chairs

Sidney TroisterC. Arb., C.S., LSMTorkin Manes LLP

Joel Kadish Barrister and Solicitor

day one April 3, 2017

14TH ANNUAL Real Estate Law Summit

*CLE17-0031001-A-PUB*

DISCLAIMER: This work appears as part of The Law Society of Upper Canada’s initiatives in Continuing Professional Development (CPD). It provides information and various opinions to help legal professionals maintain and enhance their competence. It does not, however, represent or embody any official position of, or statement by, the Society, except where specifically indicated; nor does it attempt to set forth definitive practice standards or to provide legal advice. Precedents and other material contained herein should be used prudently, as nothing in the work relieves readers of their responsibility to assess the material in light of their own professional experience. No warranty is made with regards to this work. The Society can accept no responsibility for any errors or omissions, and expressly disclaims any such responsibility.

© 2017 All Rights Reserved

This compilation of collective works is copyrighted by The Law Society of Upper Canada. The individual documents remain the property of the original authors or their assignees.

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Library and Archives Canada Cataloguing in Publication

14th Annual Real Estate Law Summit

ISBN 978-1-77094-813-7 (Hardcopy)ISBN 978-1-77094-814-4 (PDF)

14th annual Real Estate Law Summitapril 3 & 4, 2017 9:00 a.m. – 4:00 p.m.

live in toronto, university of toronto, Chestnut Conference Centre, 89 Chestnut Street or live WeBCaSt

iS thiS Summit the moSt ComprehenSive real eState CpD program out there? Many of your peers say “absolutely.” Why not join them and our accomplished presenters to learn about Planning Act dos and don’ts, and to get much-needed clarity on joint retainers, independent legal advice and independent legal representation.

Total CPD Hours = 10 h Substantive + 2 h Professionalism p LSUC CPD is an Accredited Provider of Professionalism Content

$600 live in toronto $525 live WeBCaSt+ tax (includes PDF materials and access to the on-demand webcast)

Attendees Get a Special Hotel Rate Visit our website to learn how to secure your special rate at the Doubletree by hilton in downtown Toronto.

Register online at store.lsuc.on.ca/cpd?realestate

Sidney troister C.arb., C.S., lSm Torkin Manes LLP

chairs

Joel KadishBarrister and Solicitor

#RESummit17

Welcome and Opening Remarks from Chairs9:00 a.m. – 9:10 a.m. Sidney Troister, C. Arb., C.S., LSM, Torkin Manes LLP Joel Kadish, Barrister and Solicitor

Planning Act: How Mistakes Happen, How to Stop Making Them (5 Minutes p ) 9:10 a.m. – 9:40 a.m. Sidney Troister, C. Arb., C.S., LSM, Torkin Manes LLP

Abutting Land Searches 9:40 a.m. – 9:55 a.m. Ronald Melvin, Rose, Persiko, Rakowsky, Melvin LLP

“Please Satisfy Yourself” and Other Passive Aggressive Responses to Invalid Requisitions 9:55 a.m. – 10:15 a.m. Simon Crawford, Bennett Jones LLP

“It’s Your Opinion, You Sign It” and Other Valid Reponses from Clerks to Lawyers (10 Minutes p ) 10:15 am – 10:25 a.m. Simon Crawford, Bennett Jones LLP

Super Priorities: Lending and Enforcement Issues 10:25 a.m. – 10:50 a.m.Amanda Jackson, Gowling (WLG) Canada LLP

Go Ahead and Ask Us (Question and Answer Session) 10:50 a.m. – 11:00 a.m.

Coffee and Networking Break 11:00 a.m. – 11:15 a.m.

Recent Changes to the Residential Tenancy Act: What Your Clients Need to Know 11:15 a.m. – 11:35 a.m.Joseph Hoffer, Cohen Highley LLP

Positive Covenants (Owen & Black Decision): Where are We Now? 11:35 a.m. – 12:00 p.m. Andrew Fortis, C.S., Hummingbird Lawyers LLP

Latest Environmental Issues 12:00 p.m. – 12:15 p.m. Rosalind Cooper, C.S., Fasken Martineau DuMoulin LLP

Go Ahead and Ask Us (Question and Answer Session) 12:15 p.m. – 12:30 p.m. Lunch will be provided 12:30 p.m. – 1:30 p.m. Your First Look at Second Units 1:30 p.m. – 1:45 p.m. Leo Longo, C.S., Aird & Berlis LLP

Understanding First Nations Land Claims1:45 p.m. – 2:20 p.m. Kathleen Lickers, Barrister and Solicitor In conversation with: Sidney Troister, C.Arb., C.S., LSM, Torkin Manes LLP

10 Things Real Estate Practitioners Need to Know about the Forfeited Corporate Property Act, 2015 2:20 p.m. – 2:45 p.m. Brenda Linington, Senior Counsel, Ministry of the Attorney General, Civil Law Division, Ministries of Energy / Economic Development and Growth / Research, Innovation and Science / Infrastructure / Accessibility

Marta Zoladek, Legal Counsel, Ministry of the Attorney General, Civil Law Division, Ministries of Energy / Economic Development and Growth / Research, Innovation and Science / Infrastructure / Accessibility Coffee and Networking Break 2:45 p.m. – 3:00 p.m. Abandonment of Easements 3:00 p.m. – 3:25 p.m. Craig Carter, C.S., LSM, Fasken Martineau DuMoulin LLP Key Covered Risks Which You Should be Aware Of 3:25 p.m. – 3:50 p.m. Karen Decker, Senior Vice President, Underwriting and Legal, Stewart Title Guaranty Company

Raymond Leclair, Vice-President, Public AffairsLawyers’ Professional Indemnity Company (LAWPRO®)

William McCarthy, Senior Legal Counsel and Chief Underwriter, FCT Go Ahead and Ask Us (Question and Answer Session) 3:50 p.m. – 4:00 p.m.

end of Day one 4:00 p.m.

Reception 4:00 p.m. – 6:00 p.m. Registrants attending live in Toronto are invited to join us for a reception immediately following Day One.

SCHEDULE OF EVENTS Day onE: april 3, 2017

Welcome and Opening Remarks from Chairs9:00 a.m. – 9:10 a.m. Sidney Troister, C. Arb., C.S., LSM, Torkin Manes LLP Joel Kadish, Barrister and Solicitor

ILA and ILR Simplified (30 Minutes p ) 9:10 a.m. – 9:40 a.m. Doug Bourassa, Chaitons LLP

Requirements to Pay: Don’t Let CRA Sneak One By You 9:40 a.m. – 9:55 a.m.Valerie Edwards, Torkin Manes LLP

Backdating Documents: Is It Ever Proper? (15 Minutes p )

9:55 a.m. – 10:10 a.m. Valerie Edwards, Torkin Manes LLP

Intersection of Family Law and Real Estate (10 Minutes p ) 10:10 a.m. – 10:40 a.m.Jennifer Wilson, Torkin Manes LLP

Go Ahead and Ask Us (Question and Answer Session) 10:40 a.m. – 10:50 a.m.

Coffee and Networking Break 10:50 a.m. – 11:05 a.m.

How to Prepare for a Spot Audit (30 Minutes p ) 11:05 a.m. – 11:35 a.m.Rimpal Hinduja, CPA, CGA, Supervisor, Spot Audit The Law Society of Upper Canada

Deborah Loh, CPA, CA, MAcc, Spot Auditor The Law Society of Upper Canada

Condominium Resale Searches on a Reasonable Budget 11:35 a.m. – 12:00 p.m. Robert Miller, Chaitons LLP

Go Ahead and Ask Us (Question and Answer Session) 12:00 p.m. – 12:15 p.m.

Lunch will be provided 12:15 p.m. – 1:15 p.m.

A Lot from the DOT: An Update on Recent Bulletins and Other Musings from The Director of Titles1:15 p.m. – 1:40 p.m.Jeffrey Lem, C.S., Director of Titles, Ministry of Government and Consumer Services

Preparing for Teraview Web® 1:40 p.m. – 2:05 p.m.Jennifer Connell, Product Manager, Teranet Inc.

5 Things to Look For When Your Client is Buying a Small Commercial Building (10 Minutes p ) 2:05 p.m. – 2:25 p.m.Alan Sless, Borden Ladner Gervais LLP

Coffee and Networking Break 2:25 p.m. – 2:40 p.m.

Addressing CRA Liens 2:40 p.m. – 3:00 p.m. Ian Speers, Barrister and Solicitor

Review of Agreements of Purchase and Sale with Builders 3:00 p.m. – 3:20 p.m.Mark Karoly, Harris Sheaffer LLP

When is Right, Wrong. And. When is Wrong, Right (10 Minutes p )

3:20 p.m. – 3:50 p.m.Reuben Rosenblatt, Q.C., LSM, Minden Gross LLP

Go Ahead and Ask Us (Question and Answer Session) 3:50 p.m. – 4:00 p.m.

Program Ends 4:00 p.m.

SCHEDULE OF EVENTS Day TWo: april 4 2017

Register online at store.lsuc.on.ca/cpd?realestate

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Chairs: Sidney Troister, C.Arb., C.S., LSM, Torkin Manes LLP Joel Kadish, Barrister and Solicitor

April 3 - 4, 2017

SKU: CLE17-0031000-A-REG

Table of Contents DAY ONE: TAB 1 Common Planning Act Mistakes …………………………….…… 1 – 1 to 1 – 9

The Planning Act and Why Lawyers Make Mistakes and How You Can Avoid Making Them ……………………… 1 – 10 to 1 – 33

Sidney Troister, C.Arb., C.S., LSM, Torkin Manes LLP TAB 2 Abutting Land Searches ……………………………………………… 2 – 1 to 2 – 8 Ronald Melvin, Rose, Persiko, Rakowsky, Melvin LLP TAB 3 “Please Satisfy Yourself” and Other Passive Aggressive

Responses to Invalid Requisitions …………………………….. 3 – 1 to 3 – 26

Simon Crawford, Bennett Jones LLP

14TH

ANNUAL Real Estate Law Summit

2

TAB 4 "It's Your Opinion, You Sign It" and other Valid Reponses from Clerks to Lawyers ……………………………… 4 – 1 to 4 – 26

Simon Crawford, Bennett Jones LLP TAB 5 Super Priorities: Lending and Enforcement Issues ……… 5 – 1 to 5 – 11 Amanda Jackson, Gowling (WLG) Canada LLP TAB 6 Recent Changes to the Residential Tenancies Act, 2006:

What Your Clients Need to Know ……………………………… 6 – 1 to 6 – 16 Joseph Hoffer, Cohen Highley LLP TAB 7 Positive Covenants (Owen & Black Decision):

Where are We Now? …………………………………………………… 7 – 1 to 7 – 11 Andrew Fortis, C.S., Hummingbird Lawyers LLP

TAB 8 A Primer on Clean-Up of Contaminated Lands …………….. 8 – 1 to 8 – 9 Rosalind Cooper, C.S., Fasken Martineau DuMoulin LLP TAB 9 Your First Look at Second Units …………………………………. 9 – 1 to 9 – 10 Leo Longo, C.S., Aird & Berlis LLP Patrick Harrington, Aird & Berlis LLP TAB 10 Understanding First Nations Land Claims …………………… 10 – 1 to 10 – 8 Kathleen Lickers, Barrister and Solicitor

