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LAW 703 - Class Notes Lecture 1 - Intro; Buying and Selling Real Estate Legal System ● ● ● ●

Common Law System (Except Quebec) Common Law = Statute Law + Common Law Statute Law - government made law Common Law - court made law

Public Law vs.Private Law ●

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Public Law ○ Constitutional law ○ Criminal Law ○ Tax ○ Administrative Private Law ○ Tort Law ○ Contract Law ○ Property

Hierarchy of Law 1. The Constitution 2. Legislation 3. Courts ● ●

Interpret & apply Constitution & legislation Create & apply “common law” (court-made law)

The Constitution ●

Division of Powers ○ Which level of government has jurisdiction over real estate? ■ Provinces in 1867 given constitutional power to create laws for property ○ S. 91 -- Federal ■ Banks ■ Money ■ Criminal Law ■ Taxation ■ Bankruptcy and insolvency ■ Patents and copyrights ■ International and interprovincial trade and commerce ■ Etc. ○ S. 92 -- Provinces

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■ Property rights ■ Civil rights (e.g. contract, torts) ■ Taxation ■ Corporations with provincial objects ■ Municipalities ■ Administration of justice ■ Matters of a merely local or private nature in province ■ Etc. ○ Conflicts/ Disputes ■ Conflicts/disputes arise between different levels of government over real estate ● Federal vs provincial ● Municipality vs. province ● City of toronto wants new revenue generation tools ● Building and financing affordable housing ● Airports ● Waterfront development ● Waterways ● Etc. Charter of Rights & Freedoms ○ Protect basic rights and freedoms ■ Fundamental rights, democratic rights, legal rights, mobility rights, equality rights, official languages,etc. ○ S.2 - everyone has the following fundamental freedoms: ■ Freedom of conscience and religion ■ Freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication ■ Freedom of peaceful assembly; and ■ Freedom of association ○ s.15(1) every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and , in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability ○ No property rights (to own and enjoy property) in the Charter ○ Therefore, government can regulate real estate ■ Regulate development (e.g. zoning, planning, subdividing) ■ Regulate resource industries ■ Protect environment ■ Restrict foreign ownership ■ so , real estate is predominantly governed by the provinces ■ No property or economic rights in the Charter therefore governments can restrict property rights

Jurisdiction & Authority over Real Estate ● ● ● ●

Provincial statutes (some federal statutes can impact on real estate) Court decisions Municipalities Provincial Delegated Authorities (Examples) ○ TARION

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○ Real Estate Council of Ontario ○ Condominium Authority Provincial Tribunals (examples) ○ Residential landlord & tenant board ○ Condominium tribunal ○ Assessment review board ○ Ontario municipal board

Examples of Government Intervention in Public Interest ● ● ● ● ● ● ● ● ● ●

Crown patent Expropriations Public easements Fire regulation Building code Criminal code Family law act Planning act Assessment act Environmental protection act

Real Estate: Estates and Interests ● ●

ESTATES in Land INTERESTS in Land

Brief History of Real Estate ● ● ● ● ● ● ● ● ●

Year 1066 Feudal (loyalty) system King 1500 Barons Barons sub-lease to Lords Quia Emptores (1290) - free alienation (without having to pay a fee to Lord) of rights in real estate while alive Statute of Wills (1540) - free to pass on rights in real estate to heirs upon death Statute of Tenures (1660) - pay rent instead of providing services 2 Fundamental Property Concepts recognized and enforced by law: ○ Crown (i.e. government) owns all land ○ Real property is a bundle of rights & obligations

Real Estate ●

“Bundle of Rights” to: ○ Land and anything attached to it ○ Air space to a reasonable height ○ Below surface to a reasonable depth

Estates and Interests ● ●

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Estates and interests in real estate - right(s) that a person can enforce with respect to a particular piece of land Important distinction b/n: ○ Contract - only pertains to the parties to the contract ○ Estate and interests in land - your right(s) can be enforced against anyone Estates (Possessory Rights In Land) Interests (Limited and Particular Rights (not exclusive possession) to land)

