing
One of the buyer’s primary concerns when contemplating
the giving or assumption of a mortgage at closing will be
the interest rate charged. The typical builder’s agreement
sets the interest rate on an assumed mortgage at a rate to
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REAL ESTATE
be established by the mortgagee typically about 30 days
prior to closing. The buyer’s lawyer should consider
“capping” the mortgage interest rate to protect the buyer
from the uncertainty of rising rates, particularly in the new
home scenario where the closing date is often many
months away.
3.9.6 Roadblocks to cancelling vendor-
assisted financing
The typical builder’s agreement attempts to discourage
the buyer from subsequently making its own financing
arrangements once the buyer has agreed to give or assume
the vendor’s arranged mortgage. This is accomplished by
making the vendor’s consent to any such arrangements a
prerequisite and presumably by compelling the buyer to
pay and/or reimburse the vendor for its estimated
administrative and legal costs associated with arranging
such mortgage financing to facilitate the closing. To
maintain the maximum financial flexibility in favour of
the buyer, such provisions should be revised or deleted.
3.10 Permitted early termination conditions
Another unique feature of a new home agreement of
purchase and sale that is subject to the ONHWPA and the
prescribed TARION/HCRA addendum is that the vendor
is limited in the type of early termination conditions that
can be included in the agreement of purchase and sale. As
further described in “The TARION delayed closing
warranty,” below, there are various TARION/HCRA
addendum forms, depending on the type of
transaction/project, and each form has unique early
termination conditions.
A lawyer acting for a buyer of a new home should carefully
review the permitted early termination conditions set out
in the TARION/HCRA addendum that applies to the
specific transaction and subsequently determine if the
early termination conditions included in the agreement of
purchase and sale by the vendor are permitted. Conditions
that are not permitted by the applicable TARION/HCRA
addendum are not enforceable.
In addition, a lawyer acting for a buyer in a transaction
that contains early termination conditions should bring
such conditions to the attention of the buyer and explain
to the buyer the implications of the early termination
conditions, including the right of the vendor to terminate
the agreement of purchase and sale pursuant to such early
termination conditions.
As noted above, for those condominium projects that start
selling units on or after January 1, 2023, a new and higher
prescribed interest rate will apply to the purchaser’s
deposits in the event that the vendor terminates or cancels
the condominium project.
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UNDERSTANDING A NEW HOME AGREEMENT OF PURCHASE AND SALE
On April 14, 2022, Bill 109, More Homes for Everyone
Act, 2022, received Royal Assent and will amend the
Licensing Act, including increasing the existing maximum
financial penalties for licensees that breach the HCRA’s
Code of Ethics from $25,000 to $50,000 per infraction for
individual licensees and from $50,000 to $100,000 per
infraction for corporate licensees, with no limit where the
licensee received monetary benefit from failing to comply
with the Code. Once proclaimed, these changes will give
the HCRA the authority to impose financial penalties
retroactively for contraventions that occurred on or after
April 14, 2022, and will also enable the HCRA to use the
money received from these penalties to make payments
back to purchasers who have been adversely affected by
builders and vendors who breach the HCRA’s Code of
Ethics, including unscrupulous developers that unfairly
cancel condominium projects.
4. The Harmonized Sales Tax (HST) new
housing rebate
In Ontario, HST is a hybrid sales tax of 13% paid by the
final consumer of most goods and services. The HST has
two components: the federal 5% Goods and Services Tax
(GST) under the Excise Tax Act, and the Ontario 8% Retail
Sales Tax (RST) under the Retail Sales Tax Act. The role
of Ontario vendors is to collect HST on their sales and
remit it to the Canada Revenue Agency (CRA), which acts
on Ontario’s behalf in collecting the RST component.
4.1 Harmonized Sales Tax after June 30,
2010
The governments of Ontario and Canada implemented the
HST in Ontario effective as of July 1, 2010. HST of 13%,
has been payable on all new home sales in Ontario for
which agreements have been signed after June 30, 2010
(subject to transitional rules). The Ontario legislation
creating the HST is found in the province’s omnibus
budget bill at S.O. 2009, c. 34. Ontario and Canada have
new housing rebates. Each rebate (GST and RST) has its
own formula.
4.1.1 The federal GST New Housing
Rebate
The first rebate is the federal GST New Housing Rebate.
On the first $350,000 of the pre-tax purchase price, the
GST rebate is 36% of the 5% GST payable. The rebate rate
of 36% declines to zero between $350,000 and $450,000
using a straight-line formula. The rebate is eliminated
when the price reaches $450,000. There is no GST rebate
at all if the pre-tax price exceeds $450,000.
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4.1.2 The Ontario HST New Housing
Rebate
The second rebate is the Ontario HST New Housing
Rebate. Despite its name, this rebate actually applies only
to the 8% RST component of the HST. The rebate consists
of 75% of the 8% RST—in other words, the rebate is 6% of
the sale price of the new home. The Ontario HST rebate
applies only to the first $400,000 of the sale price, and
therefore has a maximum amount of $24,000. Where the
price of a new home exceeds $400,000 net of HST, the
Ontario rebate is a flat $24,000. Unlike the GST rebate,
the RST rebate does not decline and vanish above a fixed
price point.
4.2 The rebate process
4.2.1 Summary
Therefore, for Ontario new homes priced up to $350,000
before tax, the following rebates apply:
ƒ GST component: 36% of the 5% tax; and
ƒ RST component: 75% of the 8% tax.
For new homes priced from $350,001 to $449,999, pre­
tax, the following rebates apply:
ƒ GST component: between about 35.9% and 0.1% of
the 5% GST payable:
— the rate declines steadily as the price increases
from $350,001 to $449,999; and
— there is a formula for this, and look-up tables
are available; and
ƒ RST component:
— 75% of the 8% RST payable if the price is less
than $400,000, and
— $24,000 if the price is $400,000 or more.
For new homes priced at $450,000 and above, pre-tax, the
following rebates apply:
ƒ GST component: no rebate
ƒ RST component: $24,000
4.2.2 Example
The following example calculates the rebates on a new
home priced before taxes at $200,000, assuming that the
buyer will qualify for the rebates (see “Eligibility for new
housing rebates,” below):
ƒ Total HST on $200,000 pre-tax price at 13% is
$26,000, made up of $10,000 GST (at 5%) and
$16,000 RST (at 8%).
ƒ The 36% GST rebate reduces the $10,000 GST by
$3,600 for a net GST payable of $6,400.
ƒ The 75% Ontario rebate reduces the $16,000 RST
by $12,000 for a net RST payable of $4,000.
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ƒ The total tax after the rebates is $6,400 (net GST) +
$4,000 (net RST) = $10,400.
ƒ The vendor will price the home at $210,400
inclusive of HST (the $200,000 price before tax,
plus the net taxes (after rebates) of $6,400 and
$4,000). This price is based on the following:
— The buyer qualifies for the rebates.
— The buyer assigns the rebates to the vendor.
— The vendor sends the assignments to the CRA.
— The CRA credits the assigned rebates of
$15,600 to the vendor’s HST account.
— The vendor remits the $10,400 HST collected.
Thus, the vendor has total HST credit with the CRA
of $15,600 (the assigned rebates) + $10,400 =
$26,000, which offsets the vendor’s obligation to
remit $26,000 on the $200,000 pre-tax price.
ƒ The new home agreement will state that
— if the buyer qualifies for the rebates, the rebate
amounts of $3,600 and $12,000 will be
assigned by the buyer to the vendor at closing;
but
— if the buyer does not qualify for the rebates,
then the $210,400 sale price will be adjusted at
closing by adding to it the $3,600 and $12,000
rebate amounts, resulting in a final price of
$226,000 ($200,000 plus 13%).
4.2.3 Effect on Ontario land transfer tax
In the above transaction, the transfer that the buyer
registers at closing will state that the consideration is
$200,000; that is, the price will exclude all HST. The price
will not appear as $210,400 nor as $226,000. Land
transfer tax is not paid on HST.
4.2.4 Minimizing cash-flow issues for the
buyer
New housing rebates can total as much as about $33,600.
In the above example, must the buyer pay to the CRA at
the closing the total $26,000 HST due and then apply to
the CRA after closing for the rebates?
The HST rebates and the assignment of them by the buyer
to the vendor allow the buyer to close without having to
pay the full $26,000 and then wait for weeks for the rebate
cheques from the CRA. Because the buyer needs $15,600
less cash to close, the buyer can borrow that much less on
its mortgage.
4.2.5 Putting the rebate process into
practice
The detailed procedure for the buyer to obtain this benefit
is set out in most new home agreements. It must be
explained to the buyer at closing because the buyer will be
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required to deliver the following documents to the vendor
at closing:
ƒ the CRA GST/HST new housing rebate application;
ƒ an assignment of the new housing rebate to the
builder;
ƒ a sworn statement that the new home will be the
buyer’s or a relation’s primary residence; and
ƒ the buyer’s promise to indemnify the vendor for the
rebate amounts if the rebate application is rejected
by the CRA.
4.3 Eligibility for new housing rebates
The GST and HST new housing rebates are available to the
buyer only if (a) the buyer is not a non-resident of Canada,
and (b) the new home will be the “primary place of
residence” of the buyer or of a relation of the buyer. What
constitutes a “primary place of residence” is discussed in
the CRA’s GST/HST Policy Statement P-228, “Primary
Place of Residence.” A relation is an individual related by
blood, marriage, common-law partnership, or adoption.
Blood relation is limited to parents, children, other
descendants, or siblings. Relation by marriage includes a
spouse or a person who is connected to the spouse by
blood or adoption. For purposes of the GST/HST new
housing rebate only, a relation can also be a former spouse
or a former common-law partner.
Buyers of investment properties and second homes (e.g.,
cottages) will not qualify for the rebates if the new home is
not intended to be the primary place of residence of the
buyer or of a relation. If the buyer makes false statements
in the rebate application, the buyer may be subject to
criminal and financial penalties for tax evasion under the
Excise Tax Act.
A residential landlord purchasing or building a newly
constructed or substantially renovated residential
building for rental purposes may be eligible to claim the
New Residential Rental Property rebate for some of the
federal part of the HST. The CRA has published
Guide RC4231, “GST/HST New Residential Rental
Property Rebate,” which contains complete details as to
the availability and limitations of this rebate.
5. The TARION delayed closing warranty
5.1 Background
Regulation of new home agreements in Ontario dates from
1988 in the case of freehold homes and from 1991 in the
case of condominium homes. Originally, one schedule,
called an “addendum,” was required in every new home
agreement. The original addendum was found in s. 12 of
Reg. 894, which was revoked on February 1, 2021.
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O. Reg. 165/08 and O. Reg. 629/20 contain a revised and
expanded regulatory framework for new home
agreements entered into after June 30, 2008. Separate
addendum schedules for new houses and new
condominium units now apply to address specific
construction scheduling circumstances. In 2012,
amendments to O. Reg. 165/08 took effect for agreements
entered into after September 30, 2012, and a new version
of the addenda took effect on February 1, 2021.
5.2 The addendum schedule
The “addendum” is the basic document used to
incorporate the delayed closing warranty (for freehold
properties) and the delayed occupancy warranty (for
condominiums and, as of October 1, 2012, “parcels of tied
land,” or POTLs) into a new home agreement. The word
“Closing” is part of the name of the addendum for freehold
properties because occupancy and closing coincide,
whereas with condominiums, they may not.
Each addendum is available in two separate “flavours”:
(a) for transactions having tentative closing or occupancy
dates, or (b) for transactions having firm closing or
occupancy dates. Vendors can choose between firm and
tentative closing/occupancy date options. The tentative
closing or occupancy dates must be converted into firm
dates in accordance with the regulation. Thus, for each
new home agreement of purchase and sale, builders select
one of the following forms of addendum:
ƒ Freehold firm closing date;
ƒ Freehold tentative closing date;
ƒ Condominium firm occupancy date; or
ƒ Condominium tentative occupancy date.
ƒ POTL firm occupancy date; and
ƒ POTL tentative occupancy date.
A POTL is a freehold parcel of land tied (“attached” under
s. 139(2)(a) of the Condominium Act, 1998) to a common
elements condominium corporation (CEC). The CEC owns
and maintains the roads that provide access to the
freehold lots and the other public areas of the
development. Ownership of the freehold parcels (such as
houses) can only be conveyed to individual buyers after
the CEC has been registered in the land titles office.
Because of this, agreements of purchase and sale for
freehold properties where the roads, sewers, and other
common areas are owned by a CEC have interim closings
similar to those for condominium homes.
Each addendum containing the delayed occupancy or
closing warranty consists of up to four parts:
ƒ a statement of critical dates, which requires vendors
to, inter alia, provide a specific closing or occupancy
date and state whether the date is firm or tentative.
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Different statements of critical dates are available
for differing circumstances.
ƒ the addendum itself containing definitions, early
termination conditions, the vendor’s rights and
obligations regarding extensions of closing dates,
conditions of occupancy, delayed occupancy
compensation, and termination of the agreement of
purchase and sale.
ƒ Schedule A, which lists the types of permitted early
termination conditions.
ƒ Schedule B, effective October 1, 2012, which lists
closing adjustments (see “Addendum provisions
regarding disclosure and protection of the buyer,”
below).
All of the forms of addendum and Builder Bulletins 46R
(freehold), 47R (condominium), and 48 (POTL)
explaining them are available on TARION’s website. The
builder bulletins contain an outline of the purpose of the
addendum forms.
5.3 Addendum provisions regarding
disclosure and protection of the buyer
Each addendum also includes provisions that are intended
to provide disclosure and protection to the purchaser,
such as
ƒ whether the property is within a plan or proposed
plan of subdivision.
ƒ whether the plan of subdivision is registered or in
draft form. Subsection 52(1) of the Planning Act
prohibits sales of land unless the plan of subdivision
in question has at least received draft plan approval
under s. 51 of the Planning Act.
ƒ whether the vendor has received government
confirmation that there is sufficient water supply
and sewage capacity to service the property.
ƒ whether a building permit has been issued for the
property.
ƒ whether construction has begun and, if not, when it
is expected to begin.
ƒ the termination conditions precedent (see “Limits
on conditions precedent entitling the builder to
terminate before construction begins,” below, for
the details of the limits imposed on such
conditions).
In addition, the addendum must include Schedule B,
which lists every closing adjustment the vendor proposes
to charge. Previously, these adjustments were often buried
in fine print, leaving some buyers unaware of the often
substantial extra costs that they imposed. Closing
adjustments for new homes are discussed at “New home
price adjustments at closing,” below.
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5.4 Addendum provisions regarding the
delayed closing or occupancy warranty:
extensions and termination
Closing extensions are among the most contentious issues
that face builders, buyers and their respective lawyers. The
complexity and physical challenge of building
construction all but guarantee that original closing dates
and good intentions cannot assure a timely closing. For
these reasons, lawyers acting for buyers in particular must
be aware of the complex and detailed rules for closing
extensions so that they can properly advise clients of their
rights.
Ontario Reg. 165/08 provides the regulatory basis for the
delayed closing or occupancy warranty that is part of every
new home agreement of purchase and sale entered into
after June 30, 2008. Its purpose is to protect new home
buyers from the consequences of closing delays.
In general, O. Reg. 165/08 does the following:
ƒ requires that the closing or occupancy date be
stipulated as either tentative or firm;
ƒ limits the builder’s use of conditions that provide
for early termination of the agreement if the builder
decides not to proceed with construction;
ƒ requires the agreement to disclose the current
status of development approvals and the status of
construction;
ƒ provides for adequate notice of delays to the buyers;
ƒ compensates buyers for excessive delays; and
ƒ sets an “outside closing date” or “outside occupancy
date” after which the buyer has the right to
terminate and to compensation.
(a) The statutory addendum
As previously noted, there are six forms of addendum
available (see “The addendum schedule,” above).
One of these must be included by the builder in every new
home agreement entered into on and after July 1, 2008.
Each form of addendum has specific provisions for
amending the critical dates and describe prerequisites
under which such amendments can take place.
An addendum must include a statement of critical dates,
which will vary depending on (a) the type of property (a
freehold dwelling, a unit in a condominium, or a POTL),
and (b) whether the vendor has selected the firm or
tentative closing/occupancy date option.
(i) Freehold home with the firm closing
date option
If the property is a freehold dwelling and the builder
chooses a firm closing date option, the addendum must
provide three dates:
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ƒ Specific Firm Closing Date selected by the
vendor: if the home is not completed by this date,
the purchaser is entitled to delayed closing
compensation of up to $150 a day after the firm
closing date, up to a total of $7,500;
ƒ Outside Closing Date: 365 days after the Firm
Closing Date; and
ƒ End of the Buyer’s Termination Period: the
end of the 30-day period that the buyer has to
terminate the agreement if the home is not ready by
the outside closing date.
(ii) Freehold home with a tentative closing
date option
If the property is a freehold dwelling and the builder
chooses the tentative closing date option, the buyer will
know from the start that the closing date is subject to
change. In that case, the addendum must provide six
specific dates:
ƒ First Tentative Closing Date selected by the
vendor: the date of the builder’s original closing
estimate.
ƒ Notice of Delay Beyond the First Tentative
Closing Date: 90 days before the First Tentative
Closing Date. This is the last date by which notice of
a further delay must be given.
ƒ Second Tentative Closing Date: a date 120 days
after the First Tentative Closing Date. The builder
can unilaterally extend closing to this second date
without penalty.
ƒ Firm Closing Date: a date 120 days after the
Second Tentative Closing Date. This is the
maximum limitation on the builder’s ability to
extend without setting a “Delayed Closing Date” and
paying compensation.
ƒ Outside Closing Date: the date that is 365 days
after the Second Tentative Closing Date or the Firm
Closing Date, whichever is earlier. If the house is still
not finished and final closing does not take place by
this outside date, the buyer may at the buyer’s option
terminate the agreement, receive a full refund, and
claim delayed closing compensation of up to $150 a
day after the Firm Closing Date, up to a total of
$7,500. The same compensation is available if the
buyer chooses to proceed with the agreement after
the Outside Closing Date has passed so that closing
takes place after the builder has used up all of its
permitted extensions.
ƒ End of the Buyer’s Termination Period: the
end of the 30-day period that the buyer has to
terminate the agreement if the home is not ready by
the Outside Closing Date.
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(iii) Condominium unit with the firm
occupancy date option
If the property is a residential unit in a proposed
condominium and the builder chooses a firm occupancy
date option, the addendum must provide three dates:
ƒ Specific Firm Occupancy Date selected by
the vendor: if occupancy is not provided by this
date, the purchaser is entitled to delayed occupancy
compensation of up to $150 a day after the Firm
Occupancy Date, up to a total of $7,500;
ƒ Outside Occupancy Date: the latest date that the
vendor has agreed to provide occupancy by; and
ƒ End of the Buyer’s Termination Period: the
end of the 30-day period that the buyer has to
terminate the agreement if the unit is not ready by
the Outside Occupancy Date.
(iv) Condominium unit with a tentative
occupancy date option
If the property is a residential unit in a proposed
condominium and the builder chooses the tentative
occupancy date option, the buyer will know from the start
that the occupancy date is subject to change. In that case,
the addendum must provide four specific dates:
ƒ First Tentative Occupancy Date: the date of the
builder’s original occupancy estimate.
ƒ Notice Period for an Occupancy Delay:
