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Commercial Real Estate

Arbitration Awards Not Always Appealable

Body shop tools representing commercial real estate disputes

Commercial landlords and tenants should always be prepared if a conflict arises during the leasing relationship. Some landlords and tenants anticipate potential disputes and, therefore, include clauses in their lease agreement setting out mechanisms to resolve problems through arbitration. But what happens when a party is not satisfied with the outcome of an arbitration award?

In The Tire Pit v Augend 6285 Yonge Village Properties Ltd, a party sought to appeal an arbitration award it did not agree with. This case, heard before the Ontario Superior Court of Justice, explains when a court can lawfully set aside an arbitration award.

New landlord takes issue with the tenant’s choice to extend the lease

The former landlord and the tenant, Tire Pit, entered into a lease agreement on December 16, 2013. The former landlord sold the property to a company called Augend, which became the new landlord in July 2020. Augend and Tire Pit had previously entered into litigation in May 2021, when Tire Pit sought to extend its lease for five years beyond June 2019.

The Court found that Tire Pit had exercised its option to extend the lease appropriately, even though Tire Pit had not signed a new agreement. The Court also ordered that Augend and Tire Pit submit to arbitration to determine base rent as prescribed by Section 9.13 – Option to Extend in the original lease agreement. Section 9.13 read as follows:

“Base Rent for the extension Term shall be the Landlord’s then-current rent for premises in the Building or, if the Landlord then has no such premises available, such Rent shall be the fair market rental for similar premises in the area of the Building at the time of the extension, but in no event shall the Base Rent be less than the Base Rent payable during the last year of the Term. If the parties are unable to agree on the fair market rental, if applicable, within three months prior to the commencement of the extension Term, the matter shall be referred to arbitration in accordance with the Arbitrations Act, 1991 (Ontario).”

Tenant disagreed with arbitration award

In October 2021, the parties attended arbitration. The arbitrator determined the base rent amount “by examining the ‘fair market rental’ for similar premises in the area of the building at the time of the extension.” When comparing similar premises close by, the arbitrator determined that fair base rent for the property was $50 per square foot. Tire Pit was to be credited any rent paid over that amount.

Tire Pit appealed the order on numerous grounds, some of which the Court deemed repetitive, including:

  • The arbitrator found that Tire Pit was a month-to-month tenant in 2020 until the sale of the property, while this Court had found that the Lease had been renewed for five years commencing January 1, 2020;
  • The arbitrator failed to find that Tire Pit and the Former Landlord had agreed between them on the fair market renewal base rent;
  • The arbitrator failed to follow the directions in the renewal clause of the Lease when determining the fair market rent;
  • The arbitrator failed to act fairly and give sufficient legal effect to the word “fair” in determining fair market rent (which Tire Pit defines as rent that is just and reasonable in the circumstances); and
  • The arbitrator did not clearly decide whether additional rent was payable.

A court is able to set aside an arbitration award in specific circumstances

The case of Alectra Utilities Corporation v Solar Power Network Inc set out various considerations for the courts when considering whether to set aside an arbitration award. In that decision, the Court held that an applicant must establish that the award relates to an issue which was not covered by an arbitration agreement. Alternatively, the applicant must show that the decision was beyond the scope of the arbitration agreement.

Arbitrators must operate within the limits of the authority granted to them by way of the arbitration agreement and with those prescribed by the Arbitration Act (the “Act”). Under section 45(1) of the Act, a court must grant permission to appeal an arbitration award if the arbitration agreement is silent on appeals. Further, section 46 of the Act provides reasons for a court to set aside an arbitration award.

In the case at hand, the arbitration agreement did not consider appeals.

Court denied the tenant’s request to appeal

The Court found that the arbitrator’s decision was primarily focused on the dispute that was referenced in the arbitration agreement as “i.e. the determination of the fair market rent for the Leased Premises commencing January 1, 2020, as per the provisions of the Lease, and nothing else.”

Concerning the scope and fairness of the arbitrator’s decision, the Court found that the arbitrator acted appropriately. While Tire Pit sought to understand what “additional rent” would be owed in addition to the base rent, this was not an issue which was presented before the arbitrator at the relevant time. The Court did not find that the arbitration had been conducted unfairly, contrary to Tire Pit’s allegations.

The Court refused to grant Tire Pet leave to appeal, explaining that “granting leave to appeal in this case would not contribute to ensure the consistency of the law, but, rather, would only provide a new forum for the parties to continue their private litigation.”

Contact the Lawyers at Bader Law in Toronto for Advice on Commercial Leasing Disputes

At Bader Law, our experienced business law team regularly represents corporate clients in real estate matters. Our business clients range from small family-run operations to large enterprises. Within the firm, our business law and real estate teams work together to provide comprehensive and strategic representation in a variety of commercial real estate transactions, including commercial leasing issues affecting landlords and tenants.

The real estate lawyers at Bader Law represent both individual and corporate clients regardless of whether they are buyers or sellers. We act on behalf of clients in residential and commercial real estate transactions within Mississauga and throughout the Greater Toronto Area. Our lawyers will help secure your interests and protect your financial investments. To learn how we can assist you in your next commercial transaction, contact us online or call us at (289) 652-9092 .

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Real Estate

Potential Buyers Warned About Property Subject to Proceedings

When a property is subject to potential litigation, others must be warned before taking steps to purchase it. A recent Ontario case revolved around the planned purchase of a parcel of land that was halted by the defendant. The plaintiff sought to purchase eight acres of undeveloped land from the defendant and intended to build six homes on the majority of the property. The plaintiff had paid $640,000 to the defendant, however, the purchase did not go through because the defendant claimed the plaintiff failed to close.

The parties had a previous agreement

In Halbouni v. El-Turk, the plaintiff, Halbouni, reached out to El-Turkin 2014 to express his interest in purchasing five acres of undeveloped property. Their discussions continued over three years. During this time, the defendant, El-Turk, attempted to have the land rezoned from agricultural to “urban growth boundary.”

In May 2017, El-Turk drafted an agreement by letter that read as follows:

“I Ahmed El-Turk received the sum of $10,000 (Ten Thousand Dollars) in Canadian Currency as a deposit on a sale of 5 acres of my share of the land on Sunningdale Road West. Municipal address of 1431 Sunningdale Road West, London Ontario N6G 5B7. The total price is $550,000 CDN. Both parties agreed that the location of this sold portion is the northside of the property (to be determined where exactly on the north side of the property). Final agreement will be done through lawyers of both parties.”

