October 10th - 2010

LEGAL BEAT: Material defect costs commission on 1.2 million dollar deal

The buyer sees a house in Carlisle, Ontario that meets his needs.

The buyer sees a house in Carlisle, Ontario that meets his needs. The layout of the property would provide privacy and enable him to continue with his hobby of construction and building. The property has a large house, backs onto a conservation area and is about two acres bordered by trees. He could build a structure on the west side of the house to store his tractor and lawn mower and allow for future building. He signs an offer for $1,250,000 with a $75,000 deposit.

The title search shows an easement of just over a half an acre in size comprising about 25 per cent of the property in favour of the town for the storm sewer system. No obstructions including buildings or structures are permitted on the easement lands on the west side of the house. The buyer rescinds the Agreement.

The judge reviewed the facts and previous cases such as Ridgley v Nielson and decides that this easement materially affects the buyer's use of the property. The materiality of the deficiency is determined on an objective basis, taking into consideration the view of the buyer. The four factors that are considered are the location of the easement, its size, the point of access and the owner's enjoyment of the property. The judge allowed the buyer to terminate the agreement and have his deposit returned.

MacDonald v Robson 2008 CanLII 30336

The sellers in answering the SPIS question about easements said, "unknown, on survey". In the survey question they responded, "yes, written location of sunroom". The survey that was produced made no reference to any easements. There was no suggestion that the sellers were aware of the easement or that any misrepresentation was made. Nevertheless the deal was terminated due to the material easement.

Should it be incumbent of a REALTOR® listing such a property to inquire from the sellers - and their lawyers - about significant possible factors such as a large easement? REALTORS® should probably check the title for such issues. Whatever the costs of doing so would be less than losing commission on a $1.2 million dollar deal.

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