90 days before the First Tentative Occupancy Date.
This is the last date by which notice of a further
delay must be given.
ƒ Outside Occupancy Date: This is the latest date
by which the vendor has agreed to provide
occupancy. If the unit is still not finished and
occupancy does not take place by this outside date,
the buyer may at the buyer’s option terminate the
agreement, receive a full refund, and claim delayed
closing compensation of up to $150 a day after the
Firm Occupancy Date, up to a total of $7,500. The
same compensation is available if the buyer chooses
to proceed with the agreement after the Outside
Occupancy Date has passed so that occupancy takes
place after the builder has used up all of its
permitted extensions.
ƒ End of the Buyer’s Termination Period: the
end of the 30-day period that the buyer has to
terminate the agreement if the unit is not ready for
occupancy by the Outside Occupancy Date.
(v) POTL with the firm occupancy date
option
If the property is a POTL and the builder chooses a firm
occupancy date option, the addendum must provide three
dates:
ƒ Specific Firm Occupancy Date selected by
the vendor: if occupancy of the POTL is not
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provided by this date, the purchaser is entitled to
delayed occupancy compensation of up to $150 a
day after the Firm Occupancy Date, up to a total of
$7,500;
ƒ Outside Occupancy Date: 365 days after the
Firm Occupancy Date; and
ƒ End of the Buyer’s Termination Period: the
end of the 30-day period that the buyer has to
terminate the agreement if the dwelling on the
POTL is not ready by the Outside Occupancy Date.
(vi) POTL with a tentative occupancy date
option
If the property is a POTL and the builder chooses the
tentative occupancy date option, the buyer will know from
the start that the occupancy date is subject to change. In
that case, the addendum must provide seven specific
dates:
ƒ First Tentative Occupancy Date selected by
the vendor: the date of the builder’s original
occupancy estimate.
ƒ Notice of Delay Beyond the First Tentative
Occupancy Date: 90 days before the First
Tentative Occupancy Date. This is the last date by
which notice of a delay of the First Tentative
Occupancy Date must be given.
ƒ Second Tentative Occupancy Date: a date
120 days after the First Tentative Occupancy Date.
The builder can unilaterally extend occupancy to
this second date without penalty.
ƒ Notice of Delay Beyond the Second Tentative
Occupancy Date: 90 days before the Second
Tentative Occupancy Date. This is the last date by
which notice of a further delay must be given.
ƒ Firm Occupancy Date: a date 120 days after the
Second Tentative Occupancy Date. This is the
maximum limitation on the builder’s ability to
extend without setting a “Delayed Occupancy Date”
and paying compensation.
ƒ Outside Occupancy Date: the date that is 365
days after the Second Tentative Occupancy Date or
the Firm Occupancy Date, whichever is earlier. If
the dwelling on the POTL is still not finished and
occupancy does not take place by this outside date,
the buyer may at the buyer’s option terminate the
agreement, receive a full refund, and claim delayed
occupancy compensation of up to $150 a day after
the Firm Occupancy Date, up to a total of $7,500.
The same compensation is available if the buyer
chooses to proceed with the agreement after the
Outside Occupancy Date has passed so that
occupancy takes place after the builder has used up
all of its permitted extensions.
ƒ End of the Buyer’s Termination Period: the
end of the 30-day period that the buyer has to
terminate the agreement if the dwelling on the
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POTL is not ready for occupancy by the Outside
Occupancy Date.
(b) Limits on conditions precedent entitling
the builder to terminate before
construction begins
The introduction of the new forms of TARION/HCRA
addendum on July 1, 2008, also introduced new
restrictions on a vendor’s ability to terminate the
agreement unilaterally. Schedule A of the TARION/HCRA
addendum sets out a limited list of early termination
conditions that are available for vendors. The early
termination conditions are divided into two categories.
The first set of early termination conditions are outlined
in para. 1(a) of Schedule A to the TARION/HCRA
addendum and permit the vendor to make the agreement
conditional on any of the following:
ƒ a change to the official plan, other governmental
development plan, or zoning by-law (including a
minor variance);
ƒ a consent to creation of a lot(s) or part-lot(s);
ƒ a certificate of water potability or other measure
relating to domestic water supply to the home;
ƒ a certificate of approval of septic system or other
measure relating to waste disposal from the home;
ƒ completion of hard services for the property or
surrounding area (i.e., roads, rail crossings, water
lines, sewage lines, and other utilities);
ƒ allocation of domestic water or storm or sanitary
sewage capacity;
ƒ easements or similar rights serving the property or
surrounding area;
ƒ site plan agreements, density agreements, shared
facilities agreements, or other development
agreements with approving authorities or nearby
landowners and/or any development approvals
required from an approving authority; and
ƒ site plans, plans, elevations, and/or specifications
under architectural controls imposed by an
approving authority.
The above-noted conditions are for the benefit of the
vendor and purchaser and cannot be waived by either
party. In other words, if the agreement contains one or
more of the above conditions, and the condition is not
satisfied by the date that the vendor had selected for the
condition to be satisfied, the agreement is automatically
terminated, even if the vendor is only a few days away
from satisfying the condition. It is for this reason that
most developers are hesitant to incorporate any of the
above conditions in the agreement for a project.
A second set of early termination conditions are set out in
para. 1(b) of Schedule A to the TARION/HCRA addendum
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and permit the vendor to make the agreement conditional
on any of the following:
ƒ receipt by the vendor of confirmation that sales of
homes in the freehold project (or condominium
dwelling units) have exceeded a specified threshold
by a specified date;
ƒ receipt by the vendor of confirmation that financing
for the project on terms satisfactory to the vendor
has been arranged by a specified date;
ƒ receipt of approval from an approving authority for
a basement walkout; and
ƒ confirmation by the vendor that it is satisfied the
purchaser has the financial resources to complete
the transaction.
The above-noted conditions are for the sole benefit of the
vendor and may be waived by the vendor in its sole
discretion. For example, if a vendor makes the agreement
conditional on having achieved presales for at least 80%
of the units in the project, it is completely within the
vendor’s discretion to waive such a condition even if it is
not satisfied by the date that the vendor has set for
satisfaction of the condition. In addition, the above-noted
conditions relating to construction financing for the
project may indirectly encompass some of the matters
covered by the non-waivable conditions described in
para. 1(a) of the TARION/HCRA addendum, since a
developer is unlikely to be able to obtain construction
financing if governmental approvals, necessary
easements, and/or servicing for the project are not
finalized.
6. New home price adjustments at closing
6.1 Generally
In addition to the customary adjustments to the purchase
price provided for in the OREA form, the typical builder’s
agreement expands the list of adjustable items (which can
expose the buyer to thousands of dollars of additional
charges on closing) to include some or all of the following
(among others):
ƒ where a builder’s mortgage is being assumed,
mortgage insurance fees, administration fees, and
interest on the unadvanced portion of any mortgage
being assumed;
ƒ the cost of water, hydro, and gas meters and fees
associated with the installation and connection of
such utilities;
ƒ the TARION enrolment fee, as well as the HCRA
regulatory oversight fee that took effect on
February 1, 2021;
ƒ estimated annual property taxes (even where taxes
have not been formally assessed or fully paid) and a
deposit on account of future taxes for any
supplementary assessment following closing;
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 a proportionate share of increases imposed by the
municipality before closing as development charges,
education development charges, and park and
various other government levies;
 a proportionate share of any costs arising from an
agreement between the builder and municipality
pursuant to s. 37 of the Planning Act;
 a deposit to cover potential damages or alterations
occasioned to any subdivision services, municipal
installations, grading, and/or drainage patterns
caused by the buyer (or by those for whom the
buyer is at law responsible);
 a fee for the builder’s lawyer registering partial
discharges of the construction financing mortgages
of the builder; and
 disbursements incurred by the builder’s lawyer for
discharging existing vendor mortgages and for the
Law Society of Ontario’s real estate insurance levy.
Typical new home agreements entered into over the years
were drafted in such a way that these adjustments were
buried in fine print. While experienced lawyers had little
difficulty identifying them for the buyer, many new home
buyers do not seek legal advice before signing the
agreement and so may not have been aware of the extra
charges that closing adjustments impose on them because
the adjustments were not presented in an easily found,
coherent fashion. These charges can run into the tens of
thousands of dollars in some transactions and may leave
unwary buyers unable to close for lack of the additional
funds needed to pay them.
Pursuant to the amendments to O. Reg. 165/08 referred to
previously, all agreements entered into on or after
October 1, 2012, must contain a Schedule B, which clearly
lists all such adjustments so that the potential buyer will
be aware of them from the start and be able to negotiate
with respect to them. An adjustment not included in
Schedule B cannot be charged to the buyer.
6.2 Property tax adjustments
6.2.1 Basics of real property taxation
Each municipal government has its own property tax rate
known as the millage rate or, more commonly, the mill
rate. Each tier of municipal government (regional, local,
and education for example) may have its own mill rate,
and these rates typically vary from year to year, usually
upward, of course, over time.
In real property taxation in Ontario, the taxable amount of
a real property is its market value. (Compare this for
instance to income tax, where one’s income is the taxable
amount, or sales tax, where price is the taxable amount.)
Market value is determined by periodic assessments of
every parcel of real estate in Ontario carried out under the
Assessment Act by the Municipal Property Assessment
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Corporation. The property taxes for a parcel of real estate
in any year can be determined by multiplying the assessed
(market) value of the property by the applicable mill rate.
Land that is vacant generally has a much lower market
value than land containing a building or other form of
development, so its assessment will be lower.
6.2.2 Assessment as vacant land
The definition of “vacant land” in s. 1(1) of O. Reg. 282/98,
made under the Assessment Act, includes the following:
1. Land that has no buildings or structures on it.
2. Land upon which a building or structure is being
built.
3. Land upon which a building or structure has been
built if no part of the building or structure has yet
been used.
4. Land upon which a building or structure has been
built if the building or structure is substantially
unusable.
Thus, a newly constructed home can be assessed as vacant
land until it has been used. Under s. 1(2), “any occupation
of a building or structure is a use for the purposes of
paragraph 3 of subsection (1).”
Note that the reassessment of land on this basis after a
building is demolished is not automatic. It requires an
application to the municipality. In the City of Toronto, the
application is brought under s. 323 of the City of Toronto
Act, 2006. Other municipalities will have similar
procedures in place.
6.2.3 What clients need to know
These rules lead to two important pieces of advice that a
solicitor should give to clients:
 New homes will be assessed as vacant land until the
home is occupied, typically when the buyer receives
possession. For freehold homes, this is usually the
closing date. For condominiums, this is the interim
closing date, if there is an interim closing;
otherwise, it will be the final closing date.
 Home-builder clients need to be reminded to apply
for reduced assessments. A builder who buys an old
home for the purpose of complete or partial
demolition and reconstruction should always take
the necessary steps to have the property reassessed
as vacant land effective as of the date of its
purchase. When the completed home is sold to a
buyer who occupies it, the property should be
reassessed on the basis of its new market value. If a
builder does not request reassessment after buying
the vacant property, the property’s assessed value
may continue to be based on the assessed value of
the old home instead of as vacant land.
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6.2.4 Property tax adjustments under the
builder’s agreement
The typical new home agreement may provide for
property taxes to be adjusted in one of two ways:
ƒ The vendor pays the property taxes to the end of the
year of the closing. These taxes are based on (a) the
vacant land assessment until the buyer takes
possession, and (b) the reassessed market value of
the property (usually sale price less HST and cost of
chattels) from the possession date to the end of the
year. The statement of adjustments credits the
vendor with those taxes paid by it for the part of the
year from the closing date to the end of the year.
The buyer should have no further taxes to pay for
that year. This works if the vendor knows before
closing what the assessed value of the occupied
home will be starting on the possession date.
ƒ The vendor pays the property taxes on a vacant land
basis for the entire calendar year of the closing. The
vendor apportions the paid vacant land taxes in the
statement of adjustments: the vendor is credited
with the paid vacant land taxes pro-rated from the
possession date to the end of the year. Perhaps
months or even a year after the buyer has been
living in the home, a market value reassessment
occurs. The reassessed value is used to determine
the property taxes on the “land and building”
retroactive to the possession date. The buyer
receives an “omit” property tax bill only for the
building part of the assessment, calculated from the
possession date to the end of the year. The omit bill
is for the “building only” because the vendor had
previously paid the land part of the taxes to the
possession date.
From the buyer’s perspective, the possibility exists that the
vendor may not have paid any of the property taxes
(including the taxes charged on a vacant land assessment
basis) prior to closing. Accordingly, the buyer’s lawyer
may wish to consider negotiating revisions to this clause
to clarify (at least) that the buyer will not be obliged to
accept title to the property subject to existing arrears in
property taxes or, alternatively, to require that the
vendor’s lawyer will be required to give a personal
undertaking to pay any such unpaid taxes. If this cannot
be negotiated, as an alternative, title insurance may
provide coverage.
6.3 Development charges
6.3.1 What are development charges?
Development charges and education development charges
(levies) are the subject of the Development Charges Act,
1997 and Division E of Part IX of the Education Act,
passed into law by the Education Quality Improvement
Act, 1997. These Acts set out frameworks under which
development charge by-laws and education development
charge by-laws can be passed. Such by-laws allow local
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authorities to set specific levies for different types of
building developments. Some municipalities also have
park and similar levies. While levies are subject to revision
by the local municipality from time to time, they become
fixed and must be paid when a building permit is issued
for the new home.
6.3.2 How do development charges affect
buyers?
Vendors pay a levy for each dwelling unit they construct.
If a vendor sells a home before a building permit is issued,
it estimates the levies it will pay for the home based on
rates then in effect. Those levies are built into the price of
the home.
If the levies then increase before a building permit is
issued, the builder wants to pass on the increase to the
buyer. The form of agreement will typically refer to these
as “increases in the levies,” or something similar, and will
require the buyer to pay such increases as a price
adjustment at closing.
The vendor’s approach is open-ended—the agreement sets
no limit on the increase in the levies that the buyer may be
required to pay—and thus poses a potentially very large
extra expense for the buyer.
Because of this, during price negotiations, buyers should
either delete levy increases or require that a cap be placed
on them. The builder will more readily agree to this if the
builder has already received its building permit for the
property at the time of entering into the agreement since
at that point the development charges will have been
quantified and may already be fully included in the price
of the new home.
To thwart the potential imposition of such charges onto
the buyer after closing where the builder fails to pay them,
the buyer’s lawyer should consider negotiating a covenant
from the vendor to indemnify the buyer for unpaid
balances; however, there is no assurance a builder will
honour its indemnity. Preferably, the buyer’s lawyer will
verify payment of development charges with the
municipality, or the builder can be required in the
agreement to provide proof of payment before closing.
Title insurance may cover this risk as well, but this should
be verified.
6.3.3 Development charges and home
builders
When a land developer sells building lots to a home
builder, the builder’s lawyer must as part of the title search
determine whether there are unpaid development charges
for the vacant lot, which may have arisen if a building
permit has been issued. The agreement between the
builder and developer should either require payment of all
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UNDERSTANDING A NEW HOME AGREEMENT OF PURCHASE AND SALE
development charges by the builder or, alternatively,
should state explicitly what the charges are expected to be
and that the builder will assume them. If the builder
unknowingly builds a home, signs an agreement to sell it,
and only then learns about $50,000 in development
charges, the builder may look to its lawyer for
reimbursement.
7. The vendor’s construction duties and
obligations
7.1 Vendor’s right to modify plans
Vendors will reserve the right to modify the plans and
specifications as a result of unforeseen difficulties in
completing the home in the manner or style originally
contemplated or to terminate the agreement entirely. Any
such termination clause is subject to the addendum forms
of O. Reg. 165/08, which restrict economic grounds for
termination. If the plan of subdivision has not yet been
registered when the agreement of purchase and sale is
entered into, the vendor may be reluctant to allow changes
to the contract that would limit or restrict its ability to
alter the plans and specifications of the dwelling since the
vendor itself may be subject to modifications (including
lot size) of the proposed plan of subdivision that will only
be crystallized upon its registration. Depending upon the
buyer’s bargaining power, the only changes one can
successfully negotiate may be those that limit the degree
of modifications or require written notice of same before
implementation.
For example, the typical builder’s agreement purports to
allow the vendor to make such minor modifications to the
plans and specifications as may be required by the
developer and municipality to ensure the orderly
completion of the development project and the new
home’s compatibility with it. Developers and
municipalities frequently require the vendor to obtain
approval of building specifications by an architectural
control committee in order to ensure an aesthetic quality
or standard for exterior design, colour, and finishes that is
uniform throughout the subdivision. This, in turn, may
allow less flexibility to the buyer to make changes to the
design or structure of the home.
Where the agreement has been entered into after the
registration of the plan of subdivision and the issuance of
a building permit, few, if any, changes to the site will likely
arise that would require significant changes to the plans
and specifications of the dwelling. Moreover, such plans
and specifications would, in such circumstances, have
likely already received architectural approval (if such
approval was required in the first place). In this scenario,
the buyer’s lawyer should find less resistance in curtailing
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the vendor’s unilateral right to alter the plans and
specifications prior to closing.
The typical new home agreement may specify an exact
maximum level of variance that must be accepted by the
buyer in the event of an alteration affecting the
dimensions of the dwelling, but the vendor has the right to
alter the plans and specifications provided that doing so
does not materially diminish the value of the property nor
substantially alter the dwelling.
7.2 Substitutions of materials
The typical new home agreement provides the vendor with
the right to substitute other materials of at least equal
quality to those originally specified in the contract or in
the plans and specifications referred to in the contract,
provided such substitution does not diminish the value of
the property or substantially alter the dwelling. This