In addition to the above, both parties agree that another $200,000 would be paid in cash. By November 2018, Halbouni had paid a total of $640,000. El-Turk expressed a need to close the sale in 2019. Halbouni replied that he would be ready to close upon receiving legal documents.

The parties disagreed on the subject of the purchase

In July 2019, Halbouni’s lawyer drafted an agreement, which was never signed. In January 2021, El-Turk demanded immediate payment of the remainder of the purchase price or he would terminate the agreement. The parties disagreed on the size of the land to be sold and accused each other of stalling the purchase.

The plaintiff commenced an action seeking a declaration that the agreement with the defendant was valid and binding. The plaintiff also sought an order transferring the interest in the property. The defendant asserted that the agreement was unenforceable and that Halbouni forfeited any money paid to the acquisition of the property. In this case, the plaintiff was moving for a Certificate of Pending Litigation.

What is a certificate of pending litigation?

A certificate of pending litigation can be used on a property when one party claims an interest that is not reflected on the land’s title. This is a means to flag the property to other potential purchasers as being subject to legal proceedings. This information is critical to know before taking steps to acquire that property.

To determine if a certificate of pending litigation should be issued, the Court must consider various legal principles set out in Peruzza v Spatone:

“Factors the court can consider on a motion to discharge a [certificate of pending litigation] include (i) whether the plaintiff is a shell corporation, (ii) whether the land is unique, (iii) the intent of the parties in acquiring the land, (iv) whether there is an alternative claim for damages, (v) the ease or difficulty in calculating damages, (vi) whether damages would be a satisfactory remedy, (vii) the presence or absence of a willing purchaser, and (viii) the harm to each party if the CPL is or is not removed with or without security […]”

A certificate of pending litigation was required to warn potential purchasers

The first factor was cleared because the plaintiff had incorporated a company to hold real estate. The second factor, concerning the property’s uniqueness, was also successfully cleared. As the plaintiff submitted, the land was “near a pond, district park, a new high school and elementary school, a shopping mall, a golf club, a university, and a significant amount of municipal infrastructure that could allow for the lands to be serviced.”

Halbouni wanted to build homes on the land for these unique characteristics. Similar land would not be available to the plaintiff due to the rise in demand for developable land in the area. Regarding the third factor, concerning the intent of the party purchasing the land, Halbouni was found to have bought the land for the purpose of building a home for his family. Questions arose as to whether the land was suitable for building a family home, but the plaintiff maintained that the land may one day be able to be developed upon.

The fourth factor seeks to rule out alternative claims for damages. While Halbouni could not explain that full cost of the damages would be impossible to calculate, this did not rule out the issuance of a certificate of pending litigation. The fifth factor confirmed there were no other land purchases that would be affected by a certificate of pending litigation, if ordered. Finally, the last factor considered is whether either party would be harmed with or without an order for a certificate of pending litigation. No evidence was presented that indicated the defendant would be interfered with by a certificate of pending litigation. In contrast, the plaintiff had already lost $640,000 in his effort to acquire an interest in the property.

In balancing all these factors, the Court found in favour of the plaintiff. A certificate of pending litigation was therefore registered.

Contact Mississauga Real Estate Lawyers at Bader Law for Commercial and Residential Real Estate

Bader Law represents individual and corporate buyers in real estate transactions in Mississauga and throughout the Greater Toronto Area. Our experienced real estate lawyers take strategic action to reduce risk, secure clients’ interests, and protect their financial investments. Our team reviews Agreements of Purchase and Sale, handles title insurance matters, and assists with mortgages and refinancing.

Bader Law ensures your real estate matters are tended to in a timely and professional manner. To schedule a consultation, contact us online or call 289-652-9092.

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Commercial Real Estate Real Estate Residential Real Estate

Mortgage Pre-Approval a Good Idea Before Signing

Purchasing a home in Canada is no small feat. With the high cost of owning a home, some people may not qualify for a mortgage. It’s essential to determine this before signing an Agreement of Purchase and Sale to avoid any unintended consequences or real estate disputes that may stem from a failure to obtain a mortgage.

In a recent case before the Ontario Court of Appeal, a couple appealed a decision that lost them their down payment and saddled them with hefty legal costs.

The couple was unable to secure mortgage pre-approval

In Leaf Homes Limited v. Khan, a couple met with a homebuilding corporation, Leaf Homes Limited, after they learned of the corporation’s new development. The couple had moved to Canada in 2003 and 2004, and while Mr. Khan spoke English proficiently, Ms. Khan’s English was limited. Ahead of the meeting with Leaf Homes Limited, the corporation sent the Khans an email containing an Agreement of Purchase and Sale. The representative of Leaf Homes Limited instructed the Khans to bring the Agreement to the appointment with them, as well as a mortgage pre-approval, post-dated cheques, and identification.

As the Khans were under the impression the meeting was just to collect information about the development, they did not bring the postdated checks and did not seek mortgage pre-approval. They were shown the project and asked to choose a lot. They then met with a sales associate.

The Khans alleged that the sales associate pressured them into entering the agreement. She told them that if they could provide a 20 percent down payment, they would be able to secure financing. She also suggested that Leaf Homes Limited would help them secure mortgage pre-approval if they were unsuccessful on their own. When they left, they had signed the agreement and later arranged to provide the corporation with six cheques (five of them post-dated) for $30,000 each. However, when Mr. Khan sought to secure financing, he was unsuccessful and did not have the funds to pay the difference between the appraisal value and the home’s purchase price. He notified Leaf Homes Limited of this issue in August 2018.

A default judgment was awarded to the corporation

In response to the Khans’ anticipated breach of the agreement of purchase and sale, Leaf Homes Limited commenced an action seeking damages for the breach and costs in September 2018. When the Khans did not reply, the corporation noted them in default a month later. The property was sold in February 2019 for $500,000 less than the asking price. In April 2019, Leaf Homes Limited received a default judgment against the Khans for $407,903.92 in damages and $7,000 in costs.

The Khans learned of the proceedings in May 2019 when Mr. Khan’s bank account was garnished, and a writ of seizure and sale of their home had already been filed. Mr. Khan could not understand the copy of the default judgment and other court documents left in his mailbox. He immediately sought counsel, who arranged for a motion to set aside the default judgment and permission to file a statement of defence and counterclaim. The counterclaim sought to recover the Khans’ $180,000 down payment and the $7,016.15 they had provided for upgrades.