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TAB 11 10 Things Real Estate Practitioners Need to Know About the Forfeited Corporate Property Act, 2015 ……. 11 – 1 to 11 – 8

Brenda Linington, Senior Counsel, Ministry of the Attorney General, Civil Law Division, Ministries of Energy/ Economic Development and Growth / Research, Innovation and Science/ Infrastructure / Accessibility

Marta Zoladek, Legal Counsel, Ministry of the Attorney General, Civil Law Division, Ministries of Energy / Economic Development and Growth /Research, Innovation & Science Infrastructure / Accessibility

TAB 12 Abandonment of Easements ……………………………………… 12 – 1 to 12 – 40

Craig Carter, C.S., LSM, Fasken Martineau DuMoulin LLP

TAB 13 Key Covered Risks Which You Should be Aware Of …… 13 – 1 to 13 – 5

Karen Decker, Senior Vice President, Underwriting and Legal, Stewart Title Guaranty Company

Raymond Leclair, Vice-President, Public Affairs Lawyers' Professional Indemnity Company (LAWPRO®)

William McCarthy, Senior Legal Counsel and Chief Underwriter, FCT

TAB 1

Common Planning Act Mistakes AND

The Planning Act and Why Lawyers Make Mistakes and How You Can

Avoid Making Them

Sidney Troister, C.Arb., C.S., LSM

Torkin Manes LLP

April 3, 2017

14TH ANNUAL

Real Estate Law Summit

COMMON PLANNING ACT MISTAKES

Sidney H. Troister, LSM1 Real Estate Law Summit 2017

April 3, 2017

______________________________________________________________________________

A good part of my practice is acting for LawPRO and title insurance reviewing alleged Planning Act mistakes and then figuring out how to f ix them. F ixing Planning Act mistakes is a whole different topic in i tself but i t should be noted that fixing your own mistakes can be dangerous. Sometimes, lawyers with the best of intentions further complicate matters with their own repairs and r isk jeopardizing the title policies that their clients have or their own errors and omissions insurance by doing so. Be careful when you embark on a title repair necessitated by your own actions since it can create problems.

Planning Act mistakes usually a rise i n one of two ways. The first s cenario, of course, is that somebody’s title is bad and the error is discovered at the time of resale. A requisition is received, the problem discovered and the time to fix it is short. The second scenario is that somebody’s title is good, but the mortgage that they gave to somebody else is bad. That is usually discovered when the lender is selling under power of sale and the defect i s discovered when the lender is selling. Again, the time to fix the problem is often short.

The following are what I consider to be the top five recurring mistakes so many lawyers make when it comes to Planning Act. Remarkably, some of them are simple.

1. The failure to appreciate that PINs, lots on concessions, parts on reference plans are irrelevant for Planning Act.

Section 50(3)(a) provides for one exception to the rule against dealing with land where one owns abutting l and: “ the l and i s de scribed i n a ccordance w ith a nd i s w ithin a r egistered p lan of subdivision”. S ubsection 50(5) contains further provisions for part lot control that provides for prohibitions where land is on a plan of subdivision but you are dealing with part of a lot or block on the plan.

Except for land on a plan of subdivision and more particularly, the whole of a lot or block on a registered plan of subdivision, there is no ot her type of description of land that is exempt from the prohibitions of the Planning Act.

In particular, the whole of a PIN, the whole of a lot on a concession, and the whole of a part on a reference p lan g et n o s pecial t reatment u nder t he Act. O nly t he whole lot on the pl an of subdivision is exempt. Most importantly, the whole of a PIN is not the same as the whole of a lot on a plan of subdivision. It is the legal description, not the PIN, that governs for Planning Act.

1 Sidney Troister is a partner at Torkin Manes LLP. He is the author of The Law of Subdivision Control in Ontario, the th ird edition of which was published in 2012 by Canada Law Book and is considered the leading expert in Ontario on the application of section 50 of the Planning Act.

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2. They think the PIN is the title

A corollary to the first mistake is misunderstanding the legal description of the land in question. It is all too easy to pull a PIN and think you have searched title and have all of the land. We no longer have t o pul l out dus ty books a nd l ook at pl ans, and w e rarely have t o pl ot a l egal description the way we used to. Now, we can go on-line, plug in the municipal address, and the computer will spit out a Land Titles parcel page for us . I have seen, un fortunately, too many lawyers rely on what the computer spits out and considered that the title. They then draft all of their documents based on that PIN number. H ere i s the p roblem. They don’t know what the property boundaries look like. A t best, they have schematic maps from Teranet that show PIN numbers but they may not pul l the maps. Those maps are not particularly precise. T hey also don’t show what the property looks like and because it costs extra to search adjacent lands, some lawyers just don’t do it.

I h ave h ad cases w here a p arcel o f l and co nsisted o f 4 s eparate P INs an d t his w as a ci ty residential property. The property ended up being not only part of a property, but also part of a closed road allowance on the east side. The property also consisted of a lot addition on the west side, and the 4 P INs or properties that made up t his single family dwelling property, was never consolidated into a single PIN.

The result is that the lawyer put a mortgage on only one of the 4 PINs and breached the Planning Act. In the old days, we had to copy our description off an old transfer in order to get the proper legal description. Now, the computer pre-populates the legal description, so if you only know of one PIN because you didn’t pull out the transfer or otherwise investigate very carefully what the land looks like, the mortgage may be registered on only part of the land being dealt with. It leads to an obvious Planning Act problem since the owner owned abutting land but as well, needs to rectify the transfer to include the missing lands.

3. The failure to search abutting landowners.

The rule is s imple. No person shall convey land by deed or t ransfer i f they own any abutting land. That may be what is regarded as a restriction against the current owner but it also applies to everyone in the chain. No one in the past could transfer land if they owned abutting land since a past contravening transfer meant that the transferee never got title and therefore had no title to give. T he rule applies to all land in Registry and all land in Land Titles so it is easy to make mistakes.

What do you search?

You search t itle to your land and create a chain of owners back as far as is necessary. It may mean having to pull and examine prior PINs, or pulling prior land titles or registry office parcel pages to get a relevant chain of owners. You then search the t itle to the owners of all abutting lands to that with which you are dealing and match the chain of those owners against the owners in your c hain. If t here w as a ny s imilarity i n ownership, you h ave t o s ee i f t here w as a ny applicable exception that allowed the t ransactions in your chain to proceed in accordance with the Act.

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When don’t you have to search abutting owners?

You do not need to search for Planning Act compliance in the following cases:

1. The land being dealt with is the whole of a lot on a plan of subdivision, provided that the plan is not deemed “deregistered” under subsection 50(4). Subsection (3) says one of the exceptions to the rule is if your land is on a plan of subdivision, and subsection (5) relates to “part lot control” i .e. if you are only dealing with part of a lot, you then have to be concerned about Planning Act. So, the simple rule again is if your land is the whole of a lot on a pl an of s ubdivision w here t he pl an of s ubdivision ha s not be en de emed t o be deregistered, you do not need to search abutting owners.

2. The l and b eing d ealt w ith i s t he i dentical p arcel of l and t hat w as pr eviously c onveyed

with an unstipulated consent. This is the “once a consent, always a consent” rule under subsection 50(12). T he key in r elying on s ection 50(12) i s that it is th e land that was conveyed with consent that gets the seal of approval. That is the only parcel of land that can be conveyed without having to search back through the chain of title.

3. The land being dealt with is part of a lot or block on a plan of subdivision if a part lot control exemption bylaw was registered and has not expired. If your land is part of a lot on a plan of subdivision and is the subject matter of a “part lot control exemption bylaw” under subsection (7), you do not need to search abutting ownership. The reason for that is the land is exempt under subsection 50(3) because i t i s on a plan of subdivision and because of the bylaw, subsection (5) (part lot control) does not apply.

How far back do you search?

Here are the rules:

In order to determine if the property title has any prior Planning Act contravention that would nullify t he ow ner’s t itle or t he ow ner’s ability t o c onvey o r ot herwise de al w ith t he l and, assuming t he abutting l ands ne ed t o be s earched, you m ust s earch fo r p rior Planning Act contraventions b y s earching t he ow nership of all a butting l ands b ackwards t o t he f irst t o be encountered in your owner’s chain of title of the following possible “start dates”, prior to which date Planning Act contraventions are irrelevant:

1. A transfer or deed with the three statements under subsection 50(22) of the Planning Act; Section 50 ( 22) says, wherever land has been conveyed with the 3 statements, any prior conveyance is deemed not to have prevented the conveyance of an interest in land.

2. The da te t hat t he l ands be came Land T itles C onverted Q ualified T itle (LTCQ) and

provided t hat t he pa rcel r egister s pecifically excepts section 44( 1) pa ragraph 11 of t he Land Titles Act. Section 44 sets out all of the rights, liabilities and encumbrances that all land is subject to under the Land Titles Act. There is a list of paragraphs that sets out the exceptions to the rule of good title upon first registration and what it essentially says is if your land is in Land Titles, even though it is in Land Titles, your land is subject to certain limitations, one of which is prior contraventions of section 50 of Planning Act. However, that r ule can b e ex cepted i f a contrary i ntention i s ex pressed o n t he P arcel R egister.

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LTCQ parcels typically make converted title subject to section 44(1) of the Land Titles Act except for paragraph 11, which is the section dealing with section 50 of the Planning Act. What it means is that your title is good regardless of any Planning Act breaches that occurred pr ior t o t he d ate of c onversion. Note, onc e your l and i s i n Land T itles, i t continues t o be s ubject to t he Planning Act. S o, unl ess you have a p arcel t hat w as previously conveyed with consent, or that is the “whole of a lot on a plan of subdivision”, you have to worry about Planning Act on a go-forward basis from the date the land was converted.

3. A transfer with consent, provided it was not given with the stipulation that it applied only

to the one transaction - subsection 50(12). 4. The date of issuance of a validation certificate under section 57. 5. The registration of a transfer or charge with consent or the registration of a condominium

or pl an of s ubdivision - subsection 50( 14). If the l and you a re de aling w ith i s not identical t o l and pr eviously conveyed w ith c onsent but i s pa rt of l and previously conveyed w ith c onsent, search ba ck onl y to t he l ast t ransfer with c onsent. Subsection (14) says any breach o f t he Planning Act prior t o a consent c ures pr ior breaches.

6. June 27, 1970, pr ovided that no subdivision control by-law has been passed prior to this

date. 7. The date of the passage of a subdivision control by-law passed between June 15, 1967,

and June 27, 1970. 8. June 15, 1967, if a subdivision control by-law was passed prior to June 15, 1967. Prior to

1970, l and was onl y subject t o t he Planning Act if the local municipality had passed a bylaw making Planning Act apply. After 1970, all land in Ontario became subject to the Planning Act. In 1967, the Province passed a Planning Amendment Act that provided that any breaches of the Planning Act occurring prior to June 15, 1967 were deemed cured, or deemed never to have prevented the conveyance of an interest in land. T his means that even i f an owner breached the Planning Act prior to 1967, t he t itle was cured effective June 15, 1967. S o, if there was never a bylaw passed invoking subdivision control, you would search back to 1970. If a bylaw was passed prior to 1967, you would search back only as far as 1967 because the errors were corrected as of June 15, 1967, and if you find a bylaw passed between 1967 and 1970, then you search back as far as the bylaw.