provision is important to the vendor, particularly if there
is a significant length of time between the date that the
agreement is entered into and the closing date, because
the vendor may have no assurance at the time of contract
formation that certain building materials, finishes, or
fixtures will be available or what their cost will be at the
time of commencing construction of the dwelling.
As noted earlier, the statutory addendum discloses to the
buyer the possibility of the vendor substituting
construction materials without notice. Where the buyer is
entitled to make construction or finishing selections in
accordance with the terms of the agreement, s. 18(1) of
Reg. 892 deems that the vendor warrants that no
substitutions shall be made with respect to selections
without the written consent of the buyer, except for the
following two cases:
ƒ The buyer, having been notified of the opportunity
to make a selection of certain materials or finishes,
does not make such selection within a specified time
frame.
ƒ Any item initially selected by the buyer is not
available, and the buyer has not made a new
selection within a further specified time frame.
If the buyer fails to make the initial or substitute selection
of materials or finishes, then the vendor will be entitled to
make the selection on the buyer’s behalf, provided the
selection is of equal or better quality than the original
selection set out in the purchase agreement. Furthermore,
with respect to an item that is not to be selected by the
buyer, s. 19 of Reg. 892 provides that the vendor warrants
to the buyer that where the vendor makes a substitution,
the substitute item will be of equal or better quality than
the item referred to in the purchase agreement.
Where the agreement allows the buyer to select items and
substitutions are made without the buyer’s consent, the
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vendor must either change the items back to the original
selection or offer the buyer a cash settlement instead. The
following are listed as examples of substitutions
considered “minor” by TARION, thus entitling the buyer
to the foregoing monetary compensation:
ƒ the colour of paint (interior and exterior), but
excluding any shading differences. In all cases of
changes to colour, the change must be a major
change in colour and not merely a difference in
shading.
ƒ the design and colour of cabinets and countertops.
ƒ the colour of roofing.
ƒ the colour and type of kitchen and bathroom
fixtures.
ƒ the style of interior trim.
ƒ the colour and type of floor.
ƒ the type of windows.
7.3 The meaning of “completion” or
“substantial completion”
In a typical new home agreement, the stage at which the
buyer is required to close the transaction and take
possession will be defined in terms of “completion” or
“substantial completion.”
At what point has substantial completion taken place? The
agreement will typically define “completion” or
“substantial completion” solely in terms of compliance
with legislative standards. This sounds comforting, but
legislative standards are essentially minimum standards
and may be much less than what the buyer expects.
There are four sources of legislative standards of
“completion” to be considered:
ƒ Subsection 13(1) of the ONHWPA states that the
home be constructed in a workmanlike manner, free
from defects in material, be fit for habitation, and
constructed in accordance with the Ontario
Building Code Act, 1992.
ƒ Enforcement of construction standards under the
Building Code Act, 1992 is achieved by prohibiting
occupancy of a new building except as authorized by
the Building Code. Section 1.3.3 of Division C of the
Building Code sets out the detailed prerequisites for
a municipality to authorize occupancy. In general
terms, the emphasis of these requirements is on
competent completion of structural, mechanical,
plumbing, and electrical systems and upon
compliance with safety and health standards. The
legislation does not deal with, for instance, whether
all four bath tubs or the granite kitchen counter of a
new home have been installed.
ƒ Where the property is subject to a subdivision
agreement with the municipality, certain conditions
contained therein may also have to be satisfied
before the home can be approved for occupancy.
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ƒ Municipal by-laws may provide for building and
occupancy standards beyond those prescribed
pursuant to the Building Code Act, 1992.
Agreements may oblige the buyer to complete the
transaction if the home has been “substantially
completed” to a point sufficient to permit occupancy in
accordance with the Building Code Act, 1992, the Building
Code, and the local municipality’s occupancy standards
even though there may be numerous outstanding
unfinished items to be addressed (e.g., the installation of
certain interior finishes and fixtures, exterior sodding,
landscaping, painting, and driveway paving).
For agreements entered into after June 30, 2008,
O. Reg. 165/08 imposes the requirement that the vendor
deliver an occupancy permit (as defined in the regulation)
at closing. This has the effect of modifying any definition
of “completion” contained in the agreement. Occupancy
permits are generally issued when the home meets the
minimum requirements of the municipality’s by-laws, the
Building Code Act, 1992, and the Building Code. These
requirements may be satisfied long before the home is
completed for the purpose of the agreement. Final
completion of the builder’s work after possession may
continue with several weeks of cosmetic and other work,
and exterior work may not be completed for several
months, depending on the season.
Some municipalities do not issue formal occupancy
permits to buyers or their lawyers. In such cases, the
vendor’s lawyer should be asked to provide proof that
occupancy has been authorized.
Any contractual provision that would oblige the buyer to
occupy the newly constructed premises contrary to s. 11 of
the Building Code Act, 1992 is illegal and unenforceable
and should be deleted by the buyer’s lawyer. Beyond this,
depending on the bargaining power of the buyer and the
price, size, and quality of the home being acquired, the
buyer’s lawyer may be able to negotiate an amendment to
the offer that contractually elevates the standard of quality
construction and completion to reflect the buyer’s
expectations (which would likely be related to the
purchase price paid). The more expensive the home, the
more likely it will be that a higher standard can be
negotiated. The solicitor should explain to the buyer what
“substantial completion” means, so that the client’s
expectations upon taking possession can be moderated
accordingly.
7.4 Statutory warranty coverage
Every new home in Ontario comes with warranty coverage
provided by the builder and guaranteed by TARION.
Under s. 6 of Reg. 892, the monetary limit for warranty
protection for new dwelling units is $300,000. The
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UNDERSTANDING A NEW HOME AGREEMENT OF PURCHASE AND SALE
maximum coverage for condominium common elements
is $50,000 times the number of dwelling units, to a
maximum of $2.5 million. These amounts were increased
on February 1, 2021; the maximum coverage for those
condominium projects where the first purchase in the
project was entered into on or after February 1, 2021, is
the lesser of $3.5 million or an amount equal to $100,000
times the number of dwelling units in the project. In
addition, O. Reg. 8/23, made under the ONHWPA, will
amend Reg. 892 to increase the maximum coverage for
self-contained one-family dwellings and duplexes to
$400,000 where the purchase agreement was entered
into after July 1, 2023. Coverage begins on the buyer’s
date of possession and remains in effect even if the home
is sold before the warranty expires.
Subsection 13(1) of the ONHWPA and ss. 14–15 of
Reg. 892 set out the warranties that every vendor of a new
home is deemed to have given to the buyer in connection
with the sale and closing of the new home. These
warranties will be enforced or honoured by TARION (in
the event of the vendor’s inability or unwillingness to do
so) provided the buyer formally reports the deficiencies in
writing to TARION on the prescribed forms within the
following time periods:
ƒ Within one year after the date specified in the
certificate of completion and possession (CCP) (i.e.,
usually on or just before the date of closing): for all
claims or deficiencies relating to the manner in
which the home was constructed, its fitness for
habitation, and breaches of the Building Code (Act,
s. 13(1)).
ƒ Within two years after the date specified in the
CCP: for any claims relating to (Reg. 892, ss. 14 and
15(2)–(3))
— water penetration through the basement or
foundation of the home;
— any defects in materials including windows,
doors, and caulking that render the building
envelope of the home susceptible to water
penetration;
— any defects in the electrical, plumbing, and
heating delivery and distribution systems of
the home;
— any defects in the exterior cladding of the
home, resulting in detachment, displacement,
or physical deterioration; and
— any violations of the Building Code affecting
the health and safety of the occupants,
including without limitation those violations
pertaining to fire safety, insulation, air and
vapour barriers, ventilation, and heating and
structural adequacy.
ƒ Within seven years after the date specified in the
CCP: for major structural defects, which are defined
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in s. 1 of Reg. 892 to include any defect in work or
materials that results in the failure of a load-bearing
portion of any dwelling or that adversely affects its
load-bearing function or that materially and
adversely affects the use of such dwelling for the
purpose for which it was intended, including
significant damage due to soil movement, major
cracks in basement walls, and collapse or serious
distortion of joints or roof structures (Reg. 892,
s. 16).
Pursuant to s. 13(2) of the ONHWPA, the following
matters are specifically excluded from warranty coverage
by TARION:
ƒ defects in materials, design, and work supplied by
the owner;
ƒ secondary damage caused by defects, such as
property damage and personal injury;
ƒ normal wear and tear;
ƒ normal shrinkage of materials caused by drying
after construction;
ƒ damage caused by dampness or condensation due to
failure by the buyer (owner) to maintain adequate
ventilation;
ƒ damage resulting from improper maintenance;
ƒ alteration, deletion, or additions made by the buyer
(owner);
ƒ subsidence of the land around the building or along
utility lines, other than subsidence beneath the
footings of the building;
ƒ damage resulting from an act of God;
ƒ damage caused by insects and rodents, except where
construction is in contravention of the Building
Code;
ƒ damage caused by municipal services or other
utilities; and
ƒ surface defects in work and materials specified and
accepted in writing by the owner as at the date of
the CCP.
O. Reg. 8/23 also introduced a new temporary relocation
warranty that will take effect for transactions where the
purchase agreement was signed on or after July 1, 2023.
Specifically, every vendor of a new home warrants to the
purchaser that if, on or after the date of possession, the
home or a material portion of the home is uninhabitable
because of a condition that is covered by a warranty, the
vendor shall pay the purchaser the sum of $150 per day for
the period that the home or a material portion of the home
is uninhabitable, up to a maximum of $15,000 per home.
In lieu of compensation, a vendor may, at its expense,
provide reasonable alternative accommodation for the
displaced inhabitants.
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Finally, s. 13(6) of the ONHWPA confirms that the
statutory warranties apply despite any agreement or
waiver to the contrary.
7.5 Obtaining warranty service after closing
The procedures for builders to handle warranty claims are
set out in detail in TARION Builder Bulletin 49.
7.5.1 Prerequisites
Before taking possession, the buyer must
ƒ execute a confirmation of receipt of a homeowner
information package (s. 2(2) of Reg. 892 now
permits an electronic delivery method for this
information);
ƒ complete a pre-delivery inspection (PDI); and
ƒ at or immediately after the PDI, complete and sign a
CCP together with the vendor or its representative.
If the buyer cannot personally attend at the PDI with the
vendor, then the buyer may appoint a designate by signing
and delivering to the vendor before the PDI an
“appointment of designate for pre-delivery inspection” or
similar agency form. This form expressly authorizes the
buyer’s designate to attend, conduct the PDI with the
vendor’s representative, and execute the three above-
mentioned forms on the buyer’s behalf.
The buyer’s warranty coverage begins on the date of
closing if possession is delivered at closing. In the case of
new condominium units for which an interim closing
takes place, the warranty coverage begins on the date of
taking possession.
7.5.2 Submitting warranty claims
Solicitors should warn buyers that TARION has
traditionally strictly enforced its time frames so that late
filing of warranty forms by a buyer after taking possession
can result in an extensive loss of warranty coverage.
The buyer must deliver a “30-day statutory warranty”
form to TARION and the vendor within the first 30 days
after the warranty coverage begins, listing all outstanding
or incomplete items and known deficiencies. If this form
is received by TARION more than 30 days after the
warranty coverage begins, TARION will not act on it,
which means that an unwilling vendor will not have to
provide warranty service resulting from the 30-day form.
The buyer will then have to wait until the 11th month after
possession to submit the “year-end warranty” form. Again,
if that form is received late by TARION, TARION will not
act on it, and the buyer will in effect have lost its right to
warranty service under the one-year portion of the
TARION warranty.
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REAL ESTATE
Any items listed on the PDI form that have not yet been
completed or rectified, as well as any newly discovered
deficiencies, should be listed on the 30-day form. The
builder will then have a maximum of 120 days after the
30-day form is received by TARION to repair or correct all
listed warrantable deficiencies. The builder must be
allowed reasonable access to the home in order to
complete the requisite repairs. If the builder fails to
complete its work by the end of that 120-day period, then
the homeowner will have 30 days thereafter to contact
TARION and formally request a conciliation. In that
event, TARION will notify the builder in writing that an
outstanding warrantable deficiency is being claimed by
the buyer, and the builder will be given 30 days to resolve
the issue and avert the conciliation.
If the outstanding matter is not repaired or resolved to the
homeowner’s satisfaction within that time period, then
TARION will conduct an on-site inspection and issue a
warranty assessment report to both the homeowner and
the builder within 10 days of the inspection. If TARION
finds that even one item in the report is warranted, then
the conciliation will be “chargeable” to the builder, and the
builder will have one final opportunity to correct the
outstanding items within 30 days from the date of
issuance of the warranty assessment report. Failure to do
so will result in TARION settling the matter directly with
the homeowner (by TARION either repairing the
outstanding matter on its own or making a cash settlement
payment to the homeowner to cover the cost of the
repairs).
After the initial 30-day period, the homeowner should
take note of further outstanding deficiencies that appear
and list these items on the year-end warranty form, which
must be submitted during the last 30 days of the first year
of possession. The reporting procedures and timeframes
for builder repairs that applied to the 30-day deficiencies
will be the same for the year-end deficiencies.
There are similar procedures available for Years 2 to 7 of
the warranty term.
The homeowner information package also identifies
certain exceptions to the foregoing time lines for repairing
warrantable deficiencies (such as emergency situations or
seasonal items), and in such instances, the stipulated time
lines for effecting requisite repairs will change.
8. Title concerns
8.1 Permitted encumbrances
The lawyer for the vendor will want to ensure that the
buyer must accept title to the home subject to all existing
or registered restrictions, easements, and agreements
affecting title to the subject property in addition to any
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UNDERSTANDING A NEW HOME AGREEMENT OF PURCHASE AND SALE
potential or future easements, restrictions, and
agreements that might be entered into by the subdivider,
developer, vendor, and/or builder with any government
authorities, any public or private utility authorities, and
any adjacent landowners, between the date that the
agreement of purchase and sale has been entered into and
the closing date. Thus, the “permitted encumbrances”
clause typically found in builders’ agreements is generally
far more extensive and pervasive, both in degree and
scope, than the title provisions found in the OREA form.
In some instances, the agreement of purchase and sale
may oblige the buyer to grant and execute specific
easements or covenants to or in favour of any of the
aforementioned third parties.
8.2 Builder’s rights of re-entry
In addition, builders’ forms of agreement reserve rights of
re-entry in favour of the vendor so that the vendor can
lawfully re-enter the property after closing to complete
any remaining work to the satisfaction of the municipality.
Since there must be dominant and servient tenements of
land in order for an easement to be validly created in law,
the builder, if it does not own neighbouring land, will
endeavour to retain a right of re-entry in the nature of a
licence in favour of the vendor to re-enter the property, a
copy of which will be attached to the Transfer so as to be
registered on title to the property. Remaining work may
include
ƒ completing any outstanding construction matters
pertaining to the dwelling (including all exterior
trim and finishes, exterior painting, landscaping,
grading, and/or fencing obligations);
ƒ rectifying any grading, drainage, or servicing
problems; and
ƒ fulfilling and complying with any outstanding
obligations arising under any applicable subdivision
or other development agreement(s) with the
government authorities.
When the municipality is satisfied that the vendor has
fulfilled its obligations under the relevant development or
subdivision agreement, then all municipal works, services,
and facilities installed by the developer within the
subdivision will be formally assumed by the municipality.
8.3 Restrictions on the use of the property
8.3.1 Restrictive covenants
The vendor will also often wish to impose certain
restrictive covenants regarding the buyer’s use and
enjoyment of the subject property in order to maintain a
uniformity of appearance throughout the housing project
and to preserve any perceived “market value” of the
remaining housing inventory retained by the vendor. For
example, restrictions on the buyer’s ability (after closing)
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CHAPTER 62
to place or store materials on portions of the property
exterior to the dwelling, to erect fences exceeding a certain
height restriction, or to install a satellite dish or television
antenna are not uncommon in new subdivisions, and
buyers should be advised about them as soon as possible.
Lawyers should advise buyers to obtain from the builder
or its lawyers (prior to making the agreement firm) a draft
copy of the restrictions the builder intends to register on
closing and review them closely with the buyer to ensure
that the restrictions that will govern the buyer’s use of the
property after closing are understood and accepted.
8.3.2 Grading
Most builders’ forms of agreement will contractually
restrict the buyer’s ability to make any changes
whatsoever to the grading or drainage patterns of the
property and to make any changes or installations to the
dwelling that might affect the grading or drainage patterns
while the builder/subdivider remains liable to ensure its
satisfactory completion to the municipality. These are
included because, among other reasons, the builder or
subdivider will have extensive obligations to the
municipality regarding proper drainage, and because
changes to grading or drainage patterns could cause
flooding of adjacent properties.
8.3.3 Warning clauses
Similarly, it has become increasingly common for
municipalities to require builders to include a list of
warning clauses in their agreements of purchase and sale
in order to place potential buyers on notice as to the
limitations or absence of a variety of municipal services,
as to potential noise sources and other environmental
issues that may disturb them, and so on. Buyers should be
advised about and advised to read these warning clauses
before the agreement becomes firm.
8.3.4 Registration
The foregoing reservations, rights of re-entry, and
restrictions will either be registered on title to the property
on or before closing or will be included in the Transfer
delivered on closing by the vendor (or the registered
owner if not one and the same party) to the buyer. In
certain instances, buyers may have objections to the
nature and scope of these easements, restrictions, or
restrictive covenants inasmuch as they may have a
detrimental or prejudicial impact on the buyer’s intended
use or enjoyment of the property. For example, a
restriction without time limits on altering the grading of
the property would certainly prohibit the buyer from
installing a backyard swimming pool.
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Accordingly, the buyer’s lawyer should carefully review restrictions or easements will impact negatively upon the
the scope of the restrictions and, in particular, the nature buyer; the lawyer should correspondingly endeavour to
and extent of any pertinent easements intended to affect negotiate their deletion or restriction, if possible.
the property on closing to determine whether such