The motion judge set aside the default judgment in part

The motion judge considered the following factors in deciding the set aside the default judgment in part so that the Khans could litigate the amount of damages:

  • The Khans brought their motion promptly after learning of the default judgment.
  • Since the Statement of Claim was served on “a woman in her late thirties or forties [who] answered the door,” there was no explanation for the delay in replying to it beyond hoping the problem would disappear.
  • The motion judge did not accept the Khans’ defence that the sales associate had misrepresented the corporation’s willingness to help secure financing for the property. However, Leaf Homes Limited also failed to adequately mitigate its damages by selling the property years after the breach of the agreement of purchase and sale.
  • The Khans would be at a disadvantage if the motion were dismissed because their bank accounts were being garnished. This outweighed the disadvantage to Leaf Homes Limited.
  • The Khans had entered into an agreement without being sure they could fulfill it and sought “to delay and avoid” litigation by ignoring the Statement of Claim.

The motion judge also gave the Khans 15 days to provide submissions on costs and the corporation ten days to respond to those submissions. The Khans were not given the right of reply to Leaf Homes Limited’s submissions. In her written reasons, the motion judge ordered the Khans to pay costs on a substantial indemnity basis. In other words, they had to pay 1.5 times the equivalent of their legal fees to the winning party.

The Court of Appeal set aside the default judgment

The Ontario Court of Appeal found more than a few errors in the motion judge’s decision to only set aside the default judgment in part. Firstly, the motion judge made an error in deciding that the Khans needed to prove the success of their defence of misrepresentation. Instead, she only should have determined whether there was an air of reality to their defence. The Court of Appeal felt that there was.

Concerning the service of the Statement of Claim, the Court of Appeal noted that the process server did not provide enough information to confirm that it had actually been served on Ms. Khan, as the motion judge had assumed. In fact, she need not have considered the delay in the Khans’ reply to the Statement of Claim because, in that proceeding, the only relevant delay was the delay in responding to the default judgment. From this view, there was no delay. 

The Court of Appeal also disagreed with the motion judge’s consideration of Mr. Khan’s non-attendance at one proceeding. The Court stated that it seemed like the Khans did not become aware of the claim against them until Leaf Homes Limited began enforcing the default judgment.

The motion judge’s assessment of prejudice or disadvantages the Khans would face also lacked a crucial consideration: 

“[B]y permitting the appellants to only litigate the quantum of damages, she prevented them from pursuing their counterclaim. That would result in further prejudice to the appellants as they would be barred from seeking to recover the approximately $190,000 they had paid the respondent […].”

Avoid costly disputes by working with an experienced real estate lawyer

As a result of the motion judge’s palpable and overriding errors, the Khans’ appeal was allowed. The default judgment and the noting in default against the Khans were set aside. The Khans were allowed to file and serve a statement of defence and counterclaim within 10 days after the judgment. Leaf Homes Limited was ordered to pay their costs, fixed at $25,000.

While the Khans were successful in their case, real estate disputes are costly and stressful for all parties involved. Engaging the services of a skilled real estate lawyer early in the sale process helps ensure parties understand the full implications of the Agreement of Purchase and Sale. A lawyer can also help parties with mortgages and refinancing before any commitments expose either side to liability.

Contact Bader Law in Mississauga for Real Estate Advice

Bader Law represents individual and corporate buyers in real estate transactions in Mississauga and throughout the Greater Toronto Area. Our experienced real estate lawyers take strategic action to reduce risk, secure clients’ interests, and protect their financial investments. Our team reviews Agreements of Purchase and Sale, handles title insurance matters, and assists with mortgages and refinancing. 
Bader Law ensures your real estate matters are tended to in a timely and professional manner. To schedule a consultation, contact us online or call 289-652-9092

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Commercial Real Estate

Buyer Awarded Damages for Lost Profits in Aborted Commercial Real Estate Transaction

A buyer is generally entitled to damages when a seller in a commercial real estate transaction breaches an Agreement of Purchase and Sale by failing to complete the sale, but how do courts calculate the quantum of damages owing?

Typically, the standard measure of damages for a seller’s failure to complete a purchase of land is the difference between the contract price of the property that was to be purchased and the market value of the land. This is intended to represent the lost benefit of the bargain (for example, see Marshall v. Meirik).

However, this method of calculating damages may be changing. In a recent decision of the Ontario Superior Court, the seller under an Agreement for Purchase and Sale was held liable for the loss of the developer buyer’s expected business profits after the seller aborted the sale.

Parties enter into an agreement of purchase of sale

In The Rosseau Group Inc. v. 2528061 Ontario Inc., the parties entered into an Agreement of Purchase and Sale on January 17, 2017. The agreement stipulated that the defendant vendor would sell the property in question to the plaintiff purchaser at a purchase price of $10,500,000, with an initial deposit of $50,000, subject to certain conditions. One of the conditions required the purchaser to pay $400,000 to be held in the trust of the seller’s solicitor upon waiving all the conditions.

On March 10, 2017, the parties entered into an amended Agreement of Purchase and Sale. The purchase price was reduced to $6,615,000 to reflect a lower “net developable area” on the property than that set out in the original agreement.

The plaintiff purchaser “waived all the conditions” during the due diligence period but did not make the $400,000 payment following the waiver of the conditions. The defendant seller treated this failure to pay the $400,000 as a repudiation of the amended Agreement of Purchase and Sale and communicated this view to the plaintiff purchaser, returning the $50,000 deposit. The plaintiff initially sought an order for specific performance but then abandoned that relief and instead sought general damages for all expenses, losses, including economic losses, and lost profits arising from the defendant’s alleged failure to close the transaction.

Individual interpretations of the agreement unhelpful

The court applied the principles of contract interpretation to the original and amended Agreements of Purchase and Sale. It noted that while the surrounding circumstances will be considered in interpreting the terms of a contract, those circumstances cannot “overwhelm the words” of the agreement. The court must ground its interpretation in the contract’s text, looking at the objective evidence. Evidence of an individual’s interpretation of the agreement is not helpful. 

