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.
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