September 8th - 2009

LEGAL BEAT: Misreading a clause cost buyer $90,000

A property was being developed as a golf course, ran into financial problems and went into receivership.

A property was being developed as a golf course, ran into financial problems and went into receivership. The City was not advised of a change of use of the property from farm land (with a residential component) to commercial by reason of the golf course operation.

The property is now being reassessed and taxes will be determined and collected through an adjusted tax roll. A sale of the property was approved by the court and the Vesting Order approved the Sale Agreement entered into between the Receiver as seller and GolfNorth as buyer.

Paragraph 11 of the Vesting Order in part provides: "THIS COURT ORDERS that effective immediately upon the filing of the Receiver's Certificate, all right, title and interest shall vest in the Purchaser… free and clear of and from… taxes…charges… whether such claims came into existences [sic] prior to, subsequent to,… by operation of law or otherwise."

Paragraph 18 of the Sale Agreement provides: "ADJUSTMENTS: Any …realty taxes … shall be apportioned and allowed to the day of completion, the day of completion itself be apportioned to buyer." This undertaking to adjust is found in the Ontario Real Estate Association standard printed form Agreement of Purchase and Sale. However, Schedule "D" to the Sale Agreement provides specifically: "Notwithstanding anything in the attached printed form to the contrary, the following terms and conditions shall apply to the Agreement of Purchase - 10. CLOSING ADJUSTMENTS: The buyer acknowledges that there will be no undertaking to readjust given by the seller on closing. The buyer further acknowledges that there will be no holdback from closing proceeds relative to potential readjustment of any items on the Statement of Adjustments."

The court decided that the seller would normally be liable for the taxes under a reassessment but that was changed when the parties agreed to clause 10. The buyer had to pay the $90,000 owing to the City.

Credit Union Central of Ontario v Heritage Property Holdings 2007 CanLII 30474

MERV'S COMMENTS
This is another example of how clauses can change the legal impact of a situation and also how clauses added to an Offer can supercede the language in the pre-printed form. Buyer and Buyer's Agent beware when reading a schedule.

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Jean-Adrien Delicano

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