The above dates are significant in that in each case Planning Act contraventions for a particular parcel o f l and are i rrelevant i f t hey oc curred p rior t o t he m ost r ecent start da te. O nce you determine your start date, search the chain of title of all abutting lands from the start date to the present. If there is no similarity of ownership between the owner’s lands and abutting lands from the s tart da te t o t he pr esent, t hat i s, i f no pa st owner of your l and a lso s imultaneously ow ned abutting land, and you are satisfied that there has never been a conveyance or other dealing with your l and while a butting l ands w ere unde r t he s ame o wnership o r control, you c an r ely on paragraph 50(3)(b) or 50(5)(a) as protecting any prior dealings from being contraventions of the Act.

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Where s imilarity o f o wnership ar ises at t he t ime o f a conveyance o r o ther t ransaction, o ne i s forced to look to the other exceptions or otherwise requisition compliance.

4. Forgetting that when you buy and give a mortgage, the mortgage may be affected by the ownership of abutting land.

It i s not uncommon for an owner t o bu y the property adjacent or pe rhaps abutting land at the rear. Lawyers may forget that even though the transfer to your buyer may be valid, as soon as the buyer acquires title to the new property, title is merged and the mortgage that the buyer gives will co ntravene t he Planning Act. It ha ppens f requently t hat l awyers i nadvertently m erge properties that are otherwise separate, leading to the giving of mortgages that contravene.

5. Misunderstanding subsection 50(12) - Once a consent, always a consent. 1390957 Ontario Ltd. v. Acchione

Prior t o M arch 1979, i t w as ge nerally h eld t hat a c onsent t o c onvey had no e ffect on a ny subsequent transaction and was only effective for the one transaction for which it was sought and given. A consent t o c onvey o r m ortgage P arcel A va lidated onl y t hat pa rticular t ransaction i n question and conferred no future or subsequent benefit on the parcel.

In M arch 1979, subsection 50( 12) was added t o the Planning Act. Where a p arcel o f l and i s conveyed with consent, the prohibitions in subsections 50(3) and (5) do not apply to subsequent conveyances o r other t ransactions i nvolving the i dentical pa rcel of l and, unless i t is s tipulated otherwise when the consent is granted. Lawyers should carefully review any consent certificate on which they intend to rely to ensure that the consent was not stipulated that subsection (3) or subsection (5) shall apply to any subsequent conveyance or transaction. Subsections 50(12) and 50(13) provide as follows:

50.-(12) Where a parcel of land is conveyed by way of a deed or transfer with a consent given under s ection 53, subsections (3) and (5) of t his section do not apply to a subsequent conveyance of, or other transaction involving, the identical parcel of land unless the council or the Minister, as the case may be, in giving the consent, stipulates e ither that subsection (3) or s ubsection (5) shall apply to any such subsequent conveyance or transaction. 50.-(13) Where t he co uncil o r t he Minister stipulates in acco rdance with subsection ( 12), t he c ertificate pr ovided f or u nder s ubsection 53( 42) s hall contain a reference to the stipulation, and if not so contained the consent shall be conclusively deemed to have been given without the stipulation.

Figure 4

A B C

Assume Owner 1 owns Parcels A and B and Owner 2 owns Parcel C. Owner 1 conveys Parcel B to Owner 2 with consent. Owner 2 later wishes to sell Parcel B to a third party.

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In the above example, assuming the consent was obtained after March 1979, Owner 2 would be free to convey Parcel B without obtaining another consent, since the identical parcel for which a previous c onsent t o c onvey had b een obt ained i s be ing c onveyed again a nd t here was no stipulation in the earlier consent that it was to be applicable to the first conveyance only. While there is , a s o f th is w riting, a r easonable n umber o f c ases in dicating th at th is s ection is a lso applicable in respect of consents granted prior to March 1979, care should be taken in relying on these cases.

It should a lso be noted that i t i s only a consent to a conveyance that has this l asting effect. A consent given to a mortgage, for instance, has no lasting or future effect and subsection 50(12) is not applicable. Similarly, where land is divided and one parcel is conveyed away with consent and t he remainder p arcel i s co nveyed l ater, o nly the co nsented p arcel gets t he b enefit o f t he subsection even though the committee granting the consent considered that two new parcels of land were being created. The subsection affords the benefits only on t he parcel conveyed with consent. The remainder parcel gets no such protection or benefit.

Note that subsection (12) applies only where land has been conveyed with a consent. A mortgage with c onsent c onfers n o f uture be nefit t o t he property. S ubsection ( 14) on t he ot her h and provides a r etroactive c uring of t itle w here t he land i s not onl y conveyed but a lso c harged or mortgaged with consent.

In the ab ove ex amples, therefore, w here O wner o wns p arcels A an d B and p arcel B h as previously be en c onveyed w ith c onsent, O wner c an c onvey or m ortgage pa rcel B w ithout concern f or t he ow nership of a butting l and be cause pa rcel B w as pr eviously c onveyed w ith consent; subsection (12) provides relief. However, Owner cannot convey or mortgage Parcel A because it was never previously conveyed with consent. Owner would be dealing with Parcel A while ow ning abutting land a nd s uch a t ransaction w ould c ontravene t he Act. T here i s no exception unde r s ubsections ( 3) a nd ( 5) t o de alings w ith l and where t he a butting l and w as previously conveyed with a consent. This i llogical result was recently confirmed, based on t he plain language of the section, in 1390957 Ontario Limited v. Acchione.2

This i s a c ase i nvolving s ubsection 50( 12), t he “ once a c onsent, al ways a co nsent” r ule. The facts in Acchione are simple. Orfi, the developer owned two parcels of land, A and B. He got a consent to convey A and then conveyed A from himself to himself. He then conveyed parcel B to Acchione. Acchione then sold the property and the requisition came in that Acchione had not acquired good title because the vendor owned abutting land. The argument was “once a consent, always a consent”-- we severed the property in 2, so the transfer to Acchione is valid. The Court of A ppeal rightly concluded t hat t he Planning Act being limite d in s cope is to be i nterpreted strictly and it provides that it is only land previously conveyed with consent that gets the benefit of subsection (12). So, parcel A could be conveyed anytime regardless of ownership of abutting land but parcel B as l ong as it w as unde r t he s ame ow nership as p arcel A could not be s o conveyed. Do not believe that “once a consent, always a consent” gives freedom of conveyance to both parcels involved in a severance. That is not the case.

2 Ironically, a mortgagee selling l and under p ower o f s ale h as t he ab ility t o d eal b oth w ith t he l and pr eviously conveyed with consent and the land abutting the land previously conveyed with consent. See subsections 50(18) (c) and (d)

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6. The failure to review consent certificates, part lot control exemption bylaws.

There is a provision in subsections (12) and (13) that says that on any consent, the municipality has the ability to stipulate that subsection (12) will not continue to apply to that particular parcel of land conveyed with consent. Often this stipulation will be put on properties where there is a consent for a land addition. T hat way, “once a consent, always a consent” will not continue to apply t o t he pr operty. When you are r eviewing t itle and you s ee t hat a c onsent ha s b een endorsed on the transfer, make sure that the consent does not contain the stipulation if the vendor owns any abutting land. The stipulated consent does not get the benefit of subsection (12). This comment a pplies e qually t o granting m ortgages w here t he ow ner ow ns a butting l and a nd t he lawyer is relying on a prior consent to convey. The consent cannot have been stipulated.

It is amazing how many lawyers proceed on the basis of a prior but they ignore the stipulation.

Another mistake that is not infrequent involves the sunset provisions contained in part lot control exemption bylaws. In this example, a Builder gets approval to build 10 semi-detached houses, 5 buildings each, 10 semi-detached houses, and rather than have to apply for a consent for each conveyance, he obt ains a pa rt l ot c ontrol e xemption b ylaw. T he b ylaw in a nticipation of t he builder bui lding out these units and selling them cal ls for a s unset date o f perhaps 1 year o r 2 years after the bylaw is passed. T his saves the municipality from having to go to the bother of repealing t he b ylaw. It h as not been un common t hat t he bui lder di d n ot s ell a ll t he uni ts as quickly as he thought, and the last one or two units was sold after the sunset date of the bylaw. The l awyers did not review t he b ylaw d etails an d completed t he t ransaction, di d not s ign t he Planning Act statements and, of course, the title is now defective, because when the transfer was done, t here w as no p art lot control b ylaw i n p lace. Lawyers should check t he s unset d ate i n bylaws for part lot control exemption to make sure they are still valid.

Something else I have seen a few times is the builder’s sell before the part lot control exemption is registered. Those bylaws are not retroactive and they have to be registered on title after which they are effective.

7. Trusts and tenure of title

Taking title as “A” for one parcel and “A in trust” for the second parcel does not prevent merger. Land T itles doe s not r ecognize t rusts a nd t he Planning Act is a ll a bout who ha s t he pow er t o dispose of land. “A” and “A in trust” has only one person with that power – A. Similarly, A and B as tenants in common on one parcel and as joint tenants on the adjacent parcel does not avoid a merger. A and B still retain the full power of disposition.

Disclosing the existence of a trust where the tenure is different continues to be debated. A as the owner of one parcel and B as the owner of a s econd parcel where it is disclosed that B holds in trust f or A r aises th e q uestion w hether th ere is a me rger. S ome w ill s ay th at th e p ower o f disposition over t he s econd pa rcel registered in t he name of B rests with A . T hen a gain, on e would have to know the terms of the t rust and that begs the question of actual or constructive notice. Others say that the provisions of the Land Titles Act trumps the common law of power of disposition since the Land Titles Act does not recognize trusts and moreover, the Land Titles Act provides that only the person registered as the owner on title has the power to dispose of the land.

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62. (1) A notice of an express, implied or constructive trust shall not be entered on the register or received for registration. R.S.O. 1990, c. L.5, s. 62 (1).

(2) Describing the o wner of freehold or leasehold land or of a charge as a trustee, whether the beneficiary or object of the trust i s or is not mentioned, shall be deemed not to be a notice of a trust within the meaning of this section, nor shall such description impose upon any person dealing with the owner the duty of making any inquiry as to the power of the owner in respect of the land or charge or the money secured by the charge, or otherwise, but, subject to the registration of any caution or inhibition, the owner may deal with the land or charge as if such description had not been inserted. R.S.O. 1990, c. L.5, s. 62 (2).

68. (1) N o p erson, o ther t han t he r egistered o wner, i s en titled t o t ransfer o r ch arge r egistered freehold or leasehold land by a registered disposition. R.S.O. 1990, c. L.5, s. 68 (1).

I t end to the l atter approach s ince, at l east in m y experience, the two parcels were h istorically separate and it is usually only as a result of inadvertent conveyancing practice that the issue even arises. T he historical tendency of the case law has been to find against a t echnical merger and this interpretation supports that result. Ideally, one should anticipate the problem and avoid i t althogether b y c arefully na ming ow ners of a butting pa rcels. O ne s imple s olution i s t o a dd a second beneficial owner (even to the extent of a nominal degree of ownership) to one of the two parcels to e liminate th e a rgument th at th e b eneficial p ower o f d isposition r ests w ith th e s ame party.

MY WISH LIST FOR PLANNING ACT

My wish list for Planning Act probably derives from errors I have seen over the years and how easy it would be for the Ministry to fix those inconsistencies in the Act without harming planning principles. A s an aside, back in 2000, I sent the Red Tape Committee a draft revised Planning Act that proposed a nu mber of amendments t o t he pr ovisions t hat w ould clarify and q ualify existing provisions. Recently, with the assistance of the OBA, I have met with members of the Ministry of the Municipal Affairs and Housing to discuss my proposals. They seemed interested assuming t hat t hey und erstood t he c onveyancing i ssues ( they are pl anners, not r eal e state conveyancing lawyers) and we will have to wait and see if change is coming.