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Title insurance: an overview
1. Introduction
For many home buyers, the purchase of a home is the
largest transaction in which they will ever be involved.
Because of the amounts of money at stake, they generally
understand at least implicitly the importance of
confirming that they are getting, in legal terms, what they
have bargained for: a good and marketable title to the
home, free of encumbrances and rights of other parties
other than those that they agree to assume.
Home buyers have three choices for assuring title:
ƒ a lawyer’s opinion on title;
ƒ traditional title insurance; or
ƒ TitlePLUS® (title insurance that combines title
insurance, regulatory compliance insurance, and
legal services coverage).
Rule 3.2-9.7 of the Rules of Professional Conduct requires
a lawyer to disclose to a client the relationship between the
legal profession, the Law Society of Ontario, and the
Lawyers’ Professional Indemnity Company (LAWPRO®),
the latter being the insurer for TitlePLUS-insured
properties.
It is the lawyer’s duty to recommend the best choice to the
client, having regard to the nature of the property and the
respective assurances that can be offered by either title
insurance or an opinion on title, viewed through the lens
of the specific needs, expectations, and risk tolerances of
the client.
Title insurance brings with it a number of benefits, but
also has potential drawbacks. Among these are, first, that
title insurance does not repair legal problems; it only
compensates the owner or mortgagee for actual monetary
losses incurred as a result of the problem. Second, the
language of a title insurance policy may not provide the
coverage that the lawyer or client believes it provides.
2. What is title insurance?
2.1 The insurance contract
Title insurance is a contract to indemnify up to the face
amount of the policy a buyer and/or mortgagee of real
property in the event that loss arises from one or more
specified causes. Title insurance allows buyers and lenders
to “insure over” selected problems, rather than insisting
on a repair of the problem. It may reduce the legal bill of
the buyer or mortgagor, since certain searches may be
waived by the title insurer.
Chapter 63
Title policies contain many exceptions, which may involve
standard-form exclusions, property-specific exceptions,
or the printed stipulations of the policy itself. Because of
the typical restrictions in the policies, many endorsements
are available, especially for commercial properties.
Unlike most forms of insurance that insure for damages
arising from possible future events, the most common
forms of title insurance insure for damages arising out of
title defects that may be undiscovered before the time of
closing but which later come to light with serious adverse
consequences then arising for the insured buyer.
Title policies vary depending on whether they are
insurance policies for owners, lenders, or combined title
insurance/legal service coverage policies with owner and
lender coverage. Policies can vary from jurisdiction to
jurisdiction, and insurer to insurer. The value of title
insurance is completely dependent on the contractual
terms of the policy.
Under a title insurance policy, a property owner has a
direct claim against an insurance company if a specified
title risk causes a loss, regardless of the source of the loss.
2.2 The TitlePLUS contract
The form of title insurance policy offered by TitlePLUS is
more comprehensive than some others in that, among
other things, if in the course of the real estate transaction
the lawyer commits an error or omission for which the
lawyer is legally liable, the lawyer’s client is covered by the
TitlePLUS policy without the need for the lawyer to submit
a claim on the lawyer’s own errors and omissions policy.
The insured client is also relieved of the need to pursue
litigation against the lawyer’s errors and omissions
insurance since such coverage is integral to the TitlePLUS
policy. This is not the case in some other title insurance
policies. TitlePLUS rates and coverage are highly
competitive, and it is responsive to lawyers and their
clients.
3. Acquiring a title insurance policy
3.1 Title certification by a lawyer
Pursuant to Title Insurance Licences, O. Reg. 69/07,
made under the Insurance Act, a title insurance policy
cannot be issued without a concurrent title certificate
provided by a lawyer not employed by the title insurer. The
buyer’s lawyer will order the policy based on the client’s
(including the mortgagee’s) instructions. It is necessary
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for the lawyer to understand which searches are or are not
required by the insurer as the basis of the title certificate.
Each title insurer has its own specific search
requirements. The lawyer provides its title certificate
before closing when applying for the policy.
In addition to providing title information and search
results, the lawyer will be required to provide specific
information regarding risks such as client identification,
powers of attorney, the use of the property, and recently
registered instruments that might indicate a fraudulent
transaction.
When the policy is issued by the insurer, the policy will
usually be effective as of the time of closing, subject to
payment of the premium, which will be the direct
responsibility of the insured’s lawyer.
3.2 Drawbacks of relying solely on a
lawyer’s opinion
By contrast, where a buyer receives a lawyer’s opinion on
title instead of title insurance, the buyer only has a claim
against the lawyer (and the lawyer’s errors and omissions
insurance policy will only insure the lawyer) if the buyer
can prove that the cause of the loss fell within the scope of
the lawyer’s retainer and that the lawyer acted negligently
in respect of that issue.
A loss arising from an error on the part of any other party
(such as a municipality responding to a search request)
will therefore not generally be covered by the lawyer’s
errors and omissions insurance, but it will be covered by
title insurance. Similar risks such as seller forgery or
identity theft are not under the control of the buyer’s
lawyer but will generally be covered by title insurance. The
title insurer may absorb such losses and may try to recover
the loss by way of subrogation.
Furthermore, a lawyer’s opinion on title can only speak to
the state of the property as of closing. Title insurance
policies are increasingly offering protection for “post­
policy date” events, such as a neighbour starting to
encroach on the property or the fraudulent discharge of a
mortgage that harms the interest of the lender.
3.3 Advising the client about title insurance
Under r. 3.2-9.4 of the Rules of Professional Conduct, a
lawyer is required to assess all reasonable options for
assuring title when advising a client. While the lawyer
must advise the client that title insurance is not
mandatory and is not the only option available to protect
the client’s interests, it is clear that lawyers practising real
estate cannot disregard the availability of title insurance.
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Rule 3.2-9.4 includes a comment emphasizing the
lawyer’s fundamental role when title insurance is used in
a transaction:
Although title insurance is intended to protect the client
against title risks, it is not a substitute for a lawyer’s
services in a real estate transaction.
The lawyer must not receive any compensation from a title
insurer for recommending a specific insurer (r. 3.2-9.5)
and must disclose to the client that no commission or fee
is being furnished by the insurer (r. 3.2-9.6). Many title
insurers circumvent this rule by paying the lawyer a
“counsel fee” as consideration for services provided, as
opposed to paying what might otherwise be considered a
“referral fee.” Any such counsel fee must be fully disclosed
to the client, and the client’s written consent to this fee
must be obtained.
4. Scope of policy coverage
An owner’s policy generally provides coverage for the
following types of losses:
ƒ title to the estate or interest insured (usually the fee
simple estate in the subject property) being held (or
vested) other than as shown in the policy;
ƒ any title defect and charge, lien, or encumbrance on
the title;
ƒ unmarketability of title; and
ƒ lack of a right of access to and from the land.
Title insurers generally evaluate the degree of risk before
agreeing to provide coverage for a specific property and
will exclude any risks that they are not prepared to cover.
Title insurers usually do not insure potential risks that will
not be revealed by public records, and any problem or
defect disclosed in the public records may simply be listed
in the property-specific exceptions (assuming that it is not
already excluded by the standard-form exclusions, as is
the case with Aboriginal land claims, for example). Title
policies generally insure for losses resulting from certain
types of fraud. The legal and other costs of defending a title
are covered by most policies (if the apparent ground of
attack is a covered risk).
It is open to the lawyer who has discovered a defect to ask
the insurer, as part of the policy application, to “insure
over” the problem, in whole or in part, for the buyer
and/or the lender. If the insurer agrees, then coverage is
provided for the defect; otherwise, it will be specifically
excluded. Insuring losses from specific (and presumably
low risk) defects is generally more obtainable, at a cost, in
commercial rather than in residential policies.
There are now homeowner and lender policies available in
Ontario that provide much broader coverage, especially in
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terms of “off-title” risks such as work orders, zoning, and
miscellaneous survey-related issues.
The property covered by the policy and the amount of
insurance are set out on Schedule A to the policy. Schedule
A will also contain the name of the insured (i.e., buyer or
lender), a description of the estate or interest in the land
that is covered by the policy (e.g., fee simple for an owner),
and a statement of who holds the title to that estate or
interest in the land.
Schedule B may contain some printed exceptions, plus
room to add property-specific exceptions to the policy. In
addition, the pre-printed policy contains standard
exclusions, such as environmental claims and Aboriginal
land claims.
Residential policies may insure for the following risks if in
each case the risk is not known to the buyer or lawyer
before closing:
ƒ zoning;
ƒ building and use restrictions;
ƒ right of occupancy restrictions;
ƒ unrecorded construction liens;
For commercial properties, it is common for the following
items not to be covered by the standard-form owner’s
policy. Coverage for these matters needs to be negotiated
with the insurer and the coverage added as endorsements
to the policy:
ƒ zoning;
ƒ building and use restrictions;
ƒ right of occupancy restrictions;
ƒ unrecorded construction liens;
ƒ taxes or special assessments not shown as existing
liens;
ƒ items created, permitted, assumed, or agreed to by
the insured;
ƒ items known to the insured but not shown in the
public record;
ƒ rights to subdivide;
ƒ expropriation rights (unless revealed by registered
title);
ƒ events occurring subsequent to the date of the
policy;
ƒ gifts;
ƒ claims of those in possession not shown by public
records;
ƒ survey-related items (encroachments, overlaps,
boundary disputes, unregistered easements, and
shortage in area);
ƒ mineral rights;
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ƒ reservations in patent (Crown grant in Ontario);
ƒ Aboriginal rights;
ƒ environmental issues; and
ƒ current mortgages.
There is no uniform policy currently in use in Ontario.
Where there are “plain language” policies in Canada and
the United States, they are often used for properties
containing up to four residential units, and the coverage is
generally broader than that described above. Even under
“plain language” policies, coverage often narrows where
the insured property is not on a registered plan of
subdivision. Coverage differs because insurers appreciate
the process for registering a plan of subdivision and the
likelihood that certain risks are diminished by that
process.
For lenders, standard policies have fewer exclusions.
Lender policies are more likely to cover adverse
possession, unrecorded construction liens, survey
matters, and special assessments because these items
rarely go to the heart of a property’s value and the lender
is generally not exposed up to 100% of the value in any
event. The title insurer is prepared to be generous with
coverage because there is little risk.
5. The requirements of the insurer versus
the best interests of the client
5.1 What is the amount of the loss?
Title insurance policies compensate the buyer for actual
loss resulting from covered title risks. For example, one
popular policy defines actual loss to mean “the difference
between the value of the insured estate or interest as
insured, and the value of the insured estate or interest
subject to the defect, lien or encumbrance insured against
by the policy.” This works well enough if the loss is easily
quantifiable as liquidated damages. For instance, unpaid
property taxes are easily quantifiable— the actual loss is
the amount of the unpaid taxes.
But suppose the “loss” consists of a two-foot easement that
runs along a side boundary of the lot, has accrued over
many years by prescription in favour of a neighbouring
property, and was not agreed to in the agreement of
purchase and sale. Is there a loss? If so, how can it be
determined? If the buyer is a builder intending to
demolish the house and build a new one, the easement
may devalue the property and so may be quantifiable,
whereas for an owner-resident with no such special issues,
this is not easily quantifiable as a loss.
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5.2 Prevention: protecting a client from
trouble
Relying solely on title insurance is easy for a lawyer to do
but may not be the most professional way to protect the
client’s interests. As discussed, easily quantifiable losses
are not always the kind of title defect that buyers
encounter after closing. The solicitor’s responsibility
therefore goes beyond the task of recommending title
insurance and includes assessing preventative measures
that can help the client avoid potential legal problems.
Title insurers may not require that the lawyer conduct
certain searches–one common justification for using title
insurance is that fewer such search expenses will be
needed; however, the searches themselves, though not
compulsory in the eyes of the insurer, may be relevant to
the buyer and required by the lawyer’s retainer.
For example, title insurers often will not require that the
lawyer obtain a property information report from the
municipality for a resale home in an urban area. Such a
report would disclose, for instance, open building permits
(where a builder did not obtain final inspections by the city
or perhaps did not complete certain work as required by
the city). A lawyer who habitually dispenses with this
search without first thinking about it may miss important
information.
Suppose a client buys a suburban resale home sold new by
a small builder to the first owner (the seller) one year
earlier. The lawyer does not obtain a property information
report because it costs $100 and the title insurer does not
require it. Six months after closing, the buyer is notified
by the city to vacate the property because there are open
building permits from the original construction and
occupancy has never been authorized. The title insurer
will bear the cost of repairing the situation, but the client’s
life will be greatly disrupted, and the client may wonder
why the lawyer did not discover this before closing. The
client would have been better served in these particular
circumstances had the report been obtained and a timely
requisition sent to the seller’s lawyer.
The policy will be subject to many exceptions and
exclusions, some of which may be important to the buyer.
It is the solicitor’s responsibility to prudently advise the
buyer whether additional searches should be done, even if
at increased cost to the buyer.
6. Title insurance and land surveys
Where title insurance is being utilized in the context of a
residential purchase, it is often purchased as an
alternative to an up-to-date survey of the property in order
to facilitate mortgage financing.
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REAL ESTATE
As prevention, in combination with title insurance, a
survey can be of great assistance in detecting and resolving
title issues before closing, rather than presenting the
buyer with potentially far-reaching insured legal problems
after closing. The buyer’s lawyer should advise about
survey issues and the differences and possible
consequences of an owner’s policy versus simply a
mandated lender’s policy. Advice should also be given
about the usefulness of obtaining a building compliance
report, a zoning review, and various other government
reports via off-title searches, especially when very old
homes, rural homes, farms, and cottages are involved—
even if the title insurer agrees to dispense with a survey
and some or all of these reports.
If the buyer pays for a lenders-only policy to be issued in
place of a survey (in order to satisfy the lender’s
requirement that one or the other be produced), the buyer
has no protection whatsoever with respect to defects that
would have been revealed by a survey. Only the
mortgagee’s interest is insured. The buyer will presumably
receive a lawyer’s opinion on the title, but the opinion
should be “subject to any deficiencies that would have
been disclosed by an up-to-date survey.”
7. The lawyer’s role on behalf of the client
Where title insurance is being obtained, the lawyer’s role
in residential, and even more so in commercial,
transactions includes the following:
ƒ determining which insurer to deal with, in terms of
the given insurer’s financial backing, experience,
and extent of policy coverage of an insured risk.
ƒ if one is not dealing with the insurer directly,
confirming that the person one is dealing with has
authority to bind the insurer to the coverage
negotiated.
ƒ negotiating the premium, if possible.
ƒ reviewing the initial policy commitment, including
the following:
— is the “insured” named correctly?
— is the legal description correct?
— would it be preferable for the owner to have
any specific problems resolved as opposed to
“insured over”?
— what coverage is excluded from the
commitment/policy?
ƒ advising whether the insured should obtain an up­
to-date survey (as discussed above).
ƒ advising whether the buyer should have more than
one policy. This becomes an issue if the policy is
going to cover more than one site, in terms of how
the coverage will be allocated under the policy.
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ƒ advising about the face amount of the policy (the
amount of insurance being purchased).
ƒ advising about possible endorsements. This may
include preparing documentation in order for the
insured
— to be entitled to specific endorsements or
affirmative insurance; or
— to obtain waivers of standard exclusions.
The following are examples of endorsements that
may be appropriate, depending on the
circumstances of the transaction:
— an inflation endorsement (automatically
increases the policy amount in accordance with
a specified schedule);
— a condominium endorsement (covers, inter
alia, whether the condominium development
was properly created under the relevant
statute);
— a zoning endorsement (used to insure the
zoning classification and the permitted uses for
the property); and
— a septic system endorsement (to insure that
the installed system was properly licensed
when built).
ƒ determining whether the insured has any
knowledge that would give rise to a “knowledge
defence” and, in effect, limit the policy. If so, written
disclosure must be made to the insurer. Any
knowledge of the lawyer will likely be imputed to
the client as well.
ƒ advising about future conduct that might cause a
lapse or termination of coverage. For example,
advice should be given about a change of ownership,
failure to notify the insurer regarding a claim, the
risks of settling a claim without notifying the
insurer, the need to be able to document any loss,
and so forth.
ƒ reviewing the final policy once issued to ensure it
complies with any re-certified or amended
report/commitment issued following negotiations
or the resolution of existing title problems.
ƒ alternatively, determining whether the existing
transaction can be completed without an entirely
new title insurance policy. Can an existing policy be
transferred?
8. Buyer’s acknowledgment
A title insurer may require the buyer to sign an
acknowledgment before closing, stating the following:
ƒ that the buyer has received a copy of Schedule B and
understands the exceptions listed therein, including
environmental problems;
ƒ that the buyer understands that the policy does not
provide any coverage with respect to
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— future changes or additions to the structures
located on the property or changes to the use
of the property;
— matters that the buyer created, agreed to, or
was aware of before closing without having
disclosed them to the insurer;
— defects disclosed in a home inspection report
received by the buyer;
— government rights, including expropriation;
— lack of compliance with fire retrofit or building
code requirements; and
— residential rent regulation.
ƒ other matters, which may vary from policy to policy.
The lawyer must review this document carefully with the
client before it is signed so that the client understands the
limits of the coverage that title insurance provides.
Even if a title insurer does not require a buyer’s
acknowledgment, the client should be asked to sign one
confirming the information, particularly about policy
coverage limitations, that the lawyer has advised the client
about. Lawyers should prepare their own forms of
acknowledgment if necessary. This is just another
example of the “defensive practice” of law and is a best
practice.
9. The lawyer’s responsibility
Rule 6.1-6.1 of the Rules of Professional Conduct stresses
the important role of the lawyer in respect of title
insurance. It prohibits a lawyer from allowing a non-
lawyer (such as a paralegal or assistant employed by the
lawyer) to give legal opinions regarding the insurance
coverage obtained or to do any of the following without
supervision:
ƒ provide advice to the client about title insurance;
ƒ present insurance options or information regarding
premiums; or
ƒ recommend one product over another.
10. COVID-19 pandemic: title insurance
While the current COVID-19 pandemic has not seen any
inherent innovations in title insurance, contingency
planning for possible worst-case scenarios has brought
increased attention to some pre-existing features of title
coverage, including “gap coverage” and coverage against
fraudulent impersonation of parties:
ƒ “Gap coverage”: Gap coverage is built into many
policies and provides coverage for the insured
owner or lender if there is a gap of time between the
completion of the transaction and registration of
title documents. In a scenario in which parties are
prepared to close a transaction but cannot register
title documents (primarily because of closure or
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unavailability of land registration systems), gap
coverage allows the parties to treat the transaction
as closed. Each title insurer requires that the
purchaser’s (or lender’s) lawyer have a title search
and writ search of certain currency and register as
soon as practical after registration services become
available. The decentralized and web-based
registration system in Ontario has meant that, at the
time of writing, there has been no prescribed
shutdown of Ontario’s land registration system;
thus, gap coverage has not as yet played a major role
in response to the pandemic.
ƒ Fraud coverage: Social distancing measures
consequent to the COVID-19 pandemic (including
meeting and identifying clients by face-to-face
videoconference rather than in person and remote
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REAL ESTATE
commissioning of documents) has resulted in
concerns about the lessened opportunity for lawyers
to detect fraud, including impersonation of parties
and fake identification (see Chapter 68 (Fraud in
real estate transactions) of these Study Materials).
Mortgage lenders in particular have expressed
concern about the enforceability of their loans in the
event that the borrower is in fact an imposter. Most
title insurers have indicated that their existing
policies include coverage against fraud, including
unenforceable mortgage security because of
impersonation, and that such coverage persists
when a lawyer meets their clients solely by a face-to­
face videoconference.
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Commercial real estate transactions
1. Introduction
The same basic principles that apply to conveyancing and
financing of residential properties also apply to
commercial properties, although the dollar figures
involved are usually larger and there may be additional
considerations dictated by the nature of the property.
Issues regarding closing dates, requisition dates,
representations and warranties, damage prior to closing,
treatment of chattels and fixtures, and the vendor’s status
under s. 116 of the Income Tax Act are still relevant. A
purchaser must still be satisfied regarding the physical
integrity of the building and soil, and a purchaser’s lawyer
still performs all the usual legal searches relating to title,
executions, zoning and work orders, realty tax and water
arrears, environmental searches, and reviews of the
survey (unless title insurance is to be used). Even though
the use of title insurance is becoming more common, it is
no substitute for appropriate due diligence, and often both
vendor’s and purchaser’s lawyers have to familiarize
themselves with title so that they are in a position to
negotiate appropriate agreements (such as any required
assignment or assumption agreements, easements, or
cost-sharing agreements) or obtain appropriate
compliance letters. Closing takes place in much the same
way as it does in a residential transaction. The statement
of adjustments is calculated in the same way although
there are usually additional adjustments relating to leases
(e.g., deposits, common area maintenance costs, and
rental payments), maintenance contracts, or additional
deposits paid in stages as various purchaser’s conditions
are satisfied or waived.
Commercial transactions might involve industrial, office,
or retail properties, apartment buildings, hotels,
condominiums, daycare centres, recreational areas (such
as golf courses or fishing lodges), farms, mines, or gravel
pits. Commercial properties are not always urban, so it is
not unusual to encounter issues relating to septic tanks,
potable water supply, water drawing rights, conservation
authority regulations, utility rights-of-way, separation of
surface rights from mineral rights, or even heritage
conservation or cemetery issues. A commercial property
may be part of a larger development giving rise to cost
sharing, easement, or traffic flow issues and specialized
insurance and financing arrangements. Commercial
transactions can include vacant land being acquired for
development purposes or already constructed buildings.
Physical integrity and zoning issues arise with both new
Chapter 64
and old buildings. A purchaser of an older building may be
able to rely on non-conforming use principles to establish
that the use and structure are permitted but has to accept
that further changes to the structure or its use are limited.
New construction has its own issues including
construction liens; issues about who will repair damage
resulting from the inevitable settling of the building and
soil; and related guarantees of structural soundness, work
orders, final inspections, and so on. Environmental
conditions, soil compaction, and zoning are significant
concerns when acquiring vacant land for future
development.
Other considerations may be raised due to the nature of
the legal interest being transferred. For example, if a
leasehold interest (rather than ownership in fee simple) is
being acquired, the purchaser’s lawyer must review the
lease and deal with the landlord and any limitations
imposed by the lease, including the transferee’s ability to
finance the transaction. The vendor’s lawyer should
ensure that the proposed sale complies with the
requirements of the lease. It is also common for very
valuable properties to be owned by a number of co-
owners. If the fee simple interest to be acquired in a
transaction constitutes less than a 100% interest in a
property, both the vendor’s and the purchaser’s lawyers
need to be sure that no prior co-owner’s rights (like a right
of first refusal) interfere with the sale.
2. Agreement of purchase and sale
The principles regarding drafting and negotiating a
residential agreement of purchase and sale apply to the
drafting and negotiation of a commercial agreement of
purchase and sale. The following are some additional
considerations.
2.1 Price/value
The purchaser will need a reasonable period of time to
investigate and confirm independently all the information
that supports the value of a transaction. Most commercial
transactions permit a purchaser to have a sensible period
of time to access the property, inspect relevant books and
records, and make inquiries at applicable regulatory
agencies before committing to purchase. Some purchasers
are prepared to incur the costs involved in a title search
and related legal searches during this “due diligence”
period. Others prefer to satisfy themselves about the
financial and physical aspects of the property before
incurring the expense of legal investigations. Sometimes a
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vendor will offer representations, warranties, or
guarantees regarding issues of importance to the
purchaser. Some properties are sold on an “as is, where is”
basis, requiring the purchaser to be satisfied, based solely
on the purchaser’s own independent investigations.
Whether this happens depends on many factors, including
bargaining power and sometimes the identity of the
vendor. For example, a receiver or mortgagee in
possession often does not know enough about the
property to make reliable statements. Even if a vendor is
prepared to give representations and warranties, a
prudent purchaser will perform some due diligence rather
than rely on the vendor. There may also be legal areas
requiring specialized expertise, such as environmental
contamination or realty taxes.
Once decisions are made about the areas to be
investigated, it will be necessary to incorporate
appropriate conditions into the agreement of purchase
