Real estate midterm 1 notes PDF

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Notes for chapters on midterm 1...

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Interests in Real Estate -

Registry system - do your own research, no government guarantee Land title system- 3 principles, government guarantee S.78 Land titles act: Registered interests in the same piece of land or property will rank based

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on the order in which they were registered Certicate of title is not completely indefeasible- s.44 of the LTA exceptions, fraud, knowledge

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of unregistered interest S.50 Planning Act: no person shall convey land that is valid for more than 21 years unless it is in accordance with a registered plan of subdivision, consent is given, they do not retain an interest or equity of redemption in the land

Initial stages of a transaction -

The seller would enter into a seller listing agreement for a real estate agent to represent them

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They would put a listing up and an interested buyer who may have entered into a buyer representation agreement to have an agent help them If the buyer is interested, they would enter into an APS. The seller does not need to disclose all

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information regarding the house so it is important to draft conditional provisions into the contract or ask for a SPIS -

The seller need not provide one or say anything but it they do then what they say needs to be truthful and complete or else it would count as a misrep

Statute of frauds -

S. 4: No action will be brought unless the contract is in writing and signed by the party to be charged (unless doctrine of part performance can be proved)

Doctrine of Part Performance Deglman case- SCC 1. 2. 3. 4. 5.

Alleged oral contract Part performance by the person alleging the contract They suered a detriment The part performance is referable and consistent will alleged contract for the land Prove contract by parol evidence

Ernie Sand Case- Ontario court of appeal 1. Prove oral contract 2. Part performance by either party (paying a deposit does not count as part performance)

3. Show detriment to person alleging the contract by part perf (loss of the land can count as a detriment) 4. Referable and consistent with contract for land Ad Idem -

all essential terms must be agreed upon b/n the parties for an enforceable contract What is essential will be determined of a subjective case by case basis of what the parties consider to be essential terms

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Hunter case- disagreement on the cottage

Mental Incompetence -

A contract may not be enforceable if one of the parties was mentally incompetent or drunk or

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otherwise lack capacity The party trying to avoid the contract must prove that they were mentally incompetant at the time and that the other party knew or should have known of it

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Browser case- he was MI but it was not known or to the point that it should have been known York condo case- owner of condo forced to sell due to inappropriate behaviour and breach of condo rules, no other remedy would have been sucient

Duty to Bargain in Good faith -

No duty to negotiate a contract in good faith, parties pursue their own interests Peel condo corp case- States that a developer does not have a duty of good faith to buyers

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during negotiations or a duciary duty Bhasin case- duty to act honestly and in good faith once there is a contract, GF is not the higher duty of a duciary. GF does not impose loyalty or to put the interests of the other party rst

Illegality - Illegality as to contract formation vs. performance (okay if it is possible to x before the closing -

of the deal) ONHWPA states that a builder cannot sell homes before the builder is registered. In the case the builder was not registered and entered into the contract. Before the deals closed, the builder registered and the courts concluded in the favor of the builder

REBBA - S.4- must be registered to trade in real estate

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S.5- exemptions to registration S.9- no action for commission will be brought if the person is not registered or exempt

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S. 34- no ashing information or a document related to a trade in real estate S.35- no furnishing false info S35.1- so registrant shall while acting on behalf of someone say there is an oer when there is

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no written oer or there is no oer in writing S. 35.1.2- retain records from a certain period of time

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S.35.1.3- inquiry from the registrar to check how many written oers a seller has received for the purchase of that property S.37/38- regarding false advertising Pg 159- RECO code of ethics S.32.2(b) Registrant shall disclose in writing all facts within their knowledge that would aect the value of the real estate

Triggering event for the payment of commission -

The contract will contain the clause Clause 2 of the SLA(standard orea form)- commission will be paid after any valid oer made so

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even if the sale doesn’t close, commission is still owed, not conditional on the sale Holdover clause- If the house is sold to someone in a certain number of days who was introduced by the agent during the listing period after the agreement has expired, the agent still gets the commission or the dierence between their commission and the new agent

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Same applies for the buyer agreement and there may be a representation clause where the seller pays for part of the buyers commission

Multiple representation agreement -

When one brokerage rm represents both the seller and buyer (doesn’t have to be the same