Estates ● ●

Exclusive right to possess land for a period of time 3 Types: ○ Fee simple estate ■ Package of rights ● Largest bundle of rights (but not absolute) ● For an indefinite time period ● Exclusive possession and use ● Right to benefits from land ● Right to dispose of it (i.e. sell it; gift it; pass on to heirs) ● Right to lease it ● Generally right to use or abuse it ■ Limitations on rights ● Cannot commit torts (e.g. occupiers liability, nuisance, rule in Rylands v. Fletcher) ● Subject to laws and regs ○ Zoning and planning regs ○ Environmental laws ○ Etc. ● Subject to expropriation ○ (i.e. government has right to take your bundle of rights) ○ Life estate ■ Package of rights ● Exclusive possession and use for a designated “life: but cannot commit “act of waste” ● Profits ● Lease (but cannot exceed life estate) ● No obligation to spend $ to keep building in good condition ● No right to dispose of real prop. Upon death ■ Limitations on rights ● Cannot commit torts ● Subject to laws and regs ● Subject to expropriation ○ Leasehold estate ■ Package of rights ● By contract landlord agrees to grant a tenant exclusive possession of the prop. For a specific period of time ● Contract can limit tenant’s rights ● Note: residential tenancies have been significantly modified by provincial statute ■ Limitations on rights

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● Cannot commit torts ● Subject of laws and regs ● Subject to expropriation Statute of Frauds (Ontario) ● Lease for a term greater than 3 years must be in writing to be enforceable ● An oral lease for term 3 years of less is enforceable (if you can prove it exists)

Interests ● ●

Limited and particular rights to land (but does NOT include exclusive possession 4 Types: ○ Easement ■ Package of rights ● Dominant tenement (DT) ○ Land that benefits ● Servient Tenement (ST) ○ Land that has/have burden ● DT has right to use ST land in a stipulated way ○ Example: holder of DT has right to walk or drive across ST ● “Runs with the land” ■ Limitations on rights ● Cannot commit torts ● Subject of laws and regs ● Subject to expropriation ○ Restrictive Covenant ■ Package of rights ● Dominant tenement (DT) ○ Land that benefits ● Servient Tenement (ST) ○ Land that has/have burden ● ST cannot be used in a particular way (i.e. negative covenant) which thereby benefits the DT ○ Example: ST shall not be used for commercial or industrial uses ● “Runs with the land” ■ Limitations on rights ● Cannot commit torts ● Subject of laws and regs ● Subject to expropriation ○ Profit a Prendre ■ Package of rights ● Right to take something valuable away from another person's land ● Applies to minerals or other natural things (e.g. blueberries, moose, trees) ● No automatic right to the things ○ So things do not belong to you until you actually harvest them ● No DT nor ST ■ Limitations on rights ● Cannot commit torts ● Subject of laws and regs ● Subject to expropriation ○ Mineral Lease

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Package of rights ● Allows 1 person to extract and retain minerals from another’s land ○ Mineral - virtually every substance contained in the ground ● ML is usually granted by the government ● ML implies access and occupancy rights (i.e. a small area for the purpose of extraction) ● No DT nor ST Limitations on rights ● Cannot commit torts ● Subject of laws and regs ● Subject to expropriation

Important Concept - “Running with the Land” ●

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Runs with the land ○ Fee simple estate ○ Life estate ○ Leasehold estate ○ Easements ○ Restrictive covenants ○ Profit a prendre ○ Option to purchase Does not run with land ○ License ○ Contracts ○ Right to first refusal

Land Registration Systems ● ● ●

Different “estates” and “interests” (e.g. fee simple, easement, restrictive covenants, lease, etc.) may exist at the same time in the same parcel of land Land registration system documents the existence of estates and interests in land, and creates a priority system 2 Types of Registration Systems in Ontario: ○ Registry system (older system) ■ Opportunity to inspect and evaluate documents that may affect real property ■ 40 year title search ■ Government does not guarantee registered docs are valid ■ Satisfy yourself of a good “chain of title” ■ Priority determined by the time of registration ○ Land Titles System ■ Better system ■ Government “guarantees” validity (subject to certain exceptions) of documents registered ■ indefeasibility - with few exceptions, documents registered cannot be defeated ■ Priority determined by the time of registration

Land Titles System -- 3 Principles ●

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Mirror ○ In general, all interests listed in Certificate of Title (“C of T”) reflect valid interets ○ Tells the whole story of the property Curtain ○ Only valid interests are listed in the C of T ○ No need to look ‘behind the curtain’ (i.e. C of T) Insurance ○ A person who suffers a loss due to an error in C of T is entitled to compensation ■ Government saying all info is correct, and if someone relies on that info, they receive compensation ○ Assurance Fund