In any event, if I had my druthers, I would do a number of things including the following:

1. I w ould m ake a n e xception f or de aling w ith l and t hat a buts l and pr eviously c onveyed under the Planning Act. That would solve the Acchione problem. It is ironic that under the Act, an owner who owns Parcels A and B, where Parcel A was previously conveyed with a consent, can convey A but cannot convey B. H owever, i f there is mortgage on both A and B, the lender can deal with ei ther parcel A or parcel B because subsection (18), the power of sale provision, says that a mortgagee can sell land previously conveyed with consent as well as land abutting land previously conveyed with consent.

2. The second amendment I would make i s t o change the search rules and have a s liding

rule j ust l ike w e ha ve f or 40 years s earches i n Land R egistry t hat s ays that an y contravention occurring 25 years or 20 years prior to the date of dealing is deemed cured. This will avoid the need to search back Planning Act breaches back to 1967 or 1970.

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3. I would pr opose a n e xception f or l and abutting l and t hat ha s b een put i nto a Condominium. You would be surprised the number of times people discuss a requisition about Phase I that has been condominiumized, then they want to put a mortgage on Phase II which has not, and the condominium is owned by the Developer.

4. Certainly, the retroactivity of subsection (12) issue is almost looking as a thing of the past

but every now and then, i t still arises as an i ssue. S ubsection (12) came i nto ef fect in March 1979 and provides that if land is conveyed with consent, you don’t need a consent for a further dealing with the land. The question is whether a consent granted in 1973 would have that same effect and, of course, that has never been resolved.

5. Subsections (16) and (17), the partial discharge provisions, are a total mess and you have

to r ead m y book t o unde rstand w hy. Essentially, it is a p artial c ode th at e xcludes a ll kinds of exceptions and issues arise frequently.

6. Have a rule to apply to cancel a consent. This would allow flexibility where one wants to

add to a parcel previously conveyed with consent and has to take complicated measures to transfer away a part of a parcel to the municipality.

7. Lastly, I would make the rules for obtaining consents much lot easier including the ability

of someone other than an owner to comply for consent, freeing up the rules on validations so t hat you c ould va lidate t itle e ven i f i t di d no t c omply w ith th e O fficial P lan o r th e zoning bylaws but all those are for conversations for another day.

STROISTE/1773941_.1

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THE PLANNING ACT AND WHY LAWYERS MAKE MISTAKES

And How You Can Avoid Making Them

Sidney H. Troister LSM1 April 3, 2017.

1. INTRODUCTION

Section 50 of t he Planning Act affects v irtually all tr ansactions involving real p roperty interests in Ontario. Its purpose is to control the manner in which land can be divided and dealt with, and non-compliance is fatal to any intended transaction. Because it i s restrictive in nature, limiting the manner in which owners can deal with their land, it has been the subject of numerous schemes for avoidance, legislative amendment and extensive litigation to determine the manner in which it affects transactions. Contrary to some beliefs, electronic searching and conversion to Land Titles has not eliminated Planning Act compliance for the title search process but in fact, has added another layer of rules and issues. S ection 50 i s still very much a concern in the title searching process and a source for errors and defective titles. It still requires an understanding of the law and the rules of compliance and contravention that form the basis on which one decides how to search title.

This paper i s not i ntended a s a n in depth t reatment of s ection 50, bu t r ather a s a n overview of its prohibitions and more important subsections and a starting place for appreciating how t he s tatute affects t he t itle s earch p rocess. It i s d esigned onl y as a n i ntroduction t o t he section and should be read in that context.

There i s a s ubstantial body o f c ase l aw r egarding s ection 50 of t he Planning Act. Although one m ust be aware of t he r eported d ecisions, t hey are not n ecessarily t he k ey t o avoiding contraventions of section 50, or resolving issues relating to the effect of the section on prior t ransactions. M any of t he r eported d ecisions ha ve a risen i n t he c ontext of ve ndor a nd purchaser applications where the two sides of an issue are often not strenuously argued, since the parties m ay be i ntent o nly on s olving a m utual pr oblem as qui ckly and c heaply as pos sible, without extensive research or consideration of planning policies. Inconsistent judicial decisions are not un common and, consequently, may make i t di fficult for t he pr actitioner t o r ely on t he reasoning contained in any one decision to resolve questions of title. As a result, it is important to understand the plain wording of the subsections and also to appreciate the case law pertaining to t hem i n t he context i n w hich t he de cisions h ave b een rendered, s o t hat t he c ases can be properly and carefully applied to ensure compliance with the Act.

1 Sidney H. Troister, LSM is a senior partner at Torkin Manes LLP. He has written extensively on Planning Act, conveyancing and other issues for many years. He is the author of the Third Edition of The Law of Subdivision Control In Ontario: A Practical Guide to Section 50 of the Planning Act.

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2. EFFECT OF CONTRAVENTIONS: SUBSECTION 50(21)

50(21) An a greement, conveyance, m ortgage or c harge m ade, or a po wer o f appointment granted, a ssigned or exercised in contravention of t his s ection or a predecessor thereof does not create or convey any interest in land, but this section does not a ffect an a greement e ntered i nto s ubject t o t he e xpress c ondition contained therein that such agreement is to be effective only if the provisions of this section are complied with.

Subsection 50( 21) pr ovides t hat a ny t ransaction pr ohibited unde r s ection 50 ( or t he equivalent s ection in a n e arlier s tatute) “does n ot cr eate o r co nvey any i nterest i n l and”. T he types of documents specified in the subsection include agreements, conveyances, mortgages and charges. In the event that section 50 is contravened, the contravening document does not create an interest in land and, as a result, the purpose of any such document (i.e., to convey or charge) is substantially undermined, since in each case the essence of the document is to create or convey an interest in land.

Since the effect of a contravention is to negate the document’s ability to create or convey an interest in land, it is essential that one ensures compliance with section 50 in all transactions.

3. THE BASIC PROHIBITION: SUBSECTION 50(3) – WHEN TO SEARCH

(3) No person shall convey land by way of a deed or transfer, or grant, assign or exercise a power of appointment with respect to land, or mortgage or charge land, or e nter i nto a n agreement of s ale and pur chase of l and or enter i nto a ny agreement that has the effect of granting the use of or right in land directly or by entitlement to renewal for a period of twenty-one years or more unless,

(a) t he l and i s d escribed i n ac cordance with an d i s w ithin a r egistered p lan o f subdivision;

(b) the grantor by deed or transfer, the person granting, assigning or exercising a power of appointment, the mortgagor or chargor, the vendor under an agreement of purchase and sale or the grantor of a use of or right in land, as the case may be, does not retain the fee or the equity of redemption in, or a power or right to grant, assign or exercise a power of appointment in respect of, any land abutting the land that is being conveyed or otherwise dealt with other than land that is the whole of one or more lots or blocks within one or more registered plans of subdivision;

(c) the land or any use of or right therein is being acquired or disposed of by Her Majesty in right of C anada, Her M ajesty i n r ight o f O ntario or by any municipality;

(d) the land or any use of or right therein is being acquired for the purpose of an electricity distribution line, electricity transmission line, hydrocarbon distribution line or h ydrocarbon t ransmission l ine w ithin t he m eaning of P art V I of t he Ontario Energy Board Act, 1998 and in respect of which the person acquiring the land or any use of or right therein has made a declaration that it is being acquired

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for such purpose, which shall be conclusive evidence that it is being acquired for such purpose;

(d.1) t he l and or a ny u se of or r ight t herein i s be ing a cquired, di rectly or b y entitlement t o r enewal f or a pe riod of 21 or m ore years but not m ore t han 50 years, for t he pur pose o f a renewable en ergy generation facility o r r enewable energy project, and in respect of which the person acquiring the land or any use of or right therein has made a declaration that it is being acquired for such purpose, which shall be conclusive evidence that it is being acquired for such purpose;

(e) t he l and or any us e of or r ight t herein i s be ing a cquired for t he purposes of flood control, erosion control, bank stabilization, shoreline management works or the preservation of environmentally sensitive l ands under a project approved b y the M inister of N atural R esources unde r s ection 24 of t he Conservation Authorities Act and i n r espect of w hich a n of ficer of t he c onservation a uthority acquiring the land or any use of or right therein has made a declaration that it i s being acquired for any of such purposes, which shall be conclusive evidence that it is being acquired for such purpose;

(f) a consent is given to convey, mortgage or charge the land, or grant, assign or exercise a power of appointment in respect of the land or enter into an agreement in respect of the land;

(g) t he l and or a ny use of or right t herein w as acquired f or t he pu rpose of an electricity distribution line, electricity transmission line, hydrocarbon distribution line or h ydrocarbon t ransmission l ine w ithin t he m eaning of P art V I of t he Ontario Energy Board Act, 1998 and i s be ing disposed of t o t he pe rson f rom whom it was acquired; or

(h) t he onl y us e of or r ight i n l and t hat i s g ranted i s a n e asement or c ovenant under the Conservation Land Act.

The pr ohibition i s c ontained i n t he pr eamble t o t he s ubsection a nd pr ohibits a pe rson from e ffecting a br oad variety of t ransactions r elating t o l and or i nterests i n l and. “Person” includes a corporation and any other type of body, such as a partnership or a sole proprietorship, as well as an individual. The subsection applies to everyone.

The following is a sample of the significant prohibited transactions:

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1. conveying land by deed or transfer;

2. mortgaging or charging land;

3. entering into an agreement of sale and purchase of land; and

4. entering i nto a ny a greement t hat ha s t he e ffect of g ranting t he us e of or r ight i n l and, directly or indirectly by entitlement to renewal, for a period of twenty-one years or more (i.e., any agreement that would give someone the right to use land for twenty-one years or more). For example, this would include:

(a) granting a right-of-way or easement in perpetuity;

(b) granting a lease with a term of twenty-one years or more;

(c) granting a fifteen year lease with an option to renew for ten years; or

(d) granting an option to purchase.

Therefore, it must be recognized that section 50 i s, on i ts face, extremely broad and that virtually all common transactions, except perhaps short term leases without options to purchase or renew, are caught by the prohibition.

It s hould b e not ed, ho wever, t hat t he c ourts ha ve i nterpreted t he proscribed and enumerated transactions very narrowly, with the result that other types of procedures which have the e ffect of di viding l and but w hich a re not s pecifically pr ohibited a re not a ffected b y t he section. It appears f rom th e c ase la w th at th e f ollowing a re n ot in cluded in th is g eneral prohibition even though they may divide land:

vesting orders under the Family Law Act

vesting orders under the Trustee Act

4. THE EXCEPTIONS TO THE PROHIBITION

There are six situations in which the basic prohibition is not applicable and compliance with an y o ne o f t he s ix ex ceptions m akes t he t ransaction permitted. E ach e xception i nvolves either a t ransaction w here l and i s n ot b eing di vided or w here m unicipal or g overnmental consideration of planning issues is present. In these s ix s ituations, therefore, the application of the Planning Act is irrelevant.