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agent) Inform both the seller and the buyer and get signed written consent from both parties for there to be a multiple representation agreement

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Disclose to the parties that there is a multiple representation, describe what services will be oered to the parties and how they dier and get signed written consent from the parties involved

Duties of the agent/principal 1. Contractual duties - Fulll the terms of the contract

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Act with care and diligence of a reasonably prudent agent

2. Tortious duties - Do not misrepresent - Misrep that is not in APS but is material & was relied upon by the other party is actionable as tort of misrepresentation (subject to the entire agreement clause) -

Clase 26 APS- if there is a conict regarding a provision then only the provisions in the APS or any attached schedules will apply- so if a representation was made it wouldn’t count The purpose of an entire agreement clause is to make clear that the agreement between the parties is solely what is stated in the written contract, and to prevent the parties to the contract from subsequently raising claims

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The principle may be liable if the agent makes misreps while acting of behalf of them

Fiduciary duties -

Requires a duty of candour, loyalty and condentiality- pg, 202 In the Knoch estate case it is determined that not all real estate agents have a duciary duty

- In order to determine if there is an ad hoc duciary, must look at the frame v. smith case 1. F has scope to exercise some discretion or power 2. F can unilaterally exercise that power or discretion so as to aect the beneciary’s legal or practical interests 3. Beneciary is vulnerable to or at mercy of F - Galambosv Perez (2009) SCC –F must expressly agree to be bound by duciary duties & put interests of principal ahead of her own interests - Remedies are a loss of commission, damages or constructive trust Commission Payable - Set out in the BRA or SLA -

S.23(1) collect commission if there is an agreement in writing set out, (b) if they show the

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buyer the property/ introduce to the seller to set up a deal S.26- The commission shall be an agreed amount, percentage or both

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(1) If not agreement will be set according to standards (2) can be a uctuation percent depending on the price of house (3) can not ask for the dierence in price on the listing agreement and APS

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Pg. 249- commission is paid to the agent whose work is the eective cause if there is a dispute and and agent who does not act diligently or breached their duciary duty will be denied their commission by the court

Deposit -

If a good faith deposit, the seller can keep it evenif no losses suered IF it is a part payment of price then the seller must return the amount but keep

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enough to cover their losses Tang case- Whether B’s deposit is forfeited to S is a matter of contractual intention not based on if it is called a deposit

Section 15 CLPA -

States what will be included as part of the land, it is a starting point for the law to determine what is a chattel and what is a xture

Stack v Eaton Case - Sets out factors for determining if something is a xture or a chattel 1. Degree of annexation 2. Purpose or intent (is it to make the real property function better or the chattel to function better) -

Set out a four part test- pg.

1. Item is not attached to the land and just sits there by its weight then it is a chattel unless evidence shows an intention that it be part of the land 2 2. Item attached to land are part of the land unless there is contrary intention3 3. In one and two the evidence must be based upon the degree of attachment and the purpose which are clear to see(not the intention of the person) 4. The intention of the person axing the item is material only to the extent it can be presumed from the degree and object of the annexation Description of the Land - The parties should set out what land is to be sold in the APS 1. First look at what is stated in the APS, if there are not conicts or issues and everything was clearly decided 2. What you see is what you get approach (Did the parties get to see the property and if there are physical structures that outline the boundaries it should be obvious what they are getting)Wilson Lumber 3. More or less will assist with small variances 4. If APS promises specic frontage, acreage or dimensions, or if price is expressly or implicitly quoted as a formula(e.g. price per acre) court can adjust price ( Murphy v Horn) provided B is getting substantially what was bargained for

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If there is substantial performance then the party must close and sue for damages

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If there is not then they can choose not to close and sue for damages or negotiate for a lower price

Cases -

Turney v. Zhilka: no enforceable contract since the parties never reached an agreement. No ad idem Dynamic Transport: Courts will look at surrounding facts and structures to determine what

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the parties meant if unclear (storage determined 4 acres more or less) Marphy case- wherein a sale of land the quantity is stated (for instance, as 10 acres), and the

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price is stated in a lump sum (as for instance $16000), the presumption is that the price was xed with reference to the quantity- court will make abatements LeMesurier case: Objective test –deciency was very minor. Materiality cannot be determined on a subjective basis

Caveat Emptor - As a general rule ce applies and the buyer has to look out for themselves -