Priorities - Land Titles Act ●

S. 78(5) - subject to ny entry to the contrary in the register and subject to this Act, instrument registered in respect of or affecting the same estate or interest in the same parcel of registered land as between themselves rank according to the order in which they are entered in the register and not according to the order in which they were created, and , despite any express, implied or constructive notice, are entitled to priority according to the time of registration. R.S.O. 1990, c. L.5, s. 78(5) ○ Priority is determined based off time of registry

Unregistered Interests in LTS ● ●

C of T is not entirely indefeasible Titleholder is subject to: ○ Exceptions in s.44 LTA ■

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examples - short term leases, prescription, adverse possession, unpaid taxes, public easements, unpaid execution judgement creditors

Fraud Actual notice of unregistered interest

Controls on Subdivision of Land ●

Section 50 Planning Act (Ontario) ○ No person shall convey land by way of a deed or transfer, or grant, assign or exercise a power of appointment with respect to land, or mortgage or charge land, or enter into an agreement of sale and purchase of land or enter into 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 unless, ■ (a) the land is described in accordance with and is within a registered plan of subdivision; ■ (b) the grantor by deed or transfer, the person granting, assigning or exercising a power of appointment, the mortgagor or chargor, the vendor under an agreement of purchase and sale or the grantor of a use of or right in land, as the case may be, does not retain the fee or the equity of redemption in, or a power or right to grant, assign or exercise a power of appointment in respect of, any land abutting the land that is being conveyed or

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otherwise dealt with other than land that is the whole of one or more lots or blocks within one or more registered plans of subdivision;.... ■ (f ) a consent is given to convey, mortgage or charge the land, or grant, assign or exercise a power of appointment in respect of the land or enter into an agreement in respect of the land Chapter 12 - s.50 Planning Act

Buying and Selling Estates and Interests in Real Estate ● ● ●

Risk Management Agreement of Purchase and Sale (“APS”) Use of Professionals (e.g. real estate agent; building inspectors; mortgage brokers; surveyors; appraisers; lawyers; environmental consultants;)

Chapter 1 - Real Estate Transaction Initial Stages of the Transaction ●

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Real estate agent ○ Seller’s listing agreement (i.e. seller’s representation agreement) ○ Buyer’s representation agreement ○ Multiple representation (buyer and seller) Seller property information statement

Oral Contracts & Statute of Frauds ●

Section 4, Statute of Frauds (Ontario) ○ No action shall be brought...to charge any person upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them, unless the agreement upon which the action is brought, or some memorandum or not thereof is in writing and signed by the party to be charged therewith or some person thereunto lawfully authorized by the party ○ Contracts for sale of land must be in writing and signed (s.4 Statute of Frauds) ○ Exception: Doctrine of Part Performance ■ Deglman v. Guaranty Trust (1954) SCC - 5 Elements for Doctrine of Part Performance ○ Allege oral contract; ○ Show part perf. of alleged contract by person alleging contract; ○ Show detriment to person alleging contract by part perf.; ○ Show part perf. Is preferable and consistent with alleged contract for land; and ○ Rove contract by parol evidence, part perf, and any other means ■ parol evidence rule prevents the introduction of evidence of prior or contemporaneous negotiations and agreements that contradict, modify, or vary the contractual terms of a written contract when the written contract is intended to be a complete and final expression of the parties' agreement. ● Nephew lived in aunt’s home for 6 months

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Aunt died. Nephew claims aunt orally promised an investment property if he did chores and ran errands for her ● DECISION: court did not approve; doctrine does not apply; chores weren’t connected to the land Taylor v Rawana (1990) O H Ct. ● Oral agreement between 2 friends ● Agreed on price, down payment and closing ● Buyer and his wife moved into house and started renovating it ● Seller argues no contract based on s.4 Statute of Fraud ● DECISION: court agreed with buyer; part performance was renovations Erie Sand & Gravel Ltd. v Tri-B Acres Inc. (2009) ONCA ● Series family owns three properties and sold it off; sold north east property to Erie Sand; sold north west to Tri-B (negotiated for right of first refusal on south east) ● Erie wants south east property as they are connecting properties ● Erie presented offer of 1.2M and deposit of 1.2M ● Tri-B said they’ll give a lower deposit upfront and change of closing date ● Seres ad Tri-B created a new agreement and accepted Tri-B terms ● DECISION: Erie wins on appeal because courts said Erie satisfied doctrine of part performance, even though it doesn’t satisfy SCC rules