4.1 Plans of Subdivision: Paragraph 50(3)(a)

No transaction is prohibited by subsection 50(3) of the Planning Act so long as the land that is th e s ubject ma tter o f th e tr ansaction is “described i n a ccordance w ith a nd i s w ithin a registered plan of subdivision”. This is a reasonable exception, given that governmental approval would already have been granted to the pattern of land division laid out on the plan before the plan of subdivision was registered. With respect to land within a registered plan of subdivision, the underlying purpose of section 50 has already been served and need not hinder or prevent the conveyance of or other dealings with land within the registered plan.

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However, one must note the application of the “part lot” control provisions contained in subsection 50(5) of the Act, which function as a substantial qualification to this exception (see Part 5 below). Simply, i f one is dealing with part of a lot on a plan of subdivision, subsection 50(5) and not subsection 50(3) applies.

Notwithstanding the above exception, it is possible for a municipality, for the purposes of section 50, to deem a plan of subdivision which has been registered for eight years or more, not to be a registered plan of subdivision, pursuant to subsection 50(4). Presumably, a municipality would c hoose t o pa ss such a b y-law w here i t w anted t o r egain planning c ontrol ov er a n established ar ea, p erhaps b ecause o f ch anges i n p atterns o f d evelopment o r m unicipal p olicy where the previously approved plan is considered obsolete. Note that the plan remains a plan of subdivision for all purposes except for the purpose of being included in paragraph 50(3)(a):

50(4) The council o f a local m unicipality m ay b y b y-law designate an y plan o f subdivision, or part thereof, that has been registered for eight years or more, which shall be deemed not to be a registered plan of subdivision for the purposes of subsection (3).

Note that such by-laws may have been passed and registered prior to a 40 year search period or ignored o r m issed i n c onverting l ands t o t he e lectronic s ystem. T here a ppears t o be no c ase about how one would resolve a compliance problem if the old by-law is not brought forward on conversion. While the title may be valid, the municipality may not regard the property as a lot for building permit purposes.

4.2 No Abutting Lands: Subsection 50(3)(b)

Paragraph (b) constitutes the major exception to subsection 50(3). This exception allows a person to carry out the transaction so long as he or she does not retain the fee or the equity of redemption (i.e., the right to recover unencumbered ownership of the land upon r epayment of a mortgage loan) in any land “abutting the land that i s being conveyed or otherwise dealt with”, unless the abutting land is the whole of a lot or block on a registered plan of subdivision.

If a pe rson de als w ith a ll of t he l and ow ned s o t hat t hat pe rson r etains no ow nership interest in any land having a common boundary with the land being dealt with, such dealing is permitted, s ince it c omplies w ith p aragraph 50(3)(b). However, de aling onl y with a pa rt of a parcel of land while retaining ownership of abutting land is prohibited because it would have the effect of dividing the parcel into two parcels. Note the exception to the rule if the retained land is the whole of a lot or block on a plan of subdivision. From a planning perspective, this situation should not be pr ohibited. I f t he w hole l ot or block i s e xempt be cause i t i s on a pl an o f subdivision (and not subject to the part lot control rule), it follows that the abutting part lot parcel should be similarly considered a separate parcel.

It i s t his s ubsection t hat g ives r ise t o t he ne ed t o s earch a butting ow nership. If one contravenes the Act by retaining a butting l and, t hen the t itle searcher m ust s earch o wners o f abutting land to confirm that there have been no historical breaches of the Act by the current and all past owners.

Typical search errors:

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1, Relying on a P IN a s constituting a n e ntire pr operty. P INs are t he i nvention of Teranet and its way of cataloguing parcels of land. A single property can consist of more than one PIN and as a result, one cannot rely on a PIN to constitute a single property for Planning Act purposes. Planning Act is interested in legal descriptions and not PINs which are irrelevant to a Planning Act search. Abutting land to every PIN must be searched unless the land described on the PIN is otherwise exempt. In simple terms, there is no exception in the Planning Act for land consisting of the whole of a PIN. In addition, consolidating properties into a single PIN does not in a ny w ay m erger t itles f or P lanning A ct pur poses. A sking t hat P INs be c onsolidated a s a condition of a consent does not merge the properties and serves no planning purpose.

2. Tenure of l and of ten c auses t itle pr oblems. T he ba sic r ule i s t hat one ow ns abutting land if all other people with the power to dispose of one parcel have power to dispose of the other. A most common error is believing that Smith owning one parcel and Smith in trust owning the abutting parcel keeps the parcels separate. Tenure is irrelevant. Who has the power to di spose i s what counts. Committees m ay be asked t o g rant consents of s eemingly s eparate properties because of the inadvertent merger by virtue of the manner in which title is taken.

3. Lawyers may inadvertently take title in a client’s name without making sure that the client does not own abutting land. As soon as title is taken in the same name, even though the p roperties w ere h istorically s eparate, t here i s m erger. A c onsent i s needed t o unw ind t he merger.

4. Mergers can occur as a result of the operation of law. Common examples are the owner of one parcel being registered in the name of A and the abutting parcel in the name of A and B as joint tenants. B then dies and the properties are merged as a matter of law.

The f ollowing e xamples w ill a ssist in a ppreciating th e p ractical ma nner in w hich th is basic exception to the prohibition operates and how the Act can be contravened. Assume Owner is the owner of various parts of this parcel of land.

If Owner owns only parcel B, Owner is able to sell it and rely on the “no abutting lands” exception to avoid a contravention of section 50. H owever, if Owner owns parcel B and C and only w ants t o sell p arcel B , retaining P arcel C , th e tr ansaction w ill n ot f all w ithin th e “no abutting lands” exception and Owner will have to find some other exception to the prohibition for the interest to pass. The same analysis would apply if Owner were mortgaging the land, or granting an option to purchase or a lease with a term of twenty-one years or more, etc.

On a pur chase of l and, one s hould e nsure t hat t he bu yer do es not ow n abutting l and. Taking t itle in the same name will create a m erger and a p roblem for a financing of the newly purchased land. Be warned that the same person but with a variation in the name does not keep the properties separate. John Smith and John A Smith or John Smith and John Smith in trust are still the same people.

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Figure 1

A B C

D E F

Variations on t he above fact situation give some idea as to how the subsection has been interpreted and applied:

1. Owner acquired parcel B in May 2012, and parcel C in June 2013. Historically, they had been separate properties. Can Owner now sell parcel B alone and rely on the “no abutting lands” exception even though, historically, there is no planning issue involved?

Subsection 50( 3) doe s not g ive a ny consideration t o t he pr ior hi story o f t he l ands i n question. For Planning Act purposes, all abutting land under the same ownership “merges” into one parcel, and the transaction is prohibited.

2. In t he s ame f act s ituation, w hen O wner b ought P arcel C i n 2 013, c ould he g ive a mortgage to the Bank to finance his purchase?

Owner would be giving a mortgage on one parcel of land while retaining ownership of abutting l and. T he mortgage would contravene the Act even though i t i s a mortgage given to finance a purchase.

3. If Owner owned parcels B and F, can Owner sell B and retain F? Lands which only meet at a poi nt ha ve b een h eld not t o a but. A s a result, “checker boa rding” can be us ed i n t he acquisition o f p arcels o f la nd, w hereby a lternating p arcels o f la nd a re u ltimately registered in different owner’s names to avoid future potential Planning Act contraventions. Parcels A, C and E would be purchased by Owner 1, and B, D and F purchased by Owner 2 to avoid merger.

4. Could Owner sell the mineral rights to parcel B and still retain the surface rights without the transaction contravening section 50?

Subsection 50( 2) pr ovides t hat i nterests i n l ands do not a but w hen t hey m eet on a horizontal plane only. As of December 9, 1994, subsection 50(2.1) deems land to exclude mining rights in or under land but not mining rights on the land.

5. Where O wner o wns p arcels B and C , can a s ale be e ffected i n s uch a s imultaneous manner that, at the instant of simultaneous conveyances, Owner retains no abutting land?

If t he t wo pa rcels are being c onveyed t o di fferent pe rsons, a ccording t o s ubsection 50(15), Owner is deemed to retain ownership in the abutting land for the purposes of subsection 50(3), unl ess t he c onveyances i nvolve “the s ame p arties acting i n t heir s ame r espective

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capacities”. If Owner were to convey parcels B and C simultaneously to Buyer X and Buyer Y respectively, t he m erged p arcel of B a nd C w ould be di vided c ontrary t o t he s ection a nd t he simultaneous transactions would not be protected by subsection 50(3)(b). However, Owner can convey p arcels B a nd C t o t he s ame B uyer a nd t he c onveyance w ill be pr otected b y t he “no abutting lands” exception. The parcels remain merged, now under Buyer’s ownership, and there is no violation of the spirit of the section.

6. If Owner owns parcels B and C, and C is a whole lot on a plan of subdivision but B is a part lot, can Owner sell B only and have the conveyance remain within the “no abutting lands” exception?

The l ast phr ase of pa ragraph 50( 3)(b) pr ovides t hat t he no -abutting-lands e xception applies if th e abutting land i s “the w hole of on e or m ore l ots or bl ocks w ithin one or m ore registered plans of subdivision” (see Part 5 below).

4.3 Transactions Involving Government: Paragraphs 50(3)(c), (d), (e)and (g)

The rationale for these exceptions is identical. If the government or a government agency wishes to acquire or dispose of lands in such a way that additional parcels will be created, or that land will be divided, one can onl y assume that i t, as the bod y with control over planning, has considered the planning implications of the transaction and found them to be satisfied.

Paragraph 50(3)(c) creates an exception to the general prohibition for the acquisition or disposition of land by Federal, provincial and municipal governments. As a result, for example, there can b e n o Planning Act contravention regarding c onveyances t o municipalities f or r oad widening purposes.

Paragraph 50(3)(d) relates more specifically to the acquisition of land or rights in land for the purpose of t ransmission l ines pursuant t o Part V I of t he Ontario Energy Board Act, 1998. Paragraph 50(3)(e) excepts from section 50 contravention the acquisition of land or rights in land for purposes of flood control, e rosion control, bank s tabilization, shoreline management o r the preservation of environmentally sensitive lands.

4.4 Consent Obtained: Paragraph 50(3)(f)

The o ther m ajor ex ception t o t he pr ohibition set out i n s ubsection 50(3) i s i f t he transaction is effected with the consent of the relevant governmental body.

“Consent” is defined in subsection 50(1) of the Act. Approval of an otherwise prohibited transaction may be given by the appropriate municipal, city or county council or the Ministry of Municipal Affairs and Housing, depending on t he location of the land, once i t has determined that planning principles will not be sacrificed or may be compensated for in some way. Often the consent will be granted by a Committee of Adjustment or Land Division Committee, which are simply bodies to which powers to grant consent have been delegated.

Pursuant to subsection 53(43), a consent lapses on the expiry of two years following the date on w hich the certificate of decision of consent was g iven, i f t he t ransaction approved for consent has not been carried out. The body granting consent can also shorten the lapse date or impose conditions on the grant of consent.

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For example, obtaining the necessary consent to the division of a parcel of land in half, for the purpose of selling the eastern half, and satisfying all conditions that are imposed upon the granting of the consent, allows the owner to sell the eastern half within the next two years, while continuing to own the western half, without contravention of section 50. The deed to the eastern half will be endorsed with a certificate that consent to the transaction has been given, to establish that th e tr ansaction is p ermitted. One m ust e nsure t hat t he t ransaction co ntemplated b y t he consent was completed within the prescribed time.