The seller does not need to make statements but if they do then they must be true and complete Buyers should included: Condition precedent on building inspection; 2.Representations & warranties from the S; 3.Seller Property Inspection Statement (“SPIS”)

APS clauses - 13: buyer acknowledges having had the opportunity to inspect the property and understands that upon acceptance of this oer there shall be a binding agreement of purchase and sale -

between buyer and seller 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 property to be insulated with insulation containing urea formaldehyde, no knowledge of it either

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26: entire agreement clause

Exceptions to caveat Emptor 1. Contract provisions 2. Common Law 3. Statutory warranties (ONHWP) 4. Misrepresentation

5. Silence amounting to misrep 6. Half truth amounting to misrep 7. Active concealment (fraud) 8. Duty to disclose known latent defects 9. Duty to disclose known latent defects about the neighborhood relating to health and safety Duty to disclose certain latent defects - Normally caveat emptor would apply in which the buyer must take actions to protect -

themselves. One of the exceptions is the duty to disclose certain latent defects Not all latent defects must be disclosed, only those that pose a risk to health, safety and

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habitability The buyer can’t get out of a deal or sue for damages for a latent defect discovered later that was

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not disclosed if it doesn’t fall under one of these, even it if is material or reduces the value of the property Law is only concerned with latent defects that pose a risk to heal, safety and habitability

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The seller only needs to disclose defects that they knew or of should have known about. It is up to the buyer to prove that the seller knew, tried to conceal/falsify their knowledge or were

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reckless or willfully ignorant to the defect If the seller knows of a defect and lies about it or conceals it, then that would be fraud If the seller knows of a latent defect but doesn’t say anything about it, then it would be

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considered equivalent to the intentions to deceive- pg 424 If the seller is aware that the buyer is operating under and error of fact regarding an important

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feature of the house, silence will be considered a misrepresentation, same with a half truth but the seller could choose to tell the buyer to satisfy themselves and relieve themselves as long as it is not regarding a latent defect- pg 424 Swayze case- the defect that makes a premises unt for habitation does not mean that the defect has to be one that renders the whole residence uninhabitable….pg 426, ooding could also be considered a health and safetyrisk

Conclusion on defects -

Patent defects need not be disclosed- as long as there are visible clues that would prompt to do further inspection then it is patent

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Only latent defects that are known or ought to be know and that pose a risk to health safety and habitability need to be disclosed

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If it is a latent defect that is immaterial or only aects value it does not need to be disclosed but if someone asks a question about a defect you cannot remain silent, give a half truth or lie as it

would be a misrepresentation. You may say that the buyer should inquire themselves to avoid answering if it is not a latent defect of the above. Misrepresentations -

If someone makes a misrepresentation, it doesn’t matter if it is a patent or a latent defect as they

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will still be liable in tort and the defence of caveat emptor does not apply Misrepresentation requires that it was material, they relied on it, and it induced the person to enter into the contract

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A misrepresentation of silence can happen in two ways- silence by not answering or silence when you know what the buyer believes is false

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The silence when there is a duty to disclose can either be a misrepresentation or a breach of the contractual duties to disclose The contract breach has greater remedies but it only applies to certain latent defects, The tort

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of misrepresentation is better for cases where the defect is not one of the following Hoy case- termites but they relied on the inspector not the seller

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Fraser case- water in the basement but they relied on the inspector

Types and remedies Before Closing -

Recisions is available for all types of misrepresentations before closing as long as it is material and the buyer relied on it

After Closing - Available only for fraudulent misrep -

Damages available for fraud and negligent but not for innocent

Innocent misrep -

It is not a lie or something that they should have known to be false

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They can not close and sue for damages, they can only rescind before closing. Not other remedies If the statement was a promise then they could sue for contractual breach

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Fraudulent rep/ deceit - Active concealment of a defect

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Jung case- termite damage and the seller replaced the damaged wood with new wood in those spots The requirements for deceit are:

1. False statement that they knew was false 2. They had the intention to deceive 3. The plainti relied on the statement and it induced them to enter into the contract 4. They suered damages as a result Protection for new/ in construction real estate -

There is a common law implied warranty for buildings in construction at the time of the APS

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ONHWP protection for new homes- pg. 449 Section 13....