and sale. It is common for a purchaser to have the
agreement conditional for a few days on the purchaser
obtaining internal approval (e.g., from its board of
directors). Certain vendors also require internal approval,
depending on their internal corporate structure, so the
agreement may also contain a vendor’s condition to this
effect.
2.2 Harmonized Sales Tax (HST)
HST generally applies to most commercial real estate
transactions, including the sale of property and
commercial leasing. Some transactions are exempt from
HST, or the land and building may be exempt while some
of the other assets being transferred attract HST. The
agreement of purchase and sale should expressly state
whether HST is included in the purchase price or not. In
some cases, provided the purchaser is an HST registrant,
it may self-assess, claim input tax credits, and remit any
tax directly. A vendor will want protection against the
consequences of a self-assessing purchaser’s failure to pay
tax. If the purchaser’s covenant is acceptable, many
vendors will accept an indemnity. If the purchaser is to
self-assess, the lawyer should confirm the purchaser’s
HST registration number with the Canada Revenue
Agency before closing.
2.3 Income tax
Unlike a sale of a principal residence in Canada, the sale
of other land has income tax implications that need to be
addressed by both vendor and purchaser. Most purchasers
and vendors want to agree on an allocation of the purchase
price among depreciable assets and non-depreciable
assets. Often the parties’ accountants advise in this area.
The purchaser generally wants to allocate more of the
purchase price to depreciable assets so that there is more
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REAL ESTATE
to depreciate in the future, but the vendor, who has
already depreciated the same assets, wants to allocate a
lower amount on depreciable assets so as to avoid
recapture. Whatever the results of the negotiation, the
allocation must be reasonable, and it can still be rejected
by the taxing authority.
2.4 Adjustments
Although the same fundamentals of a statement of
adjustments for a residential transaction (deposit, realty
taxes, balance due on closing) apply in a commercial
context, numerous additional considerations may also be
applicable. For example, the value of land being acquired
for development purposes is often determined by a certain
price per acre or by a price per foot of frontage.
Accordingly, the parties may include an estimated
purchase price in the agreement of purchase and sale, but
stipulate that the price is to be adjusted once the area or
frontage is certified by a surveyor so that this will be an
adjustment on closing. In the case of a rent-producing
property, it will be necessary to adjust for rents and
deposits. In the case of an apartment building,
adjustments will include statutory interest accrued on the
security deposits. In retail buildings where there are net
leases, minimum rent, additional rent, security deposits,
and sometimes, percentage rent, all will need to be
adjusted. It is also common to address in the agreement of
purchase and sale how rents ought to be adjusted where
they are more or less current but not yet received or if
there is a significant arrears issue that will not be resolved
prior to closing.
Sometimes purchasers take control of collecting chronic
arrears and later account to the vendor for the vendor’s
share. Alternatively, the vendor may want to continue the
collection process on a long-standing arrears situation.
Even if the purchaser is agreeable, it will want the vendor
to agree not to interfere with the purchaser’s landlord and
tenant relationship. Assuming that there is a level of trust
between the parties, either method could work.
To the extent that maintenance contracts are being
assigned, adjust any prepaid fees. The parties should be
encouraged to agree in the agreement of purchase and sale
to deal with items for which an exact adjustment is not
available on closing. Typical of these would be
adjustments for common area maintenance costs payable
under a net lease where the actual annual amount is not
known until well after the end of the year. A reasonable
deadline for readjustment should be set—January of the
following year is too soon since the bills to the end of the
previous year would not have been received or processed
until a few months later.
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If there is inventory to be counted, appropriate
arrangements should be made and adjusted as soon as the
final numbers become available. The agreement of
purchase and sale should contemplate disagreements over
final numbers and include a mechanism or procedure to
resolve them. If wages, benefits, or other items for
employees of the vendor are being adjusted, advice should
be obtained from an employment law specialist.
2.5 Conditions
Any conditions contained in a commercial agreement are
subject to the same considerations as in the residential
context. Since the stakes are higher, so should be the
importance afforded to these terms. The lawyer should
ensure that the party benefiting from the condition has
sufficient time and access to the property to perform the
required actions and that the related “waiver of condition”
or termination provisions are clear and appropriate.
2.6 Timing issues
Commercial real estate transactions differ from their
residential counterparts because, with more aspects to
investigate, due diligence and satisfaction of some
conditions may take longer (for example, if the closing is
conditional upon re-zoning). Sufficient time must also be
allocated to negotiate the terms of the agreement of
purchase and sale, as well as any other agreements, such
as financing and mortgage documents and corporate
documents that may be necessary for the parties—most of
whom, in commercial transactions, are corporations—to
authorize the transaction.
2.7 Defects
When acting for a vendor, lawyers should familiarize
themselves with the nature of the property and subsearch
title before drafting or reviewing an agreement of
purchase and sale. This will allow them to resolve or at
least anticipate title or other defects and to craft the
agreement of purchase and sale to take these or other
peculiarities into account. If, for example, a vendor’s
lawyer knows that some encumbrance cannot be removed
from title, then it can be designated as a “permitted
encumbrance,” and the purchaser can be required to
assume the obligations under it. The purchaser’s lawyer
will want to review and assess all permitted encumbrances
before the agreement of purchase and sale becomes
binding.
2.8 Vendor take-back mortgages and
corporate authority
Theoretically, vendor take-back mortgages are no
different in a commercial context than they are in a
residential context. The lawyer should still carefully
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consider what security can and should be granted by the
purchaser in order to properly protect the vendor. Also, if
the purchaser is arranging additional financing, the
priority of the take-back security needs to be addressed.
While a vendor take-back mortgage might be perfectly
adequate, a vendor’s lawyer needs to consider whether the
client will have a functional security package. The vendor
may not want to repossess the property but only to attorn
rents, in which case a general assignment of rents is
required. If there are specific leases that are important, the
vendor may want to take a specific assignment of those. If
there is equipment without which the building cannot be
operated or on which revenue depends (like refrigerators
and stoves in an apartment building) or if the vendor could
not operate or sell the property without access to the books
and records of the purchaser/borrower (in order to see, for
example, what the terms of a lease are), then a general
security agreement (GSA) may be in order. A
developer/purchaser might want to negotiate for partial
discharges or a postponement to easements for utilities or
to servicing financing (i.e., financing for installation of
sewers, watermains, etc.). These should be provided for in
the agreement of purchase and sale.
One should be able to rely on the impression of a corporate
seal on a vendor take-back mortgage as evidence that it
has been authorized, properly executed, and delivered, but
many modern corporations do not have corporate seals.
Although theoretically it should be possible to rely on the
indoor management rule as evidence of authority and due
execution, the practice when acting for a lender or, in this
case, for a vendor who is financing the purchase by taking
back a mortgage is to require a certified copy of the
relevant corporate resolution, borrowing by-law, and an
opinion of the purchaser/borrower’s lawyer on the due
authorization, execution, delivery, and sometimes even
the enforceability of the security granted. These too should
be provided for in the agreement of purchase and sale.
Unless there is some reason to suspect that a sale is not
properly authorized, a transfer executed by the vendor and
capable of registration is usually adequate for a
purchaser’s lawyer. In the absence of vendor take-back
security or some other significant obligation that will
continue after closing, vendors’ lawyers do not ask for
evidence of the authority of a purchaser to purchase and
are content just to receive the sale proceeds on closing.
In order to confirm that the entity granting the security
actually exists and controls its assets, the lender’s lawyer
routinely obtains certificates of status and performs
searches relating to insolvency and bankruptcy. If the
security package includes an assignment of rents, leases,
or a GSA, appropriate registrations need to be filed under
the Personal Property Security Act (PPSA), including a
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copy of the registration provided to the purchaser and
appropriate postponements or waivers obtained from
other creditors of the same purchaser/borrower. A
vendor’s lawyer’s PPSA search will indicate whether the
vendor’s PPSA registration is the only one registered
against the purchaser/borrower. If it is not, the vendor’s
lawyer should make sure that the vendor’s registration has
priority over the assets in which the vendor is taking
security.
Waivers or postponements from other secured lenders
may be necessary since a secured lender can perfect more
than one security interest in more than one asset by filing
just one registration. Because it can do so before it
acquires a security interest, it is possible for a security
interest that does not initially compete with the client’s
security interest to later gain priority over that client’s
security interest.
2.9 Purchaser’s right to assign
If the agreement of purchase and sale is silent on the right
to assign the agreement, then like any contract, either
party’s “benefits” can be assigned without consent, but not
their “burdens.” If a vendor is taking back a mortgage or if
the purchaser has given significant indemnities or
covenants, the vendor would be concerned about the
purchaser’s identity and would want to limit or prohibit
the purchaser’s right to assign without vendor approval of
the assignee. The purchaser on the other hand, wants
flexibility to assign for a variety of reasons including tax
planning, liability reasons, or compliance with the
Planning Act. If the need to assign an interest in the
agreement of purchase and sale is important, it should be
included in the agreement of purchase and sale.
3. Due diligence
As mentioned, commercial transactions by their nature
usually require detailed investigations or “due diligence”
to ensure that the purchaser is acquiring the asset
bargained for. This due diligence includes physical
inspections of the property by the client, review of related
leases, and other relevant contracts, title searches, and off-
title inquiries.
3.1 Leases
Purchasers usually want to review current and historical
income and expense statements relating to an income-
producing property. On an acquisition that involves
residential tenancies, historical reviews of rent are
important, and competent rent control advice must be
obtained. Prudent purchasers will not just rely on the rent
roll and will review the leases themselves to verify whether
rent was calculated and increased correctly and whether it
matches the rent roll. In the case of net leases, purchasers
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will review the leases to ensure that they will be able to
recover their operating and maintenance costs as
completely as possible. Some leases will limit a landlord’s
recovery rights either expressly or unintentionally, and
these aspects need to be analyzed.
A purchaser who relies on a rent roll and does not review
the leases will not know about the existence of any unique
clauses that may be in the leases being assigned on closing,
such as a right to terminate, an option to purchase, a right
of first refusal, the number of parking spaces that a tenant
is entitled to use and whether they are exclusive-use
parking spaces, or whether a tenant has been granted any
“exclusive-use privileges.” The property may satisfy
zoning by-law parking ratios but still not have enough
parking spaces to fulfill the owner’s contractual
obligations with tenants. Without a lease review and
subsequent calculations, this deficiency would not be
discovered until a tenant complained. A purchaser looking
to redevelop part of a property will want to focus on
clauses allowing the landlord to relocate tenants. Even if
the rent roll tells the purchaser that a tenant has options
to renew, it may not tell the purchaser about the formula
by which renewal rental rates will be established. All lease
amendments should be reviewed as should each tenant’s
file. The file should contain correspondence giving a more
complete picture of the landlord and tenant relationship
and any disputes or complaints with the potential to
develop into a serious dispute or claim for set-off. It
should also reveal whether space has been expanded or
partially surrendered (and whether the rent was adjusted
accordingly) and so on. The rent roll usually shows
security deposits or other prepaid items, but since the
purchaser will ultimately be required to give the tenants
credit for those items, purchasers should verify these
amounts directly with the tenants by means of an estoppel
certificate. Lease reviews are a matter of experience,
common sense, and considering what information the
owner/landlord needs to know.
3.2 Estoppel certificate
Since the level of rental income from a property influences
its price, prudent purchasers can not only confirm rental
information but also limit the potential for later disputes
with a tenant who disputes the information the purchaser
has uncovered during its inspections by obtaining
estoppel certificates from the tenants prior to closing.
Except possibly for apartment buildings where no one
wants to disturb the tenant population and the amounts in
question are less significant, purchasers require and
vendors usually expect to obtain tenants’
acknowledgments from as many tenants as possible. The
purpose is, of course, to ensure that each tenant agrees
with the purchaser’s understanding of the lease terms. A
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tenant acknowledgment is simply a certificate executed by
the tenant, confirming the material facts about a lease.
Tenants’ acknowledgments are often called “estoppel
certificates” because, based on equitable principles of
estoppel (especially where the tenant acknowledges that
the purchaser and its lender are relying on the tenant’s
statement), the tenant will be estopped from later
asserting a different understanding of the lease terms.
Typically, tenants are asked to make statements about the
existence of any amendments to the lease, the lease term,
its expiry date, renewal rights, area, rent, additional rent,
escalations in rent, whether rent is paid to date, the
prepaid amounts, deposits, and defaults; that there are no
disputes or rights of set off; or if there are, about the
particulars.
Purchasers like to obtain estoppel certificates from as
many tenants as possible in advance of, and also as
reasonably close to, closing. In this way, they can be
checked to confirm that the tenant’s understanding
conforms to the purchaser’s understanding or, where
there is a discrepancy, to deal with it in some way.
Occasionally a tenant will disagree about some material
lease provision or may disclose an unfulfilled obligation of
the vendor as landlord (e.g., a repair or adjustment of rent
issue). When negotiating an agreement of purchase and
sale, it is important for both vendor and purchaser to
assess and decide what the consequence(s) will be if the
vendor is unable to produce a satisfactory number of
estoppel certificates or should the tenants’ versions of
their lease terms vary too much and too materially from
the vendor’s version. In the absence of fraud, if after
having exercised good faith and reasonable diligence, a
vendor fails through no fault of its own to obtain sufficient
and satisfactory estoppel certificates, then the parties
might agree that the vendor will certify the information
that would have been included in the missing estoppel
certificates, or they might negotiate a clause in the
agreement of purchase and sale allowing an unwinding of
the deal without either party being liable for damages or
some other solution (such as an abatement in price or a
temporary hold-back).
3.3 Off-title searches
The Appendix at the end of this chapter lists numerous off-
title searches that a purchaser’s or lender’s lawyer may
need to perform, depending on the nature of the property.
While the Appendix includes relevant commentary, a few
of the off-title concerns warrant more explanation:
ƒ Zoning and work orders: As with a purchase of
a house, a purchaser’s lawyer checks to ensure that
the use of a commercial property is permitted and
that there are no outstanding work orders by
obtaining a building and zoning compliance report
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from the relevant municipality. For commercial
properties, there are often several different
permitted uses because tenants may carry on a
different business from that of their neighbours
(e.g., a shopping centre can include retail,
restaurant, theatre, office, medical or dentist office,
and other uses). Consequently, greater care is
required in the commercial context to ensure that
the specific uses for which the property is actually
being used are permitted and that each tenant’s
space complies with by-laws and applicable codes.
Different municipalities regulate different matters,
including setbacks, density, parking ratios, outside
storage, siting of garbage containers, and so on. The
part of the development that the vendor controls
may comply with all of the by-laws and regulations,
but a tenant’s part may be in violation. If the
tenant’s lease requires the tenant to comply with
such matters, the vendor may be able to require the
tenant to rectify the problem. Be aware that other
statutes can affect the use permitted. Incidentally,
because up-to-date surveys are more often available
for commercial real estate transactions, less reliance
is placed on statutory declarations of possession
(proving possession consistent with registered title)
than is the case in residential transactions where
up-to-date surveys are less common and where
neighbours have more informal relationships with
each other than is the case among commercial
neighbours.
ƒ Environmental: This is a specialty area, but most
lawyers do at least basic searches with the Ministry
of the Environment, Conservation and Parks and
other government authorities. In most commercial
transactions where environmental issues are a
concern, at a minimum, a Phase I environmental
site assessment should be conducted by a qualified
environmental consultant. A record of site condition
(RSC) may be filed on the Environmental Site
Registry under O. Reg. 153/04, made under the
Environmental Protection Act, to register the
condition of the site as at the date of the RSC. A risk
assessment is an option available to property
owners when the site condition does not meet
standards specified for an RSC filing under
O. Reg. 153/04. On July 1, 2011, significant
amendments to O. Reg. 153/04 came into force,
imposing more stringent environmental assessment
standards, including strengthened standards for
measuring soil and groundwater site conditions,
new Phase I and Phase II environmental site
assessment standards, and a new risk-assessment
process.
ƒ Fire and health departments: One of the issues
often negotiated is whether the purchaser should be
entitled to cause inspections of the property by
relevant authorities or whether it may only inquire
of such authorities about matters already in their
files. How the negotiation ends depends on the
nature of the property and the needs of the parties.
Fire Code, O. Reg. 213/07, made under the Fire
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Protection and Prevention Act, 1997, requires that
older apartment buildings be retrofitted with fire
safety equipment. If a purchaser intends to rely on
legal non-conforming use principles to be
comfortable that the use or physical structure is
permitted, the retrofit legislation is paramount. The
lawyer should determine if the health department
has jurisdiction over the building; generally, it
regulates food preparation and service areas.
4. Assignment of contracts
4.1 Third-party contracts and guarantees or
warranties
Any obligation of the vendor to assign the benefit of
guarantees or warranties to the purchaser should be set
out in the agreement of purchase and sale. Many
maintenance contracts relating to commercial properties
are very informal. Formal written arrangements need to
be reviewed to determine whether they can be assigned to
the purchaser without the contractor’s consent. Where the
contractor’s consent is required, someone needs to take
responsibility for obtaining it. Even if there is no
restriction on assigning, it is good practice to alert the
contractor to the fact that the vendor will soon be dealing
with the purchaser. Since many contracts require 30 (or
more) days’ notice of cancellation, it is useful if the
purchaser can identify at an early date those contracts it
wants to assume. The vendor’s lawyer can draft this
requirement into the agreement of purchase and sale so as
to allow the vendor a reasonable time to terminate
unwanted contracts without paying a penalty for
cancelling on short notice. There may be circumstances
where a vendor insists that the purchaser assume certain
contracts (for example, a long-term contract might cost
too much to terminate, or if the vendor is taking a vendor
take-back mortgage, the vendor may want the comfort of
knowing that the purchaser has reliable contractors
providing services that support rent and life and safety
systems). Sometimes vendors expect their lawyers to
arrange to cancel contracts or obtain contractors’ consents
to assignments. If this is the case, the lawyer should ask
for pertinent information such as utility account numbers,
details as to letters of credit that have been supplied,
copies of contracts, and so on. Obviously, if the closing
date of the transaction is extended or abridged, the
contractor should be advised.
5. Closing
Closing is the culmination of all of the negotiations,
inspections, and paperwork mentioned above.
Commercial transactions are often closed at lawyers’
offices rather than the registry office, and only the
documents to be registered are taken to the registry office.
In areas where electronic registration exists, many
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closings now take place by delivering to the opposing
lawyer, in escrow, those documents that are not to be
registered. A form of document registration agreement
(such as the one that can be found on the Law Society of
Ontario’s website) is entered into regarding treatment of
the documents that are to be registered, and these are
“messaged” between the parties in the normal way. The
following are items that one might typically find on a
commercial real estate closing agenda:
ƒ statement of adjustments (pre-closing) (same as
residential).
ƒ tenant estoppel certificate(s) (pre-closing).
ƒ transfer with or without Planning Act boxes
completed (purchaser to supply affidavit of land
transfer tax and land transfer tax cheque) (same as
residential).
ƒ mortgage assumption agreement, if applicable, and
related mortgage statement (same as residential).
ƒ vendor take-back mortgage, collateral security, and
supporting resolution and/or opinion, if applicable.
ƒ general conveyance (for significant equipment and
furnishings).
ƒ assignment of guarantees.
ƒ assignment of third-party contracts and related
consents, if appropriate.
ƒ assignment and assumption of leases. Theoretically,
an assignment of leases from vendor to purchaser is
not necessary. The new owner, as landlord, is
entitled to collect rents from tenants. The practice is
that such a document is exchanged on closing.
Purchasers find it useful to have a piece of paper to
prove that the lease has been assigned, and vendors
like to know that the purchaser is now responsible
for all of the landlord’s obligations. Such documents
also often include mutual indemnities whereby the
vendor indemnifies the purchaser from claims made
by tenants respecting matters arising before closing,
and vice versa.
ƒ notice and direction to tenants. This is simply a
piece of paper signed by the vendor notifying
tenants of the sale and directing that future lease
payments be made to the purchaser. Tenants react
better to a seamless transition, so many purchasers
deliver (along with the formal notice and direction)
a welcoming letter identifying the new owner and
the new property manager and giving telephone
numbers and other means of contacting the new
landlord.
ƒ purchaser’s insurance (if there is a vendor take-back
mortgage or security package) showing the vendor
as loss payee as its interest may appear.
ƒ mutual undertakings to readjust.
ƒ direction and redirection as to funds.
ƒ purchaser’s direction re: title (if the purchaser
directs that the title be registered in someone else’s
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name) and assumption by purchaser’s assignee of
significant covenants and indemnities, if any.
 vendor’s certificate or statutory declaration
pursuant to s. 116 of the Income Tax Act (same as
residential).
 remaining tenant estoppel certificates or vendor’s
certificate/statutory declaration in lieu of missing
estoppel certificate (if required by the agreement).
 purchaser’s covenant to self-assess, pay HST, and
indemnify vendor, if applicable.
 certified closing proceeds or wire transfer.
 keys (same as residential) and security passes and
codes.
 original leases (and applicable extracts from tenant
files), maintenance contracts, plans, surveys, and
any other relevant contracts or documents.
6. Post-closing
Immediately after closing, the lawyers should call the
clients and advise them that the deal has closed. The
lawyer acting for the purchaser should deliver the keys.
The vendor’s solicitor should immediately disburse the
closing funds.
The purchaser’s solicitor should write to the tax
department and utilities department to advise them of the
change of ownership so that future bills will be sent to the
purchaser.
It is very important for the solicitor to diarize the file in
order to ensure completion of the following:
 receipt of confirmation of registration of all
discharges, together with a copy of the registered
discharge for the solicitor’s file;
 compliance with all undertakings; and
 reporting to the client and delivery of the statement
of account.
If the lawyer has obtained moneys for fees and
disbursements, in trust, these fees and disbursements
cannot be transferred to the general account until a report
regarding the transaction is delivered to the client.
Lawyers should write the report on the transaction as soon
as possible. The reporting letter will serve several
important functions. First, when acting for the purchaser,
it is the legal opinion to the client on the transaction.
Second, it should be a good record of what took place:
 what the client’s instructions were;
 what the lawyer did in response to the instructions;
and
 other material matters with respect to the property.
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It will form an excellent defensive tool, as well as a good
starting point if the client decides to sell the property.
When reporting to a purchaser, the lawyer’s report may
include the following:
 the opinion on title or a title insurance policy. The
opinion will usually say “that the purchasers have a
good and marketable title in fee simple, subject to
the following exceptions.” Then recite all of the
exceptions. Any qualifications to good title should
be items that have been discussed with the client
before closing and on which the client’s instructions
have been obtained. Any waivers by the client
should be detailed—for example, instructions on not
obtaining an up-to-date survey of the property,
waiver of a condition, and any other material
instructions.
 details regarding the statement of adjustments and
how funds were dealt with on closing.
 full particulars of any mortgages. Be sure to let the
purchaser know when mortgage instalments are
payable and the manner of making such payments.
It is wise to put this in a preliminary report so that if
the report is delayed at all, the purchaser still has
this information in a timely fashion.
 responses to search letters, including the status of
zoning and building searches, tax account and
utility status, and all other non-title searches.
 factual information such as the date of closing, how
title was taken, and a short description of the
various closing documentation.
 insurance arrangements.
 any unusual aspect of the transaction.
The report on a sale tends to be somewhat shorter. This
letter is largely focused on the statement of adjustments
and the disbursement of funds. If mortgages have been
discharged, the details of the discharge should be set out.
If there has been a mortgage back, the details of the
mortgage back should be fully set out, as well as any
waivers obtained from the client and instructions on any
unusual matters. Helpful factual information, such as the
date of closing, confirmation of payment of realty taxes,
and other payments, is useful. A short description of the
closing documentation should also be included.
Keep a copy of the reporting letter with all documents
together, either in a bound form or in one subfolder. This
will avoid sifting through the file at a later date and will
save a great deal of time and frustration if the file has to be
recalled for any reason.
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Appendix
Off-Title Searches for Commercial Transactions