“Ad Idem” ● ●

Ad idem - all essential terms must be agreed upon between the parties for an enforceable contract Essential terms - are what the parties consider to be essential terms ○ Hunter v Baluke (1998) O Gen Div ■ Gretzky’s buying a Muskoka cottage ■ All terms had been settled between parties except the term regarding possession of the boat house ■ B proposed an amendment in writing regarding the boat house ■ S did not sign the amendment ■ S assert that there is no enforceable APS ■ DECISION: ● ● Ad idem ● Doctrine of part performance

Mental Incompetence ● ●

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A contract may not be enforceable if one of the parties was mentally incompetent or drunk or otherwise lack capacity Test: party trying to avoid contract due to MI must prove: ○ He/she was MI; and ○ Other party to the contract had actual or constructive knowledge of MI Browser v Prager (1999) OSCJ ○ S had been involuntarily committed to a psychiatric hospital for delusional disorder and mixed personality disorder. 2 months later released. S was on medication ○ No one involved in the transaction was aware of S’s medical history nor condition

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At time of sale the medical evidence showed that S was suffering from depression and mental illness ○ B and S sign APS ○ S does not want to complete transaction ○ DECISION: ■ No sign that he knew there was MI; contract was valid York Condo Corp #301 v James (litigation Guarding of) 2014 ONSC ○ A unit owner was being violent, harassing and exhibited inappropriate conduct ○ Unit owner was arrested under the Mental Health Act ○ Unit owner was released about 1 month later and was on medication ○ Condo corp. Seeks a court order to force the unit owner to sell unit and move out ○ DECISION: ■ Condo Corp wins; owner must be evicted

Duty to Bargain in Good Faith ● ●

No duty to negotiate a contract in good faith Each party pursues his/her own self-interest ○ Peel COndo Corp 505 v Cam-Valley Homes Ltd. (2001) OCA ■ Approved to build 5 high rise condos ■ Marketed as “woodland community with an outdoor recreational area at its centre nestled among trees” (Ora Lands) ■ One condo tower was built but the others cancelled due to change in the market ■ Developer decided to keep ORA Lands and build townhouses on it ■ The condo documents stated that the developer had the option to keep and developed the ORA Lands ■ Buyers sue developer ■ DECISION: ● Does a developer owe a fiduciary duty to buyers? ○ No ● Does a developer have a duty of good faith to buyers during negotiations? ○ No; they had the option to do it but did not have to do it ○ Bhasin v Hrynew 2014 SCC ■ Good faith contractual performance is a general organizing principle of the common law of contract which underpins and informs other rules (e.g. honesty, candor, reasonable performance) ■ In all contract there is a common law duty to act honestly in the performance of the contract ■ Note: Good faith is not the higher duty of fiduciary. Good faith does not impose loyalty or to put the interests of the other party first

Illegality ● ●

Illegality as to contract formation vs. illegality as to performance of a contract Beer v Townsgate I Ltd. (1997) OCA ○ Builder enters into APS to sell new home ○ ONHWPA states that a builder cannot sell homes ○ Builder was not registered at time of APS ○ Beer sues -- wants APS declared void of illegality

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DECISION: ■ Because registered later, he was able to perform; happened before closing ■ Contract is valid

Letter of Intent ● ●

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What if parties settle all the essential terms but a formal detailed agreement was not concluded? General Guidelines ○ Courts will not enforce “agreements to agree” ○ When parties have agreed on all essential terms and have agreed to finalize agreement later, there is a binding contract ○ When parties have agreed on all essential terms but make it clear there is not contract until a formal agreement is entered into, there is no binding contract Caution re: Letters of Intent ○ Substance over form ○ Post - “Letter of Intent” conduct ○ Wallace v Allen, 2009 (ONCA)

Lecture 2 - Real Estate Agency Relationship (Ch. 2) Real Estate Agency Relationship ● ● ●

CREA - Canadian Real Estate Association - trade association; not regulator body Ontario Government created Real Estate Council of Ontario → regulatory body that issues licenses to real estates agents; als controls discipline Real Estate and Business Brokers Act, 2002 ○ “Brokerage” The firm ○ “Broker” - a person or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed ○ “Real estate” - includes leasehold interests and businesses and fixtures, stock in-trade and goods connected with the operation of a business ○ “Registrant” - includes brokerage, broker, sale...