Requisition Deadline For Present Legal Use Of Property Clarified By Court Of Appeal

• Published date: 08 March 2022
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Trials & Appeals & Compensation, Real Estate
• Law Firm: Gardiner Roberts LLP
• Author: Mr James R.G. Cook

The Ontario Real Estate Association's standard form of residential Agreement of Purchase and Sale (APS) contains a paragraph that sets a deadline for a buyer to investigate and verify the present legal use of a property before closing. This paragraph describes what is defined as the "requisition date" but the formula for calculating the date is confusingly described, which has resulted in uncertainty amongst real estate lawyers and even motion judges.

A recent decision of the Ontario Court of Appeal clarified the procedure that is to be followed for determining the requisition deadline in the standard form APS: 2651171 Ontario Inc. v. Brey, 2022 ONCA 148 (CanLII).

In the case, the appellant buyer made a written offer to purchase the respondent's property in Ottawa for $1,610,000. The listing had described the property as a fourplex with two 1-bedroom units and two 3-bedroom units. The APS described the property as a residential fourplex. The scheduled completion date was October 1, 2019.

All conditions in the APS were waived by the buyer on July 26, 2019.

On September 26, 2019, the buyer's real estate lawyer received a compliance report from the City of Ottawa that could not confirm the lawful use of the property as a fourplex. The report also noted that a previous owner had not arranged for all required inspections relating to a building permit issued for the construction of a rear addition.

The buyer's lawyer wrote to the seller's lawyer on the same day requisitioning a copy of permits and final inspections from the City to confirm that the property's use could lawfully be continued as a fourplex, as well as inspection reports relating to the rear addition.

The seller declined to respond, taking the position that the objections were made beyond the "requisition date" in paragraph 8 of the APS. As a result, the transaction did not close.

After the seller resold the property for a lower price, litigation ensued between the parties, with the buyer seeking return of the deposit and the seller seeking damages arising from the failed transaction. The parties brought dueling summary judgment motions, which were decided in favour of the seller.

On appeal, the primary issue was the motion judge's application of paragraph 8 in the APS, which stated as follows:

8. TITLE SEARCH: Buyer shall be allowed until 6:00 p.m. on the 16 day of September, 2019 (Requisition Date) to examine the title to the property at Buyer's own expense and until the earlier of: (i) thirty...