Common searching errors:

1. A certificate of consent is dated by the committee of adjustment or land division committee. T he t ransaction at tached t o t he consent cer tificate must be carried out within two years of the date of the certificate. S earchers must review the date on the certificate to ensure that the transaction occurred within the two year life of the certificate of consent. If the consent has lapsed, you may be asked to grant a new consent for the same transaction contemplated in the previous application.

2. Thinking once a consent always a consent makes 2 s eparate lots. It does and i t doesn’t. If one property is conveyed with consent, 2 l ots are created but i f they remain under common ow nership, onl y t he l ot c onveyed w ith c onsent ha s s tatus f or s eparate de aling. You may be asked to grant a consent or validation for a property that you previously assumed would be separate but where the property in question was the retained and not the severed property. See comments of subsection 12.

5. PART LOT CONTROL: SUBSECTION 50(5)

Paragraph 50(3)(a) allows a transaction to proceed without being in contravention of the Act so long as the land being dealt with is “within a registered plan of subdivision”. Subsection 50(5), however, was enacted to deal with the problem of the owner who wants further division of a parcel of land already within a plan of subdivision.

A pl an of s ubdivision e ssentially t akes a l arge parcel o f l and and t hrough a pl anning process, divides the parcel into many smaller parcels called lots or blocks. These lots or blocks are conveyable parcels and excepted under subsection 50(3) because they have been recognized for pl anning pur poses a s l ots w hich ma y b e d ealt w ith w ithout r egard to s ection 50 of t he Planning Act. Subsection 50(5) addresses the i ssue of an owner of a lot or block dealing onl y with part of that lot or block in a manner that would be contrary to original intentions when the plan of subdivision was approved.

(5) Where l and i s w ithin a pl an of s ubdivision r egistered b efore or a fter t he coming into force of this section, no person shall convey a part of any lot or block of the land by way of a deed, or transfer, or grant, assign or exercise a power of appointment in respect of a part of any lot or block of the land, or mortgage or charge a part of any lot or block of the land, or enter into an agreement of sale and purchase of a part of any lot or block of the land or enter into any agreement that has the effect of granting the use of or r ight in a part of any lot or block of the land d irectly o r b y entitlement to r enewal f or a p eriod o f tw enty-one years o r more unless,

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(a) the grantor by deed or transfer, the person granting, assigning or exercising a power of appointment, the mortgagor or chargor, the vendor under an agreement of purchase and sale or the grantor of a use of or right in land, as the case may be, does not retain the fee or the equity of redemption in, or a power or right to grant, assign or exercise a power of appointment in respect of, any land abutting the land that is being conveyed or otherwise dealt with other than land that is the whole of one or more lots or blocks within one or more registered plans of subdivision;

(b) the land or any use of or right therein is being acquired or disposed of by Her Majesty i n right of C anada, Her M ajesty i n r ight o f O ntario or by any municipality;

(c) the land or any use of or right therein is being acquired for the purpose of a utility lin e w ithin th e m eaning o f th e Ontario Energy Board Act, 1998 and i n respect of which the person acquiring the land or any use of or right therein has made a d eclaration t hat i t i s be ing acquired f or s uch pur pose, w hich s hall be conclusive evidence that it is being acquired for such purpose;

(c.1) t he l and or a ny us e of o r r ight t herein i s being acquired, di rectly or b y entitlement t o r enewal f or a pe riod of 21 or m ore years but not m ore t han 50 years, for t he pur pose o f a renewable e nergy generation facility or r enewable energy project, and in respect of which the person acquiring the land or any use of or right therein has made a declaration that it is being acquired for such purpose, which shall be conclusive evidence that it is being acquired for such purpose;

(d) t he l and or any us e of or r ight t herein i s be ing acquired for t he purposes of flood control, erosion control, bank stabilization, shoreline management works or the preservation of environmentally sensitive l ands under a project approved b y the M inister of N atural R esources unde r s ection 24 of t he Conservation Authorities Act and i n r espect of w hich a n of ficer of t he c onservation a uthority acquiring the land or any use of or right therein has made a declaration that it is being acquired for any of such purposes, which shall be conclusive evidence that it is being acquired for such purpose;

(e) the land that is being conveyed, or otherwise dealt with is the remaining part of a lot or block, the other part of which was acquired by a body that has vested in it the right to acquire land by expropriation;

(f) a consent is given to convey, mortgage or charge the land or grant, assign or exercise a power of appointment in respect of the land or enter into an agreement in respect of the land;

(g) the land or any use of or right therein was acquired for the purpose of a utility line w ithin th e me aning o f th e Ontario Energy Board Act, 1998 and i s be ing disposed of to the person from whom it was acquired; or

(h) t he onl y us e of or r ight i n l and t hat i s g ranted i s a n e asement or c ovenant under the Conservation Land Act.

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Identical in s tructure to s ubsection 50( 3), s ubsection 50( 5) pr ohibits a pe rson f rom dealing with “a part of any lot or block of the land”, where the land is within a registered plan of subdivision, unl ess t he t ransaction m ay be br ought w ithin one or m ore of t he s even specific exceptions.

Accordingly, one can rely on the paragraph 50(3)(a) plan of subdivision exception only if the land being dealt with is the whole of a lot or block on a plan of subdivision. If one i s not dealing with the entire lot or block as found on the plan of subdivision, paragraph 50(3)(a) is of no assistance, and one must proceed to find a further exception, from the list in subsection 50(5). From a search viewpoint, if one is dealing with a whole lot on a plan of subdivision, no abutting land search is necessary.

Figure 2

WEST ½

LOT 1

EAST ½

LOT 1

WEST ½

LOT 2

EAST ½

LOT 2

However, if Owner builds semi-detached houses on each lot (i.e., two dwelling units on each lot, such that only one-half o f each lot would be conveyed to a s ingle purchaser), Owner could not sell any one of the houses individually without being in breach of section 50. Although Owner i s de aling with l and w ithin a r egistered pl an o f s ubdivision, Owner r uns a foul of subsection 50(5), w hich pr ohibits de aling w ith pa rt of a l ot unl ess Owner f inds a f urther exception to rely on.

5.1 Exceptions Allowing Conveyances of Part Lots: Paragraph 50(5)(f) and Subsection 50(7)

If one w ishes t o s ell or otherwise de al w ith a pa rt of a l ot w ithin a r egistered pl an of subdivision, one must look to subsection 50(5) for exceptions to the general prohibition.

The ex ceptions ar e es sentially th e s ame as t hose s et out i n pa ragraphs 50(3)(b)-(f). T o deal with pa rt of a l ot o r block on a pl an of subdivision, one must e ither r etain no ow nership interest in abutting land, or be dealing with government or obtain a consent to the transaction.

The novel exception, applicable to transactions on or after August 1, 198 3, is paragraph 50(5)(e), which applies to dealings with the remainder of the lot or block after part of a lot has been “acquired by a body that has vested in it the right to acquire land by expropriation”.

Assume t hat a s trip o f land f rom Lots 1 and 2 ha s b een c onveyed b y O wner t o t he municipality for r oad w idening pur poses. If O wner s ubsequently w ants t o s ell L ot 1 ( more accurately, that part of Lot 1 which was not conveyed to the Municipality), the transaction would appear to be p rohibited by s ubsection 50( 5), w hich pr ohibits de aling w ith pa rt of a l ot w hile retaining an ownership interest in abutting land.

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However, O wner will be a ble t o r ely on t he exception c ontained i n p aragraph (e) t o protect the transaction, since Owner will be dealing with all of the lot except a portion owned by the Municipality, which has in it the power of expropriation.

5.2 Exempting By-law

A M unicipality can p ass a b y-law pur suant t o s ubsections 50( 7)-50(7.5) t hat e xempts specified lands from the Part Lot Control provisions (i.e., subsection 50(5) of the Planning Act). In such instance, part lot transactions are permitted, since the land is described within a Plan of Subdivision (a paragraph 50(3)(a) exception) and subsection 50(5) is not applicable.

50(7) Despite subsection (5), the council of a local municipality may by by-law provide that subsection (5) does not apply to land that is within such registered plan or plans of subdivision or parts of them as are designated in the by-law.

50(7.1) A b y-law p assed u nder su bsection ( 7) d oes n ot t ake ef fect u ntil i t h as b een approved by the appropriate approval authority for the purpose of sections 51 and 51.1 in respect of the land covered by the by-law.

50(7.2) An approval under subsection (7.1) is not required if the council that passes a by-law under subsection (7) is authorized to approve plans of subdivision under section 51.

50(7.3) A by-law passed under subsection (7) may provide that the by-law expires at the expiration of the time period specified in the by-law and the by-law expires at that time.

50(7.4) The council of a local municipality may, at any time before the expiration of a by-law under subsection (7), amend the by-law to extend the time period specified for the expiration of the by-law and an approval under subsection (7.1) is not required.

50(7.5) The council of a local municipality may, without an approval under subsection (7.1), r epeal o r a mend a by-law pa ssed under s ubsection ( 7) to de lete pa rt of t he land described in it and, when the requirements of subsection (28) have been compiled with, subsection (5) applies to the land affected by the repeal or amendment.

A typical searching error:

1. Many exempting b y-laws h ave an au tomatic expiry or s unset d ate. This is common where a developer builds semi-detached homes and the municipality provide for a two year exemption from part lot control. If sales are slow, all of the units may not be sold within the time al lowed. S earches m ust en sure t hat transactions occur or pr evious t ransactions oc curred during the time allowed for the exemption to apply or Planning Act applies. Often the error is discovered on a sale by the purchaser from the builder. A transaction completed after the bylaw expired i s voi d. Y ou may b e a sked t o c onsent t o a t ransaction or va lidate a t itle be cause t he property was or is to be sold after the date that the bylaw expired.

6. EXCEPTIONS AND CLOSING LOOPHOLES

Section 50 c ontains m any s ubsections t hat are hi ghly s pecific i n f ocus. A t horough understanding of their varied purposes requires an in depth study of early Planning Act case law. However, one c an c ome t o grips w ith t heir e ffects b y c lassifying t hem a ccording t o t wo groupings: s ubsections which pl ug l oopholes and subsections w hich c reate l oopholes i n or der

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that de sirable t ransactions not be c aught b y t he s weeping e ffect of t he pr ohibition. T he government obviously considers the former loopholes undesirable and the latter essential.

6.1 Creating Exceptions

1. Subsection 50(8) allows Vendor take-back mortgages as part or all of the consideration for the purchase of land, provided that the mortgage applies to all of the land purchased. If the owner of B purchases neighbouring parcel A, and gives a mortgage to his Vendor as part of the purchase p rice, s uch mortgage w ould otherwise contravene t he Act, s ince he w ould b e mortgaging A while retaining B. Subsection 50(8) permits this Vendor take-back mortgage. Note that the mortgage must be applicable to all of A and the mortgage must be given to the Vendor and not to a third party.

50(8) Nothing in subsections (3) and (5) prohibits, and subsections (3) and (5) shall be deemed never to have prohibited, the giving back of a mortgage or charge by a purchaser of land to the vendor of the land as part or all of the consideration for the conveyance of the land, provided that the mortgage or charge applies to all of the land described in the conveyance.

Note t hat a p urchase money m ortgage, on e given t o a t hird pa rty l ike a B ank t o f inance t he purchase , does not qualify for the exception and would breach the Act.