Type of clearance When applicable Relevant legislation

1. Realty tax arrears Always. Municipal Act, 2001, S.O. 2001, c. 25.
Request a tax certificate from the relevant s. 349(3) — taxes are a special lien on
municipal authority. property in priority to every claim,
privilege, lien, or encumbrance of
every person except the Crown.

2. Local improvement Always. Local Improvement Charges – Priority

charges In the request for the tax certificate above, an
inquiry should be made as to whether there are
any outstanding or pending local improvement
charges.
Lien Status, O. Reg. 586/06, made
under the Municipal Act, 2001.
s. 5(1) — a municipality that has the
authority to undertake a work may
pass a by-law to undertake the work
as a local improvement for the purpose
of raising all or any part of the cost of
the work by imposing special charges
on lots abutting the work or lots not
abutting the work but that will be
immediately benefited by the work or a
combination of these abutting and
non-abutting lots.
s. 5(2) — a special charge imposed
with respect to the work has priority
lien status as described in s. 1 of the
Act.
Municipal Act, 2001, S.O. 2001, c. 25.
ss. 1(2.1) and 398(2) — the
municipality is allowed to add these
charges to the tax roll.
s. 1(3) — any amount added to the tax
roll is a special lien on the property in
the same manner as taxes under
s. 349(3) and may be recovered from
the assessed owner and any
subsequent owner of the property.

3. Public utilities charges Always for any public utilities supplied by a local Fees and Charges — Priority Lien
(a) Water and sewer municipality. Status, O. Reg. 581/06, made under
charges Most municipalities have a separate department the Municipal Act, 2001.
(b) Artificial/natural that handles collection of water and sewer s. 1 — fees and charges imposed by a
gas charges, and an inquiry letter should be municipality for the supply of water
addressed to such department. and the use of a sewage system that
(c) Steam or hot have been added to the tax roll under
water Note that many municipalities will require the
written consent and authorization of the s. 398(2) of the Act have priority lien
registered owner to release this information. status as described in s. 1 of the Act.
Municipal Act, 2001, S.O. 2001, c. 25.
s. 1(3) — any amount added to the tax
roll is a special lien on the property in
the same manner as taxes under
s. 349(3) and may be recovered from
the assessed owner and any
subsequent owner of the property.

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Type of clearance When applicable Relevant legislation

4. Electrical Safety Always. Electricity Act, 1998, S.O. 1998, c. 15,

Authority — work Send a letter to the local Electrical Safety Sch. A.
orders Authority requesting information on any s. 113(11) — the Authority may issue
outstanding work orders. orders relating to work to be done in
the installation, removal, alteration,
repair, protection, connection, or
disconnection of any of works or
matters used or to be used in the
generation, transmission, distribution,
retail, or use of electricity as the
Authority considers necessary or
advisable for the safety of persons or
the protection of property.

5. Building department Always. (a) Planning Act, R.S.O. 1990, c. P.13.

(a) Zoning A letter should be sent to the building
compliance department of the relevant municipality
(b) Municipal work requesting, among other things, confirmation of
orders the zoning; whether there are any planned
amendments to the zoning; whether the building
(c) Occupancy complies with all applicable by-laws; whether
permit
there are any outstanding permits, inspection
files, or work orders; and whether an occupancy
permit has been issued.
Most municipalities will not give an opinion as to
conformity with zoning, but they will advise as
to the current zoning of the property.
(b) Building Code Act, 1992, S.O.
1992, c. 23.
Various sections of the Act give
building inspectors the power to enter
and inspect buildings and issue orders
for the performance of remedial work
within a specified time. If the required
work is not completed within the
specified time, the municipality can
complete the work. The municipality
has a lien on the property for the cost
of the work, which has priority lien
status under s. 1 of the Municipal Act,
2001.