Overall, the court found no provision for a $400,000 deposit in the amended Agreement of Purchase and Sale, and there was no provision for it to be paid and be reduced from the amount payable on closing. The parties did not have to include an explicit deletion of the $400,000 deposit in the amended Agreement of Purchase and Sale. It was evident by the terms of the amended Agreement of Purchase and Sale that it was no longer payable.

Seller found to have committed anticipatory breach

The court found that the seller, through its words and conduct, repudiated the agreements before the buyer’s performance was due. As the court found that the further $400,000 deposit was not payable by the buyer at the time of waiver of the conditions, the seller repudiated the contract when it said in writing that it considered the Agreement of Purchase and Sale and amended Agreement of Purchase and Sale at an end and returned the $50,000 deposit. The seller clearly expressed an intention not to be bound by the contract before the performance was due.

Damages awarded for buyer’s estimated lost profits

In awarding damages for lost profits, the court relied on a 2002 Supreme Court of Canada decision which held that lost profits were an appropriate measure for damages in a development case. The buyer was a developer, and, in reviewing the evidence, the court found that the parties contemplated explicitly that the buyer was acquiring the property to develop it. In fact, as part of the conditions of the sale, the buyer was required to satisfy itself concerning zoning and restrictions and the economic feasibility of the development of the site.


In calculating its lost profits, the buyer submitted expert evidence from a development consultant who estimated the costs that would have been incurred to buy, develop, construct, and rezone the land and the associated tax and legal costs of this venture. In reviewing the buyer’s development plans, he concluded that the project could have yielded an estimated $21.5 million to $23.5 million in revenue, with a cost of $11 million. Therefore, the buyers’ estimated profit was between approximately $10 million and $12.1 million.

The court rejected the seller’s argument that the buyer had failed to mitigate its damages by not purchasing another comparable property. The evidence demonstrated that the buyer was constantly looking for properties and typically purchased between five and six annually. Further, the development work in the community for the proposed development had begun 12 years prior.

Given this analysis, the court held that the buyer was owed $11.1 million, which represented the midpoint between the estimated range provided by the buyer’s expert.

Contact Bader Law in Mississauga for Knowledgeable Advice in Commercial Real Estate Transactions

Bader Law represents individual and corporate buyers in commercial real estate transactions in Mississauga and throughout the Greater Toronto Area. Our experienced real estate lawyers take strategic action to reduce risk, secure clients’ interests, and protect their financial investments. To schedule a consultation, contact us online or call 289-652-9092.

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Residential Real Estate

Ontario’s Home Construction Regulatory Authority Files Second Set of Charges Against Unlicensed New Home Builder

In recent years, Ontario, and other provinces, have seen explosive, and nearly unprecedented, growth in the new construction sector. In Ontario, new homes must be covered by a warranty backed by the Tarion Warranty Corporation (“Tarion”), a not-for-profit consumer protection organization established by the Ontario government to administer warranties under the Ontario New Home Warranties Plan Act (“ONHWPA”). For nearly forty years, Tarion has been the delegated administrative authority responsible for licensing home builders and vendors in Ontario.

Ontario Introduces New Home Construction Regulatory Authority

In 2016, the province ordered an independent review of Tarion and the ONHWPA. As a result of that review, the province introduced the New Home Construction Licensing Act, 2017 (“NHCLA”). Under the NHCLA, the province committed to creating a new regulator for licensing home builders and vendors.

In February of 2021, the government of Ontario created the Home Construction Regulatory Authority (“HCRA”). Going forward, the regulation and licensing of new home builders and vendors in Ontario are the responsibility of the Home Construction Regulatory Authority (“HCRA”). All matters related to homeowner warranty protection remain the responsibility of Tarion.

The HCRA regulates new home builders and vendors in the province and is intended to protect the public interest through a fair, safe and informed marketplace that supports the goal of a continuously improved home building industry in Ontario.

Who Needs to Register with HCRA?

All builders and vendors of new homes must register with and hold a valid licence with the HCRA. Below are the licensing categories:

  • A builder of new homes must be licensed as a builder
  • A vendor of new homes must be licensed as a vendor
  • A builder who builds and sells new homes must be licensed as a builder/vendor
  • A builder who builds contract or custom homes on land owned by the owner of the home must be licensed as a vendor and builder

Exception to HCRA Registration Requirements

As was the case under the previous Tarion licensing regime, people that wish to build their own home to live in do not generally need to be HCRA registered. These individuals are considered owner/builders provided that they satisfy several criteria:

  • owner/builders should not sell the home once they have completed construction
  • should not be hiring a builder to build their home and be in control of the project and will be ultimately responsible for the project

HCRA Licensing Fees and Requirements

HCRA has introduced licensing fees that are intended to cover HCRA’s costs in creating and overseeing a modern licensing regime for builders and the costs associated with ensuring the consumers are protected.

The licensing fees are collected annually and are not based on the license category. A new licence costs $3,000. Renewal fees are $500 annually.

HCRA has also introduced a new Regulatory Oversight Fee – a flat fee of $145 paid on a per-home basis. This fee will be collected by Tarion as part of the new home enrolment process and will then be forwarded to HCRA.

Ontario Builder Directory

The HCRA has created the Ontario Builder Directory. The directory is meant to act as the official source of background information about Ontario’s more than 5,000 home builders and vendors. The directory is searchable by both the construction location and the builder’s or vendor’s information.

In a move towards enhanced transparency, the new directory will provide consumers with significantly more information than the previous versions of the directory administered by Tarion. For instance, the new directory will disclose any charges laid by the HCRA. Previous versions only displayed convictions.

Failure to Comply with HCRA Requirements Results in Charges

HCRA has the power to monitor licensed builders and vendors, identify and take action against illegal and unethical builders, and. manage the complaints process for consumers.

After a finding of misconduct, the HCRA can revoke a licence, refuse to renew a licence, or suspend a licence. In addition, the HCRA has broad power to deal with improper and illegal conduct by those that violate the NHCLA.

The HCRA can lay charges under the New Home Construction Licensing Act, 2017 (NHCLA), the Ontario New Home Warranties Plan Act (ONHWPA) or the Provincial Offences Act (POA).

A conviction for an offence under the NHCLA, ONHWPA, and POA may come with fines; imprisonment; an order to pay compensation and/or make restitution. These cases are heard in provincial court.

HCRA Enforcement Actions

First set of HCRA Charges – August 2021

In August of 2021, the HCRA charged Ideal (BC) Developments Inc. with ten counts under the ONHWPA and one count under the NHCLA. The charges relate to freehold properties on Bostwick Crescent in Richmond Hill.