2. Subsection 50( 9) a llows l eases or an y agreements for a ny pe riod of years w here onl y “part of a bui lding or s tructure” is b eing r ented or t he s ubject o f t he ag reement. O rdinarily, a lease of part of a building for a t erm of twenty-one years or more contravenes subsection 50(3). It i s r ecognized t hat l eases of e xisting bui ldings f or l ong t erms do not c ompromise pl anning principles. The subsection, however, does not consider the effect of the exception on a grant of outdoor rights for more than twenty-one years (i.e., parking lots, patios) that accompany a l ease of a portion of a building.

50(9) Nothing in subsections (3) and (5) prohibits the entering into of an agreement that has the effect of granting the use of or r ight in a part of a building or s tructure for any period of years.

There is case law that indicates that such ancillary rights do not invalidate the lease. You may be asked t o c onsent t o a l ease f or 21 years or m ore s imply be cause t he l awyer i s ne rvous about complying with the Planning Act.

6.2 Closing Loopholes

The following subsections were enacted over a period of years to close loopholes:

1. Subsection 50(15) prevents subdivision of land by means of simultaneous conveyances. This w as i nserted t o pr event s chemes w hereby t he ow ner w ould t heoretically convey t he t wo halves of his or her land at the same instant, so that at the time of either conveyance he or she could not be said to retain the fee in abutting land.

50(15) Where a p erson conveys l and o r g rants, assigns o r ex ercises a p ower of appointment in respect of land, or mortgages or charges land, or enters into an agreement of sale and purchase of land, or enters into any agreement that has the effect of granting

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the use of or right in land directly or by entitlement to renewal for a period of twenty-one years or more by way of simultaneous conveyances of abutting lands or by way of other simultaneous dealings with abutting lands, the person so conveying or otherwise dealing with the lands shall be deemed for the purposes of subsections (3) and (5) to retain, as the case may be, the fee or the equity of redemption in, or the power or right to grant, assign or e xercise a pow er of a ppointment i n r espect of , land abutting t he land that i s be ing conveyed or ot herwise de alt w ith bu t t his s ubsection doe s no t a pply t o s imultaneous conveyances o r o ther s imultaneous d ealings i nvolving t he sam e p arties acting i n t heir same respective capacities.

2. Subsection 50(16) prevents partial discharge of a mortgage (i.e., releasing or discharging part only of the land described in the mortgage) by deeming the mortgagee to “hold the fee” in the l ands s ubject t o t he mortgage a nd t o be “conveying” the p art w hich is th e s ubject o f th e partial discharge. Subsection 50(17) contains several logical exceptions to the rule.

50(16) Where a person gives a partial discharge of a mortgage on land or gives a partial cessation of a charge on land, the person giving the partial discharge or partial cessation shall be deemed to hold the fee in the lands mentioned in the mortgage or charge and to retain, after the giving of the partial discharge or partial cessation, the fee in the balance of the lands, and for the purposes of this section shall be deemed to convey by w ay of deed or transfer the land mentioned in the partial discharge or partial cessation.

50(17) Subsection ( 16) does no t apply t o a partial di scharge of m ortgage or pa rtial cessation of charge where the land described in the partial discharge or partial cessation,

(a) is t he s ame l and i n r espect o f w hich a co nsent t o co nvey h as p reviously b een given;

(b) includes only the whole of one or more lots or blocks within a registered plan of subdivision, unless such plan of subdivision has been designated under subsection (4);

(c) is owned by Her Majesty in right of Canada or Her Majesty in right of Ontario or by any municipality; or

(d) is land to which clause (3)(g) or (5)(g) applies.

3. Subsection 50( 18) r equires M inisterial a pproval f or foreclosures and P ower o f S ale proceedings where not all of the land that is the subject of the mortgage will be affected, subject to certain exceptions. Otherwise, instead of seeking consent to division, an owner could grant a mortgage t o a m ortgagee-purchaser, not m ake mortgage pa yments, a nd s imply w ait f or t he mortgagee-purchaser to “foreclose” on a pre-arranged portion of the land, the foreclosure order itself not be ing a pr ohibited t ransfer und er s ubsection 50(3) a nd ot herwise be ing effective t o divide t he p arcel. T he p ermitted ex ceptions ar e logical, given t hat p lanning p rinciples are n ot compromised.

50(18) No f oreclosure o f or ex ercise o f a p ower o f sale in a m ortgage o r ch arge sh all have any effect in law without the approval of the Minister or of the council authorized to give a consent under section 53, a s the case may be, other than a council authorized to give a consent pursuant to an order under section 4, unless all of the land subject to such mortgage or charge is included in the foreclosure or exercise of the power of sale, but this subsection does not apply where the land foreclosed or in respect of [which] the power of sale is exercised comprises only,

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(a) the whole of one or more lots or blocks within one or more registered plans of subdivision;

(b) one or m ore pa rcels of l and t hat do not a but a ny o ther p arcel o f l and t hat i s subject to the same mortgage or charge;

(c) the identical parcel of land that has been the subject of a consent to convey given under section 53 and the consent did not stipulate that subsection (3) or (5) applies to any subsequent conveyance or transaction; or

(d) the w hole o f the remaining p art o f a p arcel of land, t he o ther p art o r parts of which parcel have been the subject of a consent to convey given under section 53 and the consent did not stipulate that subsection (3) or (5) applies to any subsequent conveyance or transaction.

Paragraphs (c) and (d) were added to the Act on December 9, 1994.

4. Subsection 50( 19) pr events j oint t enants a nd t enants i n c ommon f rom c hanging t he ownership of the land through a “release” of one owner’s interest as a preliminary to what would otherwise be a pr ohibited t ransaction, t hat i s, w here t he j oint t enant or t enant i n c ommon i s releasing his or her interest so that the adjacent lands will be owned by different legal entities.

50(19) Where a joint tenant or tenant in common of land releases or conveys the tenant’s interest in such land to one or more other joint tenants or tenants in common of the same land while holding the fee in any abutting land, e ither a lone or together with any other person, the tenant shall be deemed, for the purposes of subsections (3) and (5), to convey such land by way of deed or transfer and to retain the fee in the abutting land.

5. Subsection 50(20) destroys the usefulness of orders under the Partition Act for dividing land without consent by requiring consents for such orders unless each part of land described in the order could be conveyed without contravening section 50.

50(20) No o rder made un der the Partition Act for t he partition of l and shall ha ve any effect in law unless,

(a) irrespective of t he or der, each pa rt of the land described i n t he or der c ould be conveyed without contravening this section; or

(b) consent is given to the order.

6. Section 50.1, de emed in force 26 J uly 1990, prevents lands from being divided by will. Any division of land by will creates a tenancy in common in all of the land unless the Act has been complied with.

7. IDENTIFYING PLANNING ACT CONTRAVENTIONS – SEARCH CRITERIA

In o rder to d etermine t he v alidity o f title , it is e ssential th at th ere h as b een n o p rior contravention of the Act that would have had the effect of preventing the conveyance or creation of an interest in land. Several factors are involved in this investigation.

7.1 The Importance of Timing

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The Planning Act has seen a n evolutionary c hange i n i ts pr ovisions, i ncluding t he creation of loopholes by the courts, the plugging of loopholes by the courts, amendments to the Act to c lose l oopholes and t o c reate n ew l oopholes, to gether w ith a mendments a t p articular points in time that have changed or further developed the law. As a result, what may have been a Planning Act contravention at one point in time may not have been a contravention at some other point in time. For the purposes of making and answering requisitions or resolving title matters, it is he lpful t o unde rstand t hat t he va lidity of i nstruments m ay d epend on t iming a nd t hat one should not consider a title regarding Planning Act issues by considering the law only as it is now and disregard the law as it was at the time of the transaction. The following constitutes some of the more significant dates of substantive changes in Planning Act law which may serve to satisfy objections to title based on a Planning Act contravention.

June 15, 1967 Planning Amendment Act

Any contravention of the Planning Act occurring prior to June 15, 1967, does not have and shall be deemed never to have had the effect of preventing the conveyance or creation of any interest in land. As a result, any alleged contravention of the Act regarding land which was then subject to the Act is deemed not to have been a contravention. Until June 27, 1970, the Planning Act only applied t o l and i n t he e vent t hat the m unicipality i n w hich t he l and w as s ituate h ad designated b y b y-law the land as be ing within an area o f subdivision control. For t ransactions occurring after June 15, 1967, the section is of concern only if a by-law had been enacted prior to the date of the transaction. In the event that there is no s uch by-law registered against title, one need not be concerned with Planning Act contraventions unt il June 27, 1970, w hen all land in Ontario became subject to the application of the Act. For title search purposes, failing all else, one must search Planning Act contraventions back to these dates.

It is noteworthy that there may indeed be land where a Planning Act contravention may have occurred outside of the 40 year search period in Registry. W hile i t i s l ikely that adverse possession or other factors may answer the issue of non-compliance, technically the breach is not cured by virtue of the breach occurring prior to the 40 year period.

May 3, 1968 Planning Amendment Act

Prior to this date, it was permissible to deal with ten or more acres of land if the vendor retained the fee in ten or more acres of abutting land. From and after this date, the ten acre rule was abolished.

June 27, 1970 Planning Amendment Act

A new section 26 was enacted and made the Planning Act applicable to all transactions throughout O ntario. P rior t o t his da te, t he Planning Act applied onl y in t he event t hat a municipality had passed a by-law designating the lands as within an area of subdivision control.

Part Lot c ontrol pr ovisions w ere a lso c hanged. P rior t o t his da te, l and on a pl an of subdivision w as e xempt f rom t he Act unless t he m unicipality pa ssed a b y-law ma king subdivision c ontrol a pplicable. T he n ew Act reversed t he p rocess and made pa rt l ot c ontrol applicable, unless the municipality exempted the plan of subdivision from the prohibitions.

December 17, 1973 Planning Amendment Act

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Subsections (5b) (now subsection (16)) and (5c) (now subsection (17)) were added to the Act to prevent a partial discharge of a mortgage from being used to avoid the provisions of the Planning Act. A person giving a partial discharge of mortgage is deemed to hold the fee in lands mentioned i n t he m ortgage and t o r etain t he f ee in t he ba lance o f t he l ands a nd i s de emed t o convey the lands mentioned in the partial discharge. The rule does not apply if you are dealing with the whole of a lot or block on a plan of subdivision.

June 28, 1974 Planning Amendment Act, 1974, S.O. 1974, c. 53

The exception regarding partial discharges was expanded to exclude from the rule partial discharges in respect of land for which a consent to convey has been given or where such land is owned by the Crown. The provision is now found in subsections 50(16) and (17).

Subsection (1a) (now subsection 50(2)) was added to deem that land does not abut if i t abuts on a hor izontal pl ane onl y. T his pe rmits t he c onveying of r ights i n l and s trata ( i.e., t he conveying of underground mineral rights) while retaining the ownership of the land itself.

In addition, subsection (4e) (now subsection 50(8)) was added to create an exception to the general prohibition and permits vendor takeback mortgages provided that all of the land that is purchased is made subject to the mortgage. It should be noted that, pursuant to the provision, the ve ndor i s r equired t o t ake t he m ortgage b ack a nd t here m ight be s ome que stion a s t o t he validity of s uch a m ortgage i f t he m ortgage i s r egistered i n f avour of s ome ot her pa rty. Notwithstanding t his a mendment, Drewery v. Century City Developments Ltd. (No. 2) confirmed that the giving back of mortgages did not offend the Act in any event, since the section dealt w ith l and us e c ontrol a nd di d not c over t he s ituation of c ontemporaneous s ales a nd purchase money mortgages given back.