6. Compliance with all Always. Planning Act, R.S.O. 1990, c. P.13.

municipal agreements
registered on title
Send an inquiry letter to the specific department
of the municipality depending on the nature of
the agreement.
s. 41(7) — as a condition to the
approval of the development plans and
drawings, a municipality may require
the owner of the land to, among other
things, enter into an agreement with
the municipality dealing with and
ensuring the provision of facilities or
works.
s. 41(10) — any such agreement may
be registered and enforced against the
owner and subsequent owners of the
land.
ss. 51(25)–(26) — similar provisions
apply with respect to agreements that
may be required as a condition to the
approval of subdivision plans.

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Type of clearance When applicable Relevant legislation

7. Unregistered hydro Always. Electricity Act, 1998, S.O. 1998, c. 15,

(electrical) easements (a) Obtain from Hydro One information as to any
(a) Hydro One unregistered easements it may have over the
(formerly property pursuant to s. 46(1) of the Electricity
Ontario Hydro) Act, 1998 and s. 48(2) of the Power Corporation
(b) Municipal hydro Act through online searches at
corporation https://www.services.hydroone.com/lvr/welcom
e.html.
(b) Send an inquiry letter to the municipal hydro
corporation requesting information as to any
unregistered easements it may have over the
property pursuant to s. 46(1) of the Electricity
Act, 1998 and s. 48(3) of the Power Corporation
Act.
Sch. A.
s. 46(1) — if, immediately before the
repeal of s. 48 of the Power
Corporation Act, land was subject to a
right referred to in s. 48(2) or (3) of
the Power Corporation Act, the land
continues to be subject to the right
until the right expires or until it is
released by the holder of the right.

8. Corporate existence Always. Business Corporations Act, R.S.O.

searches It is necessary to search all corporations that
held title to the property to determine whether
they existed during the period of their ownership
of the property.
There are varying opinions on whether this
search should be done within the search period,
back 40 years, or to the Crown patent. If the
property is a LTCQ title, it is only necessary to
search corporations appearing in the chain of
title subsequent to the conversion date.
1990, c. B.16.
s. 244(1) — if a corporation is
dissolved, any of its property that has
not been disposed of on the date of
dissolution immediately forfeits to and
vests in the Crown.
s. 244(3) — a forfeiture of land is not
effective against a purchaser for value
of the land if the forfeiture occurred
more than 20 years before the deed or
transfer to the purchaser is registered.
Canada Business Corporations Act,
R.S.C. 1985, c. C-44.
s. 228(1) — property of a body
corporate that has not been disposed
of at the date of its dissolution vests in
His Majesty the King in right of
Canada.

9. Condominium status Always when dealing with a condominium
certificate property.
Note: a status certificate may be obtained in
addition to any disclosure statement required to
be provided by the declarant under s. 72 of the
Condominium Act, 1998 in connection with the
purchase of a new condominium unit.
Condominium Act, 1998, S.O. 1998,
c. 19.
s. 76 — the condominium corporation
is required to give a status certificate
in prescribed form to every person who
requests such certificate and pays the
prescribed fee.

864 LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION

COMMERCIAL REAL ESTATE TRANSACTIONS
Type of clearance When applicable
10. Fire department — Always.
work orders A letter for a search of the records of the local
fire department may require the property
owner’s consent. The Fire Marshal has
discretionary power to inspect any premises
notwithstanding that the inquiry letter only asks
for a search of records.
Send an inquiry letter to the Office of the Fire
Marshall when dealing with nursing homes,
retirement homes, or hotels.
11. Waste disposal Always.
Send an inquiry letter to the clerk of the
municipality to determine whether the property
was used as a waste disposal site and whether
there is any record of sewer use violations, any
spill events, or evidence of the operation of a
landfill or sanitary dump site.
The Ministry of the Environment, Conservation
and Parks also maintains computer database
inventories of waste disposal and PCB storage
sites, waste manifest and generator information,
and an Environmental Bill of Rights registry
containing summaries of proposed and finalized
certificates of approval, directions, and orders
that can be searched.
12. Conservation Always.
authority Send an inquiry letter to the relevant
conservation authority requesting confirmation
of whether the property is within its jurisdiction,
the restrictions that apply, and details of any
outstanding orders or violations.
LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
CHAPTER 64
Relevant legislation
Fire Protection and Prevention Act,
1997, S.O. 1997, c. 4.
ss. 19(1)–(3) — a Fire Marshal, an
assistant to a Fire Marshal, or a fire
chief (collectively referred to as an
“inspector”) may, with or without a
warrant, enter and inspect property for
assessing fire safety at all reasonable
times.
s. 21 — an inspector who carries out
such an inspection may order an owner
or occupant to take any necessary
measure to ensure fire safety on the
property.
ss. 33, 35, and 38(1) — if the person
to whom an order is issued fails to
comply, the inspector may apply to the
Fire Safety Commission for an
authorization to carry out the required
work. The inspector may issue an
order to the property owner to pay the
costs of such work and may instruct
the municipality to recover such costs.
Upon receiving such instruction, the
municipality has a lien for the relevant
amount against the property. Such lien
has priority lien status as described in
s. 1 of the Municipal Act, 2001 and is
added to the tax roll and collected like
taxes.
Environmental Protection Act, R.S.O.
1990, c. E.19.
s. 46 — no use shall be made of land
or land covered by water that has been
used for the disposal of waste within a
period of 25 years from the year in
which such land ceased to be so used
unless the approval of the Minister has
been given for the proposed use.
Conservation Authorities Act, R.S.O.
1990, c. C.27.
s. 28 — an authority can make
regulations to, among other things,
restrict and regulate the use of water
from streams, rivers, etc.; require the
permission of the authority for
interfering with the channel of any
waterway or wetlands; and require the
permission of the authority for
development, if in the opinion of the
authority, the control of flooding,
erosion, dynamic beaches, or pollution
or conservation of the land may be
affected by such development.
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CHAPTER 64 REAL ESTATE

Type of clearance When applicable Relevant legislation

13. Crown patents Deal specific, depending on the size and
significance of the transaction (although practice
varies).
Review the Crown patent to determine what
reservations and conditions were imposed in the
original grant from the Crown. A copy of the
Crown patent for the relevant lands can be
obtained from the Ministry of Natural Resources
and Forestry in Peterborough.
Public Lands Act, R.S.O. 1990, c. P.43.
Most typical reservations (mines and
minerals, white pine trees, etc.) have
been released by statute, but the Act
and predecessor legislation should be
checked to determine whether any
particular reservation is still in effect.

14. Elevating devices — Deal specific.
work orders Always where there are elevators or escalators
on the property.
Send an inquiry letter to the Technical
Standards and Safety Authority (TSSA)
requesting a status report and whether there are
any outstanding work orders. The cost of this
inquiry will depend on how many devices are on
the property.
Technical Standards and Safety Act,
2000, S.O. 2000, c. 16.
s. 6 — the Act requires an
authorization in accordance with the
Act, the regulations, or a Minister’s
Order before operating or otherwise
dealing with any elevating devices.
s. 9 — a director may suspend or
refuse to renew an authorization where
the carrying on of operations under the
authorization poses an immediate
threat to public safety or the safety of
any person.
s. 13 — a director may suspend or
refuse to renew an authorization where
the holder of an authorization is in
default of the following:
(i) the payment of a fee, an
administrative penalty, a cost, or other
charge owing to the Corporation; (ii)
payment of a fine imposed on
conviction for an offence under the
Act; or (iii) an order made under the
Provincial Offences Act.

15. Boilers and pressure Deal specific. Technical Standards and Safety Act,
vessels — work Always where there are boilers or pressure 2000, S.O. 2000, c. 16.
orders vessels on the property. See sections of the Act referred to
Send an inquiry letter to the TSSA requesting under Elevating devices, above.
confirmation that a certificate of inspection has Boilers and Pressure Vessels, O. Reg.
been issued, the date of the last periodic 220/01, made under the Technical
inspection, and whether there are any Standards and Safety Act, 2000.
outstanding orders. s. 5 — no person shall operate or use a
boiler, pressure vessel, fitting, or
piping unless the director has issued a
current certificate of inspection (there
are some exemptions to this
Regulation including systems that are
used exclusively for agricultural uses).

866 LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION

COMMERCIAL REAL ESTATE TRANSACTIONS
Type of clearance When applicable
16. Heritage designation Deal specific.
Send an inquiry letter to the clerk of the
municipality for confirmation of whether the
property is designated, whether any by-law
designating the property has been proposed or
is pending, and whether there is a lien claimed
against the property.
17. Health unit — work Deal specific.
orders Always where there is a food court or
restaurant. In other cases, consider whether
there are other property uses or circumstances
to which the Health Protection and Promotion
Act and its regulations may apply.
Send an inquiry letter to the health department
of the municipality to determine whether there
are any outstanding requirements, work orders,
or deficiencies on file and whether any permits
or approvals have been issued.
Note that the municipality will require the
written consent and authorization of the
registered owner to release this information.
LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
CHAPTER 64
Relevant legislation
Ontario Heritage Act, R.S.O. 1990, c.
O.18.
s. 27 — a register of all properties
designated under the Act within the
municipality shall be kept by the
clerk’s office containing the legal
description of the property, the name
and address of the owner, and a
statement explaining the cultural
heritage value or interest of the
property and a description of the
heritage attributes of the property.
s. 29 — where a municipality intends
to designate a property of cultural
heritage value or interest, notice of
such intention shall be served on the
owner of the property and published in
a newspaper having general circulation
in the municipality.
s. 39 — a municipality may grant a
loan to the owner of a designated
property for the purpose of paying for
the whole or any part of the cost of
alteration of such designated property
on such terms and conditions as the
council may prescribe. The amount of
such loan together with interest may
be added to the tax roll and collected
like taxes and, until payment, is a lien
on the relevant property.
Health Protection and Promotion Act,
R.S.O. 1990, c. H.7.
s. 10(2) — it is the duty of the medical
officer of health for a health unit to
cause food premises, boarding houses,
and lodging houses to be inspected.
s. 13(1) — a medical officer of health
or a public health inspector may by a
written order require a person to take
or to refrain from taking any action
that is specified in the order in respect
of a health hazard.
s. 14 — if the person to whom the
order is issued fails to comply, the
medical officer of health may cause the
actions to be carried out.
ss. 15(2)–(3) — if the costs of such
actions are not paid within 60 days of
demand, they may be added to the tax
roll and collected in the same manner
as taxes.
867
CHAPTER 64
Type of clearance When applicable
18. Development charges Deal specific. Generally applicable only in cases
of new construction.
Confirm whether there is a by-law in force
exempting the relevant property from
development charges.
If not, send an inquiry letter to the building
department of the municipality inquiring as to
either compliance with the registered agreement
or, if there is no agreement, whether a
development charge is payable, how much, and
when it is due.
19. Airport zoning Deal specific. Only if property is subject to
regulations airport zoning regulations registered on title.
These regulations pertain to uses of property
adjacent to airports that are incompatible with
the operation of the airport and/or safety of
aircraft.
While municipalities have been delegated to
handle enforcement of the regulations, there is
not a regulatory body who will respond to a
letter inquiring about compliance. If you are
concerned with the height of a building in
proximity to the airport, you will need to request
that a surveyor provide you with a form of
compliance report.
However, if the property is in proximity to a
military airport, an inquiry letter can be sent to
the Department of National Defence.
868 LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
REAL ESTATE
Relevant legislation
Development Charges Act, 1997, S.O.
1997, c.27.
s. 26 — a development charge is
payable upon the issuance of a
building permit or upon the parties
entering into a subdivision agreement
or consent agreement unless a
development charge by-law provides
otherwise.
s. 26.1 — notwithstanding s. 26, a
development charge in respect of any
part of a development that consists of
a (i) rental housing development that
is not non-profit housing development,
(ii) institutional development, or
(iii) non-profit housing development
shall be paid in equal annual
instalments beginning on the earlier of
the date of the issuance of a permit
under the Building Code Act, 1992
authorizing occupation of the building
and the date the building is first
occupied, and continuing on (a) the
following five anniversaries of that
date in the case of a development
charge in respect of a type of
development set out in (i) and (ii)
above, or (b) the following 20
anniversaries of that date in the case
of a development charge in respect of
a type of development set out in (iii)
above.
s. 27(1) — a municipality may enter
into an agreement with a person who
is required to pay a development
charge for all or any part of a
development charge to be paid before
or after it would otherwise be payable.
s. 32(1) — if a development charge
(including any interest payable in
respect thereof) remains unpaid then it
is added to the tax roll and collected in
the same manner as taxes.
Aeronautics Act, R.S.C. 1985, c. A-2.
COMMERCIAL REAL ESTATE TRANSACTIONS CHAPTER 64

Type of clearance When applicable Relevant legislation

20. Highways Deal specific, depending on proximity of Public Transportation and Highway
(a) King’s Highways property to a King’s Highway or controlled- Improvement Act, R.S.O. 1990,
access highway. c. P.50.
(b) Controlled-
access highways Send a letter to the Ministry of Transportation (a) King’s Highways
(400 series) inquiring as to any breaches of the appropriate s. 34 — a permit is required for (i) the
section of the Public Transportation and Highway construction or alteration of any
Improvement Act and whether the necessary building, fence, gasoline pump, or
permits have been issued. other structure or the placement of
any tree, shrub, or hedge within 45
metres of the highway or 180 metres
of the centre point of an intersection;
(ii) any sign within 400 metres of the
highway; (iii) use of any land within
800 metres of the highway for a
stadium, shopping mall, fairgrounds,
race track, drive-in theatre, or any
other purpose that causes persons to
congregate in large numbers; (iv) the
sale or display of produce, goods, or
merchandise upon the highway; or
(v) the construction or use of any
private road or entrance as a means of
access onto the highway.
(b) Controlled-access highways
s. 38 — a permit is required for (i) the
construction or alteration of any
building, fence, gasoline pump, or
other structure or any road or the
performing of any grading upon or
within 45 metres of the highway or
395 metres of the centre point of an
intersection; (ii) the placement of any
tree, shrub, or hedge within 45 metres
of the highway or 395 metres of the
centre point of an intersection; (iii) the
sale or display of produce, goods, or
merchandise within 45 metres of the
highway or 395 metres of the centre
point of an intersection; (iv) the
erection or alteration of any power,
pole, or other transmission line within
400 metres of the highway; (v) any
sign, notice, or advertising device,
other than one sign not more than
60 cm by 30 cm in size displaying the
name or the name and occupation of
the owner of the premises to which it
is affixed or the name of such
premises within 400 metres of the
highway; (vi) use of any land within
800 metres of the highway for a
stadium, shopping mall, fairgrounds,
race track, drive-in theatre, or any
other purpose that causes persons to
congregate in large numbers; or
(vii) the construction or use of any
private road, entranceway, gate, or
other structure or facility as a means
of access onto the highway.

LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION 869

CHAPTER 64 REAL ESTATE

Type of clearance When applicable Relevant legislation

21. Cemeteries Deal specific. Funeral, Burial and Cremation Services

This is not a precise search, and the records of
the Ministry are not very good.
Send an inquiry letter to the municipality or the
Cemeteries Regulation Unit of the Ministry of
Public and Business Service Delivery if your
client is purchasing an old farm property or
church property that is to be developed or
subdivided.
Act, 2002, S.O. 2002, c. 33.
s. 94 — no person is to disturb a burial
site or artifacts associated with human
remains except on instruction by the
coroner, pursuant to a site disposition
agreement, or in accordance with the
regulations.
s. 95 — any person discovering or
having knowledge of a burial site must
notify the coroner or the police.

22. Fuels Safety Program Deal specific.
Send an inquiry letter to the TSSA requesting
any information on incident reports, fuel oil spills
or contamination, retail facilities, or
underground storage tanks registered at the
property.
Technical Standards and Safety Act,
2000, S.O. 2000, c. 16.
Liquid Fuels Handling Code 2007,
adopted under the Technical Standards
and Safety Act, 2000 as Liquid Fuels,
O. Reg. 217/01.
Fuel Oil Code, adopted under the
Technical Standards and Safety Act,
2000 as Fuel Oil, O. Reg. 213/01.
s. 7(1) — no distributor shall supply
fuel oil to a container or tank system
that is connected to an appliance or
work unless the distributor is satisfied
that the installation and use of the
appliance and work complies with this
Regulation and the distributor has
inspected the appliance or work either
at least once within the previous 10
years or in accordance with a quality
assurance inspection program.
s. 7(4) — no person shall supply fuel
oil to an unregistered underground
tank.
Also note that under the Liquid Fuels
Handling Code 2007 and the Fuel Oil
Code, all underground storage tanks
must be removed within two years of
disuse.