The HCRA alleges that Ideal (BC) Developments Inc. engaged in illegal vending, ie entering into an agreement of purchase and sale without a licence and without being registered with Tarion Warranty Corporation. The count under NHCLA is for allegedly failing to produce evidence during a search warrant.

Second set of HCRA Charges – January 5, 2022

In its second enforcement action since inception, the HCRA has charged property developer Christopher Lamb and his company at the time, 1970175 Ontario Inc., with 52 charges in violation of the ONHWPA.

1970175 Ontario Inc., also known as the Novel Condominiums project in the Niagara Falls area, is charged with twenty-six counts of illegally acting as a vendor of a new home. Mr. Lamb, as an Officer of the numbered corporation, is charged with twenty-six counts in his personal capacity.

In connection with the above charges, the HCRA has also filed a Notice of Proposal where it outlines its intent to refuse renewal licences for other businesses run by Mr. Lamb, including Growth Social Houses Inc. due to not only the above allegations but also criminal charges pending against Mr. Lamb in other proceedings.

Is Your Builder Properly Licensed and Registered?

The HCRA is actively engaged in ensuring compliance with the new consumer protection provisions of the NHCLA. If you are looking at buying a new home, you would be well advised to ensure that the builders you are considering are properly licensed and registered. Regardless of the outcome of the hearings against Ideal (BC) Developments and Mr. Lamb and his companies, the prospective buyers of those projects likely experienced quite a few sleepless nights worrying about what will happen with their deposits, their investments, and their future homes.

Mississauga Real Estate Lawyers Advising on New Build Construction and Home Builders

The Mississauga real estate lawyers at Bader Law represent individual and corporate buyers and sellers in both residential and commercial real estate transactions. We will advise you on your options, help secure your interests, and protect your financial investments. Contact us online or at (289) 652-9092 to learn how we can help.

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Real Estate

New for 2022: Transparent Real Estate Bids and Other Changes to Ontario Real Estate Law

Ontario’s real estate industry is growing, developing, and adapting at an unprecedented pace. The rapid growth has led to calls for improvements in transparency and consumer protection.

The Ontario Government has taken action in response to some of the issues that the exponential growth has led to, and in March of 2020, the government’s Trust In Real Estate Services Act, 2020 (“TRESA 2020”) received Royal Assent. TRESA 2020 is intended to address the need for a stronger and more ethical business environment, to protect consumers when making their biggest purchase: real estate.

As a background: TRESA 2020 amends the Real Estate and Business Brokers Act, 2002 (“REBBA”), the legislation that governs real estate brokerages, brokers and salespersons (registrants) in Ontario. REBBA and its regulations are administered and enforced by the Real Estate Council of Ontario (“RECO”). RECO is a “not-for-profit corporation that is delegated by the provincial government to administer and enforce REBBA 2002 and associated regulations”.

Phased Approach to TRESA Implementation

The government has taken a phased approach to the process of developing proposed regulations to bring the related TRESA, 2020 legislative changes into force.

TRESA Phase 1 – Completed: Personal Real Estate Corporations and Standardised Titles

In Phase 1, salespersons and brokers were allowed to incorporate and be paid through a personal real estate corporation (PREC), and allowed them to use more recognisable terms, such as “real estate agent” and “REALTOR®,” to describe brokers and salespersons in advertisements. Phase 1 was completed in October of 2020.

Phase 2 began with a consultation on a draft Code of Ethics. With the benefit of industry and stakeholder input, the government has now prepared a revised draft Code of Ethics and has prepared several other draft regulations as part of Phase 2.

TRESA Phase 2 – In progress: New Code of Ethics, Open Bidding, and New RECO Powers

On December 10, 2021, the Ministry of Government and Consumer Services Branch of the Government of Ontario (“ the Ministry”) published for comment draft regulations that are needed to bring certain provisions of TRESA into force. In addition to the revised Draft Code of Ethics, the Ministry is also proposing several other regulations to continue TRESA implementation. We discuss the key regulations below.

New REBBA Code of Ethics

As noted above, the Government first solicited feedback on a New Code of Ethics in the summer of 2021. The Revised Draft Code of Ethics separates ethical requirements from technical and procedural requirements. In fact, the government now proposes to move the technical and procedural requirements in the Current Code of Ethics be moved to other REBBA Regulations.

The updated Code is supposed to be principle-based and will articulate the requirements that RECO registrants must comply with in relation to matters such as integrity, quality of service, and conflicts of interest.

Disclosing Details of Competing Bids on Real Estate

Under current REBBA rules, real estate brokerages representing a seller are required to disclose the number of competing offers to every person who makes a written offer. However, the current rules simultaneously prohibit these brokerages from discussing the contents of these offers. So buyers are left to bid in the dark, adding uncertainty to an already emotionally fraught decision.

The Ministry is proposing to open up the offer process and allow selling brokerages to disclose the details of competing offers at the seller’s direction. However, brokerages would be barred from disclosing any personal information or identifying information through this process to protect the privacy of competing bidders.

New REBBA Information and Disclosure Obligations

The Ministry is also proposing to make changes to the type of information that RECO registrants must provide to buyers, sellers and others about real estate services. Part of the new disclosure will also provide information about the registrants’ obligations towards their clients and educate individuals on their rights in relation to registrant conduct.

New Powers for the Real Estate Council of Ontario

Under the proposed regulations the Ministry is seeking to enhance the powers and tools available to RECO.

The proposed changes include:

  1. updates to the information RECO must make publicly available
  2. outlining the purposes for which RECO can require registrants to provide transactional data and related information;
  3. empowering RECO with additional authority over administrative matters related to certain advertising, record-keeping and notice requirements.

New Regulation for RECO Discipline Committees

As well as empowering RECO with additional authority over administrative matters, the Ministry is also proposing new regulations to deal with the rules and procedures of RECO’s Discipline Committee and ensuring that the proposed new regulation encompasses all the requirements currently spread between several different procedures and regulations.

REBBA Auctioneer Exemption

Under s. 5 of REBBA, an auctioneer can obtain an exemption from the requirement to register with RECO. The Ministry is proposing to tighten the exemption requirements and proposing that, as a condition to qualify for the exemption, an auctioneer must have no duties other than receiving, managing and recording competing bids and accepting the highest bid as part of an auction bidding process.

