In a recent Ontario Court of Appeal decision, the court found that a neighbourly dispute over the dimensions of the driveway of a home for sale was a significant enough defect to allow the buyers to refuse to close the sale.
The seller agreed to sell her home in Toronto to the buyers. The buyers viewed the property and agreed to purchase it for $1,905,000.
However, between the date of the signing of the Agreement of Purchase and Sale (the “agreement”) and the date the sale was to close, the neighbouring property owners asserted that the seller did not own all of what appeared visually to be the driveway of the property. After making the assertion, the neighbours fenced off a two-foot-wide strip of the 26-foot-long driveway they claimed encroached on their property.
The seller disputed the neighbours’ assertion, but could not resolve the dispute before the closing date. It remained the subject of outstanding litigation between the seller and the neighbours.
As a result of the pending dispute with the neighbours, the buyers refused to close the purchase under the agreement, on the basis that the seller could not convey clear title to the entire driveway.
The seller commenced an action for damages for the failure to close. The buyers counterclaimed for return of their deposit.
Lower Court Decision
The motion judge found in favour of the buyers.
In the judge’s view, the agreement represented that the seller owned all of what was visually apparent as the functioning private driveway of the property at the time the agreement was executed. She found that there was a defect in the seller’s title due to the dispute over whether a two-foot-wide strip of the driveway was owned by the seller and could be conveyed to the buyers. The judge found that the defect was significant enough to entitle the buyers to refuse to close.
The seller raised the following grounds of appeal:
- The motion judge misinterpreted the agreement. Properly interpreted, the seller only agreed to sell her home with a seven-foot-wide driveway. That the driveway was nine feet wide when the agreement was signed, and that the neighbour claimed two feet of that width, were irrelevant to the seller’s obligations and the buyers’ rights under the agreement. There was no title defect in what the seller had actually agreed to sell.
- In any event, the title defect of a two-foot discrepancy in the width of the driveway was not significant enough to permit the buyers to refuse to close.
Court of Appeal Decision
The court rejected the seller’s first argument. It found that the motion judge did not commit an error in finding that the buyers were entitled to believe they were purchasing the property which included the full driveway. Though the agreement included a description of the property, the buyers were entitled to believe they were buying the driveway as they visually saw it.
The court stated:
“The motion judge was entitled to find as she did, that “any reasonable person would assume that the driveway referred to in the [agreement] as owned […] would include what appeared to the eye to be the driveway”, which was “not seven feet wide but nine.””
The court also rejected the seller’s second ground of appeal. The court agreed with the motion judge that the title defect was significant enough to permit the buyers to refuse to close.
As a result, the appeal was dismissed.
There are significant legal and financial risks in entering into a residential real estate transaction. Such large purchases should not be made without proper guidance from an experienced lawyer. Without sound legal advice, you could end up paying more than you should for your home, or accept an offer that is too low, or worse yet, end up with a transaction that falls through due to missed paperwork, or details and technicalities that go unnoticed.
At DBH Law in Calgary, our real estate lawyers have more than 25 years of combined experience acting for purchasers, lenders, and developers through all stages of residential real estate transactions.
We help our clients avoid huge areas of risk, including poorly drafted or incomplete agreements of purchase and sale, hidden fees, encroachment or easement issues, complex concerns like properties held in trust, and similar pitfalls. We also look for contract language which may impose unfavourable duties or obligations. To learn more about how we can help, contact us online or by phone at 403.252.9937.