870 LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION

COMMERCIAL REAL ESTATE TRANSACTIONS CHAPTER 64

Type of clearance When applicable Relevant legislation

23. Other environmental Deal specific. Environmental Protection Act, R.S.O.

searches Most searches that can be conducted by a 1990, c. E.19.
lawyer merely provide information maintained in ss. 147 and 150 — where a person
historical government records, are quite costly, fails to comply with an order or
and take considerable time to obtain a response. decision made under the Act, the
The information will generally not provide the Director may cause the necessary work
current state of the property or any potential to be carried out, and the Director may
environmental liability. In addition to the issue an order to pay costs to the
searches already mentioned above, other person who failed to do the work.
possible searches include the following: s. 154(2) — if the person to whom the
— When acting for a lender or a purchaser order to pay costs is issued owns real
regarding an Ontario property, search the property and the Director instructs the
Brownfields Environmental Site Registry to local municipality to recover the costs
determine if a record of site condition has been for things done in connection with that
filed for the property in question or for adjoining property, the municipality has a lien on
lands (since contamination may migrate from the property. Such lien has priority lien
adjoining lands to the subject property). status as described in s. 1 of the
— For federally regulated properties, request Municipal Act, 2001 and is added to
records from Environment Canada under the the tax roll and collected like taxes.
Access to Information Act.
— Search the federal inventory of PCB storage
sites maintained by Environment Canada.
— Search Eco-Log ERIS, an environmental
database and information service company that
for a fee conducts database searches of
environmental and historical records compiled
from government and private source records,
including some information that is not otherwise
accessible directly.
— Request records from the local district office
of the Ministry of the Environment, Conservation
and Parks or Ministry of Labour under the
Freedom of Information and Protection of
Privacy Act. As of 2014, some local district
offices of the Ministry of the Environment,
Conservation and Parks will no longer perform
the searches for the requested records and
instead will provide the lawyer with the
applicable online sources to obtain the
information. Unfortunately there presently is no
consensus within the Ministry as to the proper
form of response and no consistency in the
responses received. The level of search required
will depend on the responses received from the
district office. In cases where the level of search
required (and legal fees) is significant, the client
should be advised of such costs and that it may
be more cost effective for the client to obtain a
Level 1 or a Level 2 environmental assessment
instead.

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CHAPTER 64
24. Navigable waters Deal specific.
If there are structures located in the water such
as boat houses, pump houses, docks, and piers,
conduct the following inquiries:
(a) Send a letter to the Ministry of Natural
Resources and Forestry as owner of the bed of
water inquiring as to whether there is an
approval for the structures located in the water.
(b) Send a letter to the Regional Manager under
the Navigation Protection Program inquiring as
to whether approval was given to the works and
whether there are any outstanding orders
regarding them.
(c) Send a letter to the Department of Fisheries
and Oceans, Fish Habitat Management Program
inquiring as to whether approval was given to
the works and whether there are any
outstanding orders regarding them.
872 LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
REAL ESTATE
Beds of Navigable Waters Act, R.S.O.
1990, c. B.4.
s. 1 — where land that borders on a
navigable body of water or stream has
been granted by the Crown, title to the
bed of the body of water or stream did
not transfer to the grantee in the
absence of an express grant.
Public Lands Act, R.S.O. 1990, c. P.43.
s. 24(4) — the Crown is the owner of
all structures placed or left without
authority on public lands.
Canadian Navigable Waters Act, R.S.C.
1985, c. N-22.
The Act was declared in force on
April 1, 2014, and replaces the
Navigable Waters Protection Act.
s. 5(1) — an owner who proposes to
construct, place, alter, repair, rebuild,
remove, or decommission one of the
following works may do so if the work
or its construction, placement,
alteration, rebuilding, removal, or
decommissioning would not interfere
with navigation and the owner, before
beginning the construction, placement,
alteration, rebuilding, removal, or
decommissioning, deposits any
information specified by the Minister in
any place specified by the Minister and
publishes a notice in any manner and
including any information specified by
the Minister:
(a) a major work in, on, over, under,
through, or across any navigable
water; or
(b) a work—other than a minor work—
in, on, over, under, through, or across
any navigable water that is listed in
the schedule.
Fisheries Act, R.S.C. 1985, c. F-14.
s. 35 — no person shall carry on any
work, undertaking, or activity that
results in the harmful alteration,
disruption, or destruction of fish
habitat, unless such work,
undertaking, or activity is
contemplated in the exceptions set out
in s. 35(2) of the Act.
s. 37 — the Minister has the authority
to modify, restrict, or prohibit any
work, undertaking, or activity that is
likely to result in the death of fish, in
the harmful alteration, disruption, or
destruction of fish habitat, or in the
deposit of a deleterious substance in
water frequented by fish or in any
place under any conditions where that
deleterious substance or any other
deleterious substance that results from
the deposit may enter any such
waters.
COMMERCIAL REAL ESTATE TRANSACTIONS
Type of clearance When applicable
25. Railway mortgages Deal specific.
When dealing with lands that have at any time
been owned by a railway company, a search of
the records of the Registrar General should be
conducted to verify that there are no mortgages
that affect the property.
26. Personal property Deal specific. Consider a Personal Property
security Security Act (PPSA) search if a fixture may be
the subject of a security interest under s. 34 of
the PPSA.
When dealing with a transaction that also
involves the acquisition of personal property,
conduct a standard PPSA search.
27. Bankruptcy/insolvency Deal specific. The search is not necessary prior
to a trustee-in-bankruptcy registering a notice
on title but is customary as part of the due
diligence process in large commercial
transactions.
Conduct a name search with the Office of the
Superintendent of Bankruptcy.
28. Septic tank/sewage Deal specific.
systems For all systems installed after April 6, 1998,
send an inquiry letter to the building department
of the municipality requesting confirmation that
a permit was issued and inspections completed.
For all systems installed before April 6, 1998,
send an inquiry letter to the local office of the
Ministry of the Environment, Conservation and
Parks.
LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
CHAPTER 64
Relevant legislation
Canada Transportation Act, S.C. 1996,
c.10.
s. 104 — a mortgage or hypothec
issued by a railway company deposited
in the office of the Registrar General
and published in the Canada Gazette
does not need to be registered under
any other law or statute affecting real
or personal property.
Personal Property Security Act, R.S.O.
1990, c. P.10.
Bankruptcy and Insolvency Act, R.S.C.
1985, c. B-3.
Building Code Act, 1992, R.S.O. 1992,
c. 23.
Building Code, O. Reg. 332/12, made
under the Building Code Act, 1992.
Part 8 applies to all sewage systems
constructed after April 6, 1998.
A permit is required from the building
department, inspections are required
during the course of construction, and
a final inspection must be made.
873
CHAPTER 64
Type of clearance When applicable
29. Wells/water works Deal specific.
Send an inquiry letter to the Ministry of the
Environment, Conservation and Parks requesting
a copy of the well record. Include a request for
confirmation as to whether any order to pay
costs has been issued in respect of work on the
property.
To test for the potability of the water, a water
sample should be delivered to the local health
unit for testing.
If you are dealing with a water system to which
the Safe Drinking Water Act, 2002 applies,
include a request for information concerning
outstanding work orders and instructions to
recover costs.
874 LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
REAL ESTATE
Relevant legislation
Ontario Water Resources Act, R.S.O.
1990, c. O.40.
ss. 83–84 — where a person fails to
comply with an order or decision made
under the Act, the Director may cause
the necessary work to be carried out,
and the Director may issue an order to
pay costs to the person who failed to
do the work.
s. 88(2) — if the person to whom the
order to pay costs is issued owns real
property and the Director instructs the
local municipality to recover the costs
for things done in connection with that
property, the municipality has a lien on
the property. Such lien has priority lien
status as described in s. 1 of the
Municipal Act, 2001 and is added to
the tax roll and collected like taxes.
Safe Drinking Water Act, 2002, S.O.
2002, c. 32 and its regulations.
This Act contains testing requirements
and water treatment standards that
must be met if the well services
multiple properties. The Act gives
powers to directors and provincial
officers designated under the Act to
inspect properties and make orders in
connection with the purposes of the
Act.
s. 122 — if the Director issues a notice
of emergency response to an imminent
drinking water health hazard or
appoints an interim operating authority
for a drinking water system, the
Director can issue an order to pay
costs to the owner of the drinking
water system if the system is not
abandoned or to prescribed persons if
the system has been abandoned.
ss. 124(1)–(2) — the Director may
instruct a municipality to recover
amounts specified in an order to pay
costs if (a) the person to whom the
order is directed owns land in the
municipality, and (b) the drinking
water system or part thereof is located
in the municipality. If such instruction
is issued, the municipality has a lien
for the amount specified on all land in
the municipality owned by the person
to whom the order to pay costs is
directed, and the specified amount is
deemed to be municipal taxes and is
added to the tax roll and collected in
the same way and with the same
priorities as municipal taxes.
Similar provisions apply to land in a
territory without municipal
organization.
COMMERCIAL REAL ESTATE TRANSACTIONS CHAPTER 64

Type of clearance When applicable Relevant legislation

30. Improvements under Deal specific. Drainage Act, R.S.O. 1990, c. D.17.
the Drainage Act Send an inquiry letter to the clerk of the s. 22 — lands, roads, buildings,
municipality when the property is not serviced utilities, or other structures that are
by municipal storm sewers. increased in value or that are more
easily maintained as a result of the
construction, improvement,
maintenance, or repair of drainage
works may be assessed for benefit.
s. 61(1) — a municipality that is
required to raise the whole or any part
of the cost of drainage works shall by
by-law impose upon the land assessed
for the drainage works the assessment
with which it is chargeable, and the
amount so imposed is payable in such
instalments as the council may
prescribe.
s. 61(4) — the assessments imposed
under the Act have priority lien status
as described in s. 1 of the Municipal
Act, 2001 or s. 3 of the City of Toronto
Act, 2006, S.O. 2006, c. 11, Sch. A, as
the case may be.

31. Weed control Deal specific.
Send an inquiry letter to the municipality for
information on whether an order to destroy
weeds has been issued and, if so, whether it has
been complied with or whether there are any
outstanding amounts due to the municipality.
Weed Control Act, R.S.O. 1990,
c. W.5.
s. 13(1) — an inspector who finds
noxious weeds or weed seeds may
order the person in possession of the
lands to destroy them.
s. 15(1) — if the order is not complied
with, then the inspector can cause the
weeds to be destroyed in the
prescribed manner.
s. 15(3) — the municipality may send
notice to the owner and the person in
possession of the land requesting
payment of expenses associated with
the destruction of the weeds.
ss. 15(5)–(6) — if the expenses are
not paid within 15 days, the amount
paid by the municipality for the
destruction of the weeds is added to
the tax roll for the property and
obtains priority lien status.

32. Alcohol and Gaming Deal specific. Liquor Licence and Control Act, S.O.
Commission of Applies to premises for which a liquor licence 2019, c. 15, Sch. 22.
Ontario has been issued. s. 2 — no person shall keep for sale,
Send an inquiry letter to the Alcohol and Gaming offer to sell, or sell liquor except under
Commission of Ontario to confirm that no notice the authority of a licence or permit.
to refuse, revoke, or suspend the liquor licence
has been issued.

33. Workplace Safety and Deal specific. Applies in connection with the Workplace Safety and Insurance Act,
Insurance Board acquisition of a business. 1997, S.O. 1997, c. 16, Sch. A.
Send an inquiry letter to the Board requesting a s. 146 — a purchaser is liable for all
clearance certificate. obligations owing by an employer who
disposes of all or part of the
employer’s business.

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CHAPTER 64
Type of clearance When applicable
34. Ontario Labour Deal specific.
Relations Board — Send an inquiry letter to the Board requesting
work order information as to any outstanding work orders.
35. Niagara escarpment Deal specific.
If the property lies within the control of the
Niagara Escarpment Commission, send a letter
to this Commission requesting confirmation as to
what restrictions and regulations pertain to the
property and verification that a permit has been
issued or that development was exempt.
36. Mining property Deal specific.
In the case of mining land or mining rights, an
inquiry letter should be sent to the Ministry of
Northern Development and Mines requesting a
tax certificate.
37. Greenbelt property Send an inquiry letter to the local municipality to
confirm (a) whether the land is located in a
Greenbelt area pursuant to the Greenbelt Act,
2005; and, if applicable (b) the permitted uses
under the Greenbelt area; (c) whether the land
complies with the relevant regulations; and
(d) whether any changes have been made to the
official plan and the new designation under the
official plan.
876 LAW SOCIETY OF ONTARIO: NOT TO BE USED OR REPRODUCED WITHOUT PERMISSION
REAL ESTATE
Relevant legislation
Occupational Health and Safety Act,
R.S.O. 1990, c. O.1.
s. 57(1) — an inspector may issue an
order where there is non-compliance
under this Act.
Niagara Escarpment Planning and
Development Act, R.S.O. 1990, c. N.2.
s. 14 — municipal zoning by-laws have
no effect in the area of development
control designated under this Act.
s. 24(3) — no building permit, work
order, certificate, or licence that
relates to development shall be issued
with respect to land within an area of
development control unless the
development is exempt or a permit has
been issued.
Mining Act, R.S.O. 1990, c. M.14.
s. 79(2) — the owner of surface rights
in land on which mining activities are
conducted is entitled to compensation
for damages sustained to the surface
rights.
s. 79(6) — the compensation is a
special lien upon any mining claim or
mining lands, as the case may be, and
no prospecting, mining claim
registration, or performing of work,
except by leave of the Tribunal, shall
be done by any person after the time
fixed for the payment or securing of
the compensation, unless the
compensation has been paid or
secured as directed.
Part XIII — ss. 186–203 provide for
assessment of taxes on mining lands
and mining rights. Pursuant to s. 200,
all taxes, penalties, and costs payable
under this Part constitute a special lien
on the lands or mining rights against
which the tax is levied in priority to
every claim, privilege, lien, or
encumbrance of any person.
Greenbelt Act, 2005, S.O. 2005, c.1.
The Act governs the use, development,
and protection of certain lands
designated as greenbelt areas,
including the Oak Ridges Moraine
Conservation Plan Area, the Niagara
Escarpment Plan Area, the Protected
Countryside Area, and certain areas of
the Parkway Belt West.
COMMERCIAL REAL ESTATE TRANSACTIONS CHAPTER 64

Type of clearance When applicable Relevant legislation

38. Growth matters Send an inquiry letter to the local municipality to Places to Grow Act, 2005, S.O. 2005,
confirm (a) whether the land is located in a c.13.
growth plan area pursuant to the Places to Grow The Act applies to the geographic
Act, 2005; and, if applicable (b) the permitted areas designated for growth in Ontario.
uses under the growth area plan; (c) whether
the land complies with the relevant regulations;
and (d) whether any changes have been made
to the official plan and the new designation
under the official plan.

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1. Introduction
A commercial leasing matter has attributes of both a
contract negotiation (a lengthy document with many
issues to be settled) and a commercial transaction (a
variety of stages that move to an end result). The file will
need to be organized to reflect both characteristics.
Another duality of commercial leasing is that both
contract law and property law concepts apply. This was
made clear in the leading case of Highway Properties Ltd.
v. Kelly, Douglas and Company Limited, where the
Supreme Court of Canada recognized that it was no longer
sensible to pretend that a commercial lease was simply a
conveyance and not also a contract.
On the property law side, there are rights in a lease that
run with the land, such as the right of the landlord to
collect rent, the right of the tenant to quiet enjoyment, and
rights of assignment and sublease in favour of the tenant.
On the other hand, some lease covenants are contractual
only and do not run with the land. These are typically
special rights that have been negotiated by the tenant,
such as expansion rights, rights to parking, tenant
inducements, and exclusive-use rights.
The fact that a lease is an interest in land distinguishes it
from a licence. A lease creates property rights that are
defensible against third parties. A licence is a contract that
binds only the named parties and does not run with the
land. The real property concepts applicable to leases do
not apply to licences. Where less than full property rights
are intended, licences are often used, such as for granting
rights for storage areas, kiosks in malls, and rooftop areas.
When acting in this area, lawyers will need to be familiar
with both the extensive common law that is applicable to
commercial leases as well as the various statutory
provisions found in the Commercial Tenancies Act and
various other statutes.
2. Basic legal requirements
2.1 Certainties required for a valid lease or
agreement to lease
To be a valid lease or agreement to lease there must be
agreement and certainty as to the parties (the landlord
and tenant, as well as any guarantor or indemnifier), the
premises to be leased, the commencement and duration of
the term, the rent, and all material terms of the contract
not incidental to the relation of landlord and tenant.
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Commercial leasing
The commencement date and term must be either fixed or
ascertainable. It is common for a lease to provide for a
commencement date based on a future event, such as
completion of the building by the landlord. In these types
of transactions, it is useful to consider some outside date
after which the deal aborts, or else there is a risk of the
parties having to wait indefinitely (and also the risk of the
agreement being held to be void or voidable due to the
uncertainty).
The first five requirements (parties, premises,
commencement date, term, and rent) are invariable
requirements. Whether the sixth requirement is
applicable depends on the circumstances. Where either
party has raised an issue that is important to it and that is
not a normal incident of a landlord and tenant
relationship, there must be agreement on the matter for
there to be a valid lease or agreement to lease.
In Ossory Canada Inc. v. Wendy’s Restaurants of
Canada, the Court of Appeal for Ontario noted that the
sixth item on the list of requirements for a binding
agreement to lease includes matters that either party
raises as important. In this case, matters of the garbage
enclosure and pylon sign were important to Wendy’s, and
that importance had been communicated to the landlord.
Accordingly, there could be no concluded contract until
agreement was reached with respect to those points.
Other cases have shown material terms requiring
agreement can include whether there is an obligation to
pay by postdated cheques, whether a personal guarantee
is to be provided, what liability insurance coverage is
required, the lack of a clear definition of available parking,
the rental rate in the overholding clause, the prohibition
on change of use in a sublease, the relocation right in
favour of the landlord, the landlord’s right to terminate in
lieu of granting consent to an assignment or sublease, and
the landlord’s right of early termination.
These cases show the importance of fully documenting any
preliminary agreement regarding the lease of premises.
The failure to deal with all material terms could result in a
determination that there was in fact no agreement
reached.
2.2 Statute of frauds
A lease or agreement to lease must generally be in writing
pursuant to ss. 1–2 of the Statute of Frauds. However,
there is no requirement that the agreement to lease be a
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