TRESA Phase 2 – Implementation Timelines

The consultation period for the current set of proposed regulations will close on January 24, 2022. The Ministry is currently targeting September 2022 as the date of implementation of these proposals.

TRESA Phase 3 – Future: Administrative Penalties and New Certification Programs

As part of Phase 3, the Ministry intends to set out the details of the administrative penalty regime that was enabled through TRESA, 2020, as well as consider further areas of regulatory reform (including the introduction of certification programs or changes and updates to the registration process. specialist certification program, updates to the registration process).

Mississauga Real Estate Lawyers Helping Individuals with Their Residential and Corporate Real Estate Transactions

Real estate transactions represent some of the largest financial transactions in the life of any individual or company. Whether you are a first-time homebuyer or a large corporation acquiring a new space to grow your business, it is important to retain a law firm with the experience and skill necessary to ensure your interests are protected and the transaction closes without issue.

At Bader Law, we represent individual and corporate buyers and sellers in both residential and commercial real estate transactions in Mississauga and throughout Greater Toronto Area. We will advise you on your options, help secure your interests, and protect your financial investments. Contact us online or at (289) 652-9092 to learn how we can help.

Categories
Commercial Real Estate

Commercial Tenant Who Abandoned Premises During COVID-19 Pandemic Ordered to Pay Landlord $850,000

Earlier this year, we provided a summary of court decisions on commercial rent relief cases in Canada during the COVID-19 pandemic.

More recently, an Ontario court ruled on a case in which a commercial landlord brought its tenant to court after it vacated the premises in breach of its lease during the COVID-19 pandemic.

Parties Agree To Commercial Lease With Renewal Clause

The landlord and tenant, who ran a physiotherapy clinic, signed a lease agreement in 2015 for a term of five years, ending on October 4, 2020. The base rent in 2020 was $12,825 per month. 

The lease also contained a renewal clause, which provided that the tenant had to provide six months’ notice prior to the expiry of the lease as to whether it wanted to renew or terminate the lease. The clause further stated that if the landlord did not receive the tenant’s notice, the lease would automatically renew for another term of five years. 

This meant that the tenant needed to inform the landlord of its decision to renew or terminate the lease by April 4, 2020.

On March 17, 2020, Ontario declared a state of emergency in response to the COVID-19 pandemic.

Tenant Abandons Premises During COVID-19 Pandemic

In March 2020, as a result of the COVID-19 pandemic and the declared health emergency, the tenant was forced to drastically reduce its services, which had a serious impact on its ability to earn revenue. As a result, the landlord agreed to the tenant’s request to defer its April 2020 rent until December 2020.

However, the tenant failed to provide the landlord with any notice of termination or renewal by April 4, 2020.

Instead, the tenant sent the landlord a letter on June 5, 2020 indicating that it intended to terminate the lease effective October 4, 2020. Three days later, the landlord responded stating that the renewal clause had been triggered and the lease would therefore renew for another five years.

At the end of September 2020, the tenant abandoned the premises and ceased paying rent. 

The landlord therefore went to court seeking summary judgment against the tenant.

The landlord submitted that the lease renewed automatically, while the tenant argued that the tenancy ended without renewal in October 2020.  

Court Rules in Favour of Landlord

The court noted the tenant’s main argument that the pandemic amounted to force majeure and nullified its obligation to give notice of renewal or non-renewal by 6 months prior to the renewal or termination date. The court observed, however:

“The [tenant]’s affiant deposes that due to the pandemic closure the clinic was in financial crisis and was in no position to consider renewal for another 5 years. That may be the case, but it does not explain why the [tenant] could not give notice of non-renewal. The [tenant] argues that the pandemic conditions prevented it from carrying on business as usual, but the Lease did not require business as usual and the [landlord] had already deferred some of the spring 2020 rent. All the [tenant] had to do in order to stop the automatic renewal of the term of the Lease was to give the [landlord] notice to that effect. The [tenant] failed to do so, and so the renewal provision was deemed to be exercised and the Lease was renewed for five additional years.”

Additionally, the court found that the wording of the renewal provision was precise, unambiguous and easy to interpret.

In the result, the court therefore ruled in favour of the landlord and ordered the tenant to pay the landlord damages for defaulted rent in the amount of $850,592.

Get Help

Real estate transactions represent some of the largest financial transactions in the life of any individual or company. Whether you are a first-time homebuyer or a large corporation acquiring a new space to grow your business, it is important to retain a law firm with the experience and skill necessary to ensure your interests are protected and the transaction closes without issue.

At Bader Law, we have an extensively experienced business law team and regularly represent our corporate clients in various real estate matters. We work with business clients ranging from small family-run operations to large enterprises, helping our clients manage their real property interests with an eye toward growth. Our business and real estate teams work closely together to provide thorough and strategic representation on all commercial real estate transactions, including commercial leasing issues affecting landlords and tenants.

The Mississauga real estate lawyers at Bader Law represent individual and corporate buyers and sellers in both residential and commercial real estate transactions in Mississauga and throughout Greater Toronto Area. We will advise you on your options, help secure your interests, and protect your financial investments. Contact us online or at (289) 652-9092to learn how we can help.

Categories
Real Estate

The Impact of Entire Agreement Clauses in Sale Agreements

In a recent Ontario case, a buyer learned of the importance of “entire agreement clauses” after the seller was granted re-possession of a coin laundry operation in a failed business sale.

Seller Puts Coin Laundry Business Up for Sale

The seller owned and operated a coin laundry business in Brampton beginning in 2017. The laundry also offered wash and fold and dry-cleaning services. 

In February 2019, the seller decided to sell his business.  He arranged for a real estate agent to list the laundry business for sale on the Multiple Listing Services (“MLS”). 

Buyer Purchases Coin Laundry Business

In April of 2019, the buyer searched for a small retail business to purchase to generate income for his family, for which he had approximately $100,000 to invest. He had no prior experience owning or operating a business.

In May of 2019, the buyer read about the seller’s business being for sale through an MLS search. The purchase price was $349,000. 

The buyer claimed that, at their first meeting, the seller told him that the coin laundry business was profitable and generated $12,000 per month in gross income. Based on these representations, the buyer offered to purchase the business for $290,000.

Entire Agreement Clauses Included in Purchase Agreement

On May 16, 2019, the parties signed a conditional Agreement of Purchase and Sale (“APS”) for the agreed upon purchase price, with a deposit of $20,000. The APS did not list the business’ income, but contained a provision allowing the buyer to independently verify the business’ income, which he did not do. In addition, the APS contained two “entire agreement” clauses. Entire agreement clauses mean that only the representations made in the agreement can be relied upon, to the exclusion of any other representations made in the course of the negotiations regarding the deal.

Subsequently, the buyer was notable to obtain financing to complete the purchase of the business. The listing broker therefore advised the buyer that a vendor take-back mortgage (“VTB”) could be used to complete the transaction, to which the buyer agreed. As such, the buyer agreed to pay $100,000, and there would be VTB for the remaining $190,000, repayable over four years with interest, with monthly payments of $4,540. A missed or late payment would entitle the seller to initiate enforcement proceedings without notice and the business would be transferred back to the seller.

Parties Sue Each Other Over VTB and Business Income Representations

Following the close of the sale of the business, the monthly income was significantly less than the $12,000 that the buyer had believed. In fact, from August of 2019 to March of 2021, the gross monthly income generated from the coin laundry was only $3,557. 

Thus, after the second month, the buyer could no longer afford to make the VTB payments and, in the third month, his rent cheque did not clear. He had to use his personal line of credit to cover business expenses.

The seller then commenced an action against the buyer to, among other things, enforce the VTB and to regain possession of the coin laundry business.

In response, the buyer counterclaimed alleging fraudulent and/or negligent misrepresentation, as well as breach of contract. The buyer contended that the seller had negligently or fraudulently misrepresented the income of the business.

Court Rules Against Buyer Based on Entire Agreement Clauses

The court looked at the APS to resolve the buyer’s claim. It noted that the APS contained two entire agreement clauses. The court then explained: 

“To the extent there is a dispute about whether [the seller] made a representation to [the buyer] at their first meeting about the income of the business, the [seller] relies upon the two “entire agreement” clauses in the APS. They confirm there is no representation affecting this Agreement other than as expressed in the Agreement itself.  They further rely on the several opportunities that the defendants had to conduct their own due diligence, to exercise conditions to cancel the APS, to consult a lawyer, real estate agent or accountant, or to demand greater financial disclosure during the negotiations and prior to closing.”

As such, the court ruled that the buyer was not entitled to claim misrepresentation because the entire agreement clauses prevented him from relying on any representations that were not included in the written APS. Thus, to the extent that the seller may have misrepresented the laundry business’ income, he could not make a claim based on that statement.

In addition, the court observed:

“There was also evidence submitted which could have legitimately explained why the higher $12,000 monthly income was earned prior to the sale. Notably, [the seller]’s family (his son and wife) were operating and attending to the business each day. In contract, the [buyer] did not devote equal care to the business which could explain the difference in revenue. There are other variables that could legitimately explain any reduced income, other than a negligent misrepresentation.”

In the result, the court dismissed the buyer’s claim of misrepresentation  and granted the seller’s motion for summary judgment to enforce the VTB and regain possession of the laundry business.

Get Help

Real estate transactions represent some of the largest financial transactions in the life of any individual or company. Whether you are a first-time homebuyer or a large corporation acquiring a new space to grow your business, it is important to retain a law firm with the experience and skill necessary to ensure your interests are protected and the transaction closes without issue.

At Bader Law in Mississauga, our real estate lawyers have been providing excellent service to individuals, families, and businesses throughout the Greater Toronto Area for over a decade. We can assist on any real estate transaction, from a simple sale or purchase to a complex commercial acquisition. Our real estate lawyers, in conjunction with highly skilled and trusted real estate law clerk Renella Seelochan, have considerable experience in a wide range of real estate matters. From beginning to end, we will oversee your transaction with an eye to mitigating your risk and protecting your significant financial investment.

The business lawyers at Bader Law have been establishing trusted relationships with business owners and entrepreneurs in the Mississauga community for over a decade. We work with each client to develop an effective strategy focused on their specific needs and will create custom agreements designed to avoid conflict and mitigate risk.  When conflicts do arise, we represent clients in a variety of issues and work to find effective and practical resolutions in every situation. To discuss your needs with a skilled lawyer, contact us online or at (289) 652-9092.

Categories
Residential Real Estate

Real Estate Agent Denied Commission Following Misrepresentations

In a recent Ontario case, the court denied a real estate agent’s application to be paid a commission after it found that he had made misrepresentations to the buyer about the document she was signing.

Real Estate Agent Claims Commission After Failed Deal

A real estate agent worked with a couple for more than a year to find a home in the Greater Toronto Area for their daughter. 

On November 12, 2018, the couple decided to make an offer on a property in Mississauga. Because the couple lived in a country outside of Canada, the offer was made in their daughter’s name to avoid certain taxes. As such, the daughter signed the agreement of purchase and sale as well as a buyer’s representation agreement (“BRA”).

The BRA entitled the real estate agent to a 2.5 percent commission on the Mississauga property and any single-family home the daughter bought in the Greater Toronto Area between November 12, 2018 and March 11, 2019. 

However, the daughter’s offer on the Mississauga property was rejected. 

Subsequently, on November 22, 2018, the daughter put an offer on a home in Toronto through a different real estate agent. The offer was accepted and the deal closed on January 4, 2019.

The real estate then brought an application to court seeking an order that the daughter pay him a 2.5 percent commission on the Toronto property. 

In response, the daughter brought an application seeking a declaration that the BRA was void and unenforceable. Specifically, the daughter relied on the defence of non est factum whereby a person may escape their legal obligation under a contract by proving that they were mistaken about the contents of what they were signing.

Court Rules That Daughter Does Not Have to Pay Commission 

At the outset, the court explained that in order to succeed in a defence of non est factum, the daughter had to establish the following three elements:

  1. That she was mistaken about the nature of the BRA; 
  2. That her mistake as to the nature of the BRA was the result of a misrepresentation by the real estate agent; and 
  3. That she was not careless in signing the BRA.

On the first element, the court found that the daughter had been mistaken about the nature of the BRA. While the parties presented conflicting evidence, ultimately the court found that the daughter had not been adequately involved in the discussions between the real estate agent and the parents prior to signing the BRA. Additionally, there were issues relating to the parents’ understanding of the BRA themselves, as the document was not translated and the parents relied on the real estate agent’s translation of the content. As such, the evidence showed that the real estate agent had misled the parents into believing that the BRA only applied to the Mississauga property as opposed to all subsequent deals that might be made. As such, the parents and daughter were mistaken about the contents of the BRA.

Further, the court found that the daughter had proven the second element, holding that the real estate agent had misled the parents directly and the daughter indirectly about the content of the BRA. The court found that the real estate agent had misrepresented the BRA to the daughter’s father by stating that it related to the Mississauga property only. The father then relayed the information to the daughter before she signed the documents. The court therefore stated:

“[The daughter] misunderstood the fundamental nature of the BRA and her misunderstanding was the result of [the real estate agent]’s misrepresentation to [the father].”

Finally, the court found that the daughter had proven the third element. Because the court had already held that the real estate agent had been misleading about the contents of the BRA, it held that the daughter had not been reckless in signing the agreement, stating:

“[The daughter] received an explanation about the BRA from [the real estate agent] through her father. In my view, it was reasonable for [the daughter] to rely on the information she received from [the real estate agent] through her father as the basis of her understanding of the documents. I find that [the daughter] was not careless in signing the documents even though she did not read them.”

As a result, the court held that the daughter had established non est factum. It therefore ruled that the BRA was void and the daughter did not have to pay a commission to the real estate agent.

Get Help

Real estate transactions represent some of the largest financial transactions in the life of any individual or company. Whether you are a first-time homebuyer or a large corporation acquiring a new space to grow your business, it is important to retain a law firm with the experience and skill necessary to ensure your interests are protected and the transaction closes without issue.

At Bader Law, we have an extensively experienced business law team and regularly represent our corporate clients in various real estate matters. We work with business clients ranging from small family-run operations to large enterprises, helping our clients manage their real property interests with an eye toward growth. Our business and real estate teams work closely together to provide thorough and strategic representation on all commercial real estate transactions, including commercial leasing issues affecting landlords and tenants.

The Mississauga real estate lawyers at Bader Law represent individual and corporate buyers and sellers in both residential and commercial real estate transactions in Mississauga and throughout Greater Toronto Area. We will advise you on your options, help secure your interests, and protect your financial investments. Contact us online or at (289) 652-9092to learn how we can help.

Categories
Commercial Real Estate

Court of Appeal Issues Ruling on Commercial Lease Expiry Date Ambiguity

In a recent Ontario Court of Appeal decision, the court allowed a landlord’s appeal, finding that the application judge had erred in finding ambiguity in a lease where none existed.

Parties Go to Court over Term of Lease

A grocery store signed a lease in a shopping mall in March 1979 with an initial term of 25 years. The expiry date was February 28, 2004. The store also had a right to five successive renewal periods of five years each. As such, the ultimate expiry date was to be February 2029, or a maximum of 50 years from the date the lease commenced. 

However, in 1999, when the store was planning the construction of an addition, the parties negotiated an amendment to the lease which, among other things, extended the term of the lease by ten years, commencing on March 1, 2004 and expiring on February 28, 2014. The amendment gave the store the option to extend the term of the lease for three additional periods of five years each for a total of five options or 25 years. 

The landlord brought an application for a declaration that the maximum term of the lease was 50 years, expiring in 2029. The store argued that the lease extended until February 2039, at the latest.

There was also an issue raised regarding the replacement of the property’s roof, which will not be covered here.

Lower Court Finds in Favour of Tenant

The application judge dismissed the landlord’s application on the lease issue, finding in favour of the store and declaring that the lease would expire in 2039 at the latest. He found that the lease was ambiguous because there were two reasonable interpretations of the lease term clauses. 

The first interpretation, advanced by the landlord, was that the maximum 50-year term of the lease was not altered by the amendment. As such, it argued that the lease would expire in 2029 at the latest. 

However, the second interpretation, advanced by the store, was that the parties had wanted to extend the length of the lease and the amending agreement had added an additional ten years to the maximum potential length of the lease. Therefore, the lease would expire in 2039 at the latest.

Faced with such differing interpretations, the application judge held that the factual matrix did not help resolve the ambiguity in the lease. As a result, the application judge examined the extrinsic evidence presented. He found that the extrinsic evidence, including the notice of lease registered on title and an estoppel certificate (both of which stated that the lease could be extended to 2039), supported the store’s position that the amendment extended the maximum length of the lease by ten years.

The landlord appealed, arguing, among other things, that the application judge had erred in determining the lease was ambiguous by failing to consider the lease as a whole.

Court of Appeal Finds in Favour of Landlord

At the outset of its decision, the court stated plainly: “A contract must be interpreted as a whole.” 

The court then reviewed the terms of the lease and the amendment, following which it explained:

“The application judge committed an error of law by failing to consider the wording of the provisions in the context of the agreement as a whole. If he had not committed this error, he would have come to the conclusion that there was no ambiguity….

When the 1999 amendment is read within the context of the original lease, there is no ambiguity…

In short, the application judge fell into error in failing to consider the actual wording within the context of the lease as a whole, which led him to find that the provision was ambiguous. This was an extricable legal error…”

As part of its reasoning, the court explained that if the application judge’s interpretation was given effect, it would have led to an overall term of 60 years rather than 50, which had been specifically precluded by the original lease. However, the parties had not amended the 50-year limit provision. The court opined that if the parties had intended to vary the maximum lease term they would have done so, but did not.

As such, the court allowed the landlord’s appeal and declared that the expiry date of the lease was 2029, and not 2039 as the store had argued.

Get Help

Real estate transactions represent some of the largest financial transactions in the life of any individual or company. Whether you are a first-time homebuyer or a large corporation acquiring a new space to grow your business, it is important to retain a law firm with the experience and skill necessary to ensure your interests are protected and the transaction closes without issue.

At Bader Law, we have an extensively experienced business law team and regularly represent our corporate clients in various real estate matters. We work with business clients ranging from small family-run operations to large enterprises, helping our clients manage their real property interests with an eye toward growth. Our business and real estate teams work closely together to provide thorough and strategic representation on all commercial real estate transactions, including commercial leasing issues affecting landlords and tenants.

The Mississauga real estate lawyers at Bader Law represent individual and corporate buyers and sellers in both residential and commercial real estate transactions in Mississauga and throughout Greater Toronto Area. We will advise you on your options, help secure your interests, and protect your financial investments. Contact us online or at (289) 652-9092to learn how we can help.