December 18, 1975 Planning Amendment Act

Subsection (5e) was added to prohibit foreclosures or power of sale transactions without the approval of the Minister unless all of the land referred to in the mortgage is included in the foreclosure or exercise of power of sale. Prior to this amendment, foreclosures, at least, were an effective way of avoiding the statute. See Re George Stinson Construction Inc., for example.

June 7, 1976 Planning Amendment Act

Further am endment w as m ade t o t he r ule r egarding f oreclosures o r p owers o f s ale t o permit such transactions where land being foreclosed consists of one or more lots or blocks on a plan of subdivision or a parcel of land that does not abut another parcel of land that is subject to the same mortgage (now subsection 50(18)). This provision was deemed to have come into effect on December 18, 1975, by subsection 5(2).

December 15, 1978 Planning Amendment Act

Subsection ( 4d) ha s t he e ffect of c uring c ontraventions t hat oc curred pr ior t o the registration of a plan of subdivision, a condominium description, or a conveyance made with the consent (now subsection 50(14)) and dealt with in greater detail under part 7.4, “The Retroactive Effect of a Consent”.

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Subsection (5f), deemed in force on N ovember 23, 1978, w as added to provide that any release b y a j oint t enant o r t enant-in-common of a n i nterest t o one o r m ore of t he ot her j oint tenants or tenants-in-common while retaining the fee in abutting lands is deemed to constitute a conveyance of hi s or h er i nterest b y de ed w hile r etaining t he f ee i n abutting l ands. ( now subsection 50(19).) This amendment overturns Re Gerace and Thompson et al.

Section 33a of the Act was added to require notice to be given to the Minister of Housing in a partition action. Prior to this time, partition orders, being vesting orders and not conveyances by deed o r t ransfer, w ere ex cluded f rom t he Act’s application. This provision was replaced in 1983 by what is now subsection 50(20).

Effective March 31, 197 9, subsections (4b) and (4c) (now subsections 50(12) and (13)) were added t o p rovide that w here a p arcel w as cr eated b y consent a nd s ubsequently i t w as obtained by an owner of abutting land, a further consent would not be required on a subsequent sale of the same parcel, provided the land division committee has not stipulated otherwise. This is o ften r eferred t o as t he “once a co nsent, al ways a co nsent” rule a nd a pplies s o l ong a s t he identical parcel of land conveyed with consent is being dealt with. Refer to part 7.3 for further details.

June 26, 1981 Planning Amendment Act

Partition Act orders require consent or otherwise each part o f the land described in the order must have been conveyable without contravening the section (subsection 50(20)).

August 1, 1983 Planning Act, 1983, S.O. 1983, c. 1

Section 50 was amended to add new provisions regarding:

1. the ability to convey part of a lot on a plan of subdivision where the abutting land is the whole of a lot on a plan of subdivision: paragraphs 50(3)(b) and (5)(a);

2. the ability to deal with part lots on a plan of subdivision if the only other part of the lot is owned by an expropriating authority: paragraph 50(5)(e);

3. exceptions f or O ntario H ydro, t ransmission l ines a nd c onservation a uthorities: subsections 50(3) and (5);

4. exception for dealings with parts of a building: subsection 50(9);

5. new exception for simultaneous conveyances: subsection 50(15).

July 26, 1990 Planning Amendment Act

The loophole permitting land divisions by will is addressed and, as a result, no provision in any will made before or after July 26, 1990, that purports to divide land is of any effect unless each parcel of land could be conveyed without contravening section 50. The only exception to the prohibition would be if the testator died prior to July 26, 1990. S.O 1994, c.23

December 9, 1994 Planning Act and Municipal Statute Law Amendment Act

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Amendments were made to subsection (14) permitting the application of the subsection to mortgages w ith c onsent. S ubsection ( 18) w as a mended t o a dd t wo f urther e xceptions t o t he prohibition.

7.2 The Effect of Conversion to Land Titles

The process by which lands registered in the Registry system have been converted to the Land Titles system also has a curative effect on Planning Act breaches that occurred prior to the conversion of the lands to a Land Titles Converted Qualified title.

Under the Land Registration Reform Act, lands that are registered in the Registry system have b een arbitrarily converted to Land T itles w ith a lmost a ll o f th e b enefits th at a ccrue to a Land Titles parcel of l and. Once l and i s registered in the Land Titles system, one i s generally entitled to rely on t he statement of the title that is shown on t he parcel register and, as well, on the qualifications and restrictions set out on the parcel register.

When la nd is r egistered in th e Land T itles s ystem, o ne mu st a lways r eview th e restrictions a nd limita tions o n th e Land T itles p arcel w hich t ypically in dicates th at th e Land Titles title is subject to the liabilities, rights and interests that are itemized in subsection 44(1) of the Land Titles Act and w hich or dinarily do not ha ve t o be s hown on th e r egistered title . Subsection 44(1) specifically states that al l registered land, unless the contrary is expressed on the register, is subject to a list of liabilities, rights and interests. The itemized list of liabilities, rights and interests to which lands continue to be subject includes such items as provincial taxes, certain types of leases, rights in relation to highways and to section 50 and subsection 50.1 of the Planning Act.

However, when land is converted from the Registry system into the Land Titles system, the l and i s usually converted w ith t he express statement th at th e la nd i s n ot s ubject o n f irst registration as a converted title under the Land Titles system to subsection 44(1) paragraph 11 of the Land Titles Act. The result is that once land is registered in the Land Titles system as a Land Titles C onverted Q ualified title, a nd p rovided th at th e s tatement o f th e title in cludes th e exclusion of t he a pplication of pa ragraph 11 of s ubsection 44( 1), any contravention of t he Planning Act that oc curred pr ior t o t he da te of c onversion i s de emed not t o ha ve be en a contravention of the Act. That exception or rule applies only to LTCQ. titles or Land Titles Plus titles. It does not apply to Absolute titles. Planning Act does apply on a go forward basis after the date of conversion to all land in Land Titles.

A typical searching error:

1. Considering t hat t he w hole of a P IN i s equivalent t o t he w hole o f a l ot or ha s some other quality exempting it from Planning Act compliance, the PIN is irrelevant to Planning Act compliance. It i s the legal description and the ownership of abutting land that i s relevant. PINs are not relevant to Planning Act searches.

2. Some lawyers mistakenly believe that land that is in Land Titles is not subject to Planning Act. They mistakenly believe that conversion to Land Titles exempted the land on a go forward basis.

7.3 The Subsequent Effect of a Prior Consent: Subsections 50(12) and (13)

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Prior to March 1979, it was generally held that a consent to convey had no effect on any subsequent transaction and was only effective for the one transaction for which it was sought and given. A consent t o c onvey o r m ortgage P arcel A va lidated onl y t hat pa rticular t ransaction i n question and conferred no future or subsequent benefit on the parcel.

In March 1979, subsection 50(12) was added to the Planning Act. Where a parcel of land is conveyed with consent, t he pr ohibitions i n s ubsections 50(3) and ( 5) do not a pply t o subsequent conveyances or other transactions involving the identical parcel of land, unless it is stipulated ot herwise w hen t he c onsent i s granted. S ubsections 50( 12) a nd 50( 13) pr ovide a s follows:.

50(12) Where a parcel of land is conveyed by way of a d eed or transfer with a consent given unde r s ection 53, s ubsections ( 3) a nd ( 5) of t his section do no t a pply t o a subsequent c onveyance of , or ot her t ransaction i nvolving, t he i dentical pa rcel of l and unless the council or the Minister, as the case may be, in giving the consent, stipulates either that subsection (3) or subsection (5) shall apply to any such subsequent conveyance or transaction.

50(13) Where the council or the Minister stipulates in accordance with subsection (12), the c ertificate pr ovided f or unde r s ubsection 53( 42) s hall c ontain a r eference t o t he stipulation, and if not so contained the consent shall be conclusively deemed to have been given without the stipulation.

Figure 3

A

B C

Assume Owner 1 ow ns parcels A and B and Owner 2 ow ns Parcel C. Owner 1 c onveys parcel B to Owner 2 with consent. Owner 2 later wishes to sell Parcel B to a third party.

In t he a bove e xample, a ssuming t he c onsent w as obt ained a fter M arch 1979, O wner 2 would be free to convey parcel B without obtaining another consent, since the identical parcel for which a previous consent to convey had been obtained is being conveyed again and there was no stipulation in the earlier consent that it was to be applicable to the first conveyance only. There has been no c larification or definitive decision that this section is a lso applicable in respect o f consents granted prior to March 1979, care should be taken in relying on these cases.

It should also be noted that it is only a consent to a conveyance that has this lasting effect. A consent given to a mortgage, for instance, has no lasting or future effect and subsection 50(12) is not applicable. Subsection (14) on the other hand provides a retroactive curing of title where the land is not only conveyed but also charged or mortgaged with consent. Similarly, where land is divided and one parcel is conveyed away with consent and the remainder parcel is conveyed later, onl y t he c onsented pa rcel ge ts t he be nefit of t he s ubsection e ven t hough t he c ommittee granting the consent considered that two new parcels of land were being created. The subsection

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affords the benefits only on the parcel conveyed with consent. The remainder parcel gets no such protection or benefit.

A typical searching error:

1. In the above examples, therefore, where Owner owns parcels A and B and parcel B has previously been conveyed with consent, Owner can convey or mortgage parcel B without concern f or t he ow nership of a butting l and be cause pa rcel B w as pr eviously c onveyed w ith consent. Subsection (12) provides relief. However, Owner cannot convey or mortgage parcel A because it was never previously conveyed with consent. Owner would be dealing with parcel A and own abutting land and such a transaction would contravene the Act. There is no exception under s ubsections ( 3) a nd ( 5) f or a n ow ner de aling with l and w here t he abutting l and w as previously conveyed with a consent. T his illogical result was recently confirmed, based on t he plain language of the section, in 1390957 Ontario Limited v. Acchione.

7.4 The Retroactive Effect of a Consent

Subsection 50(14), effective December 15, 1978 and revised December 9, 1994, provides that “where l and i s conveyed, mortgaged or charged with a consent, any contravention of t his section o r a p redecessor thereof t hat oc curred prior to t he co nveyance does not a nd s hall be deemed never to have had the effect of preventing the conveyance of or creation of any interest in the land”. This section appears to make every consent to a conveyance or mortgage curative of all pr ior c ontraventions of t he Act dealing w ith th e la nd th at was th e subject matter o f th e consent.

50(14) Where land is w ithin a r egistered pl an of s ubdivision or w ithin a registered description under the Condominium Act [,1998] or where land is conveyed, mortgaged or charged w ith a co nsent g iven u nder s ection 5 3 o r a p redecessor thereof, a ny contravention of this s ection or a pr edecessor t hereof or o f a by -law p assed under a predecessor of this s ection or o f a n o rder made unde r c lause 27(1)(b), as it existed on June 25, 1970, of The Planning Act, being chapter 296 of the Revised Statutes of Ontario, 1960, or a predecessor t hereof, t hat oc curred be fore t he r egistration of t he plan of subdivision or description or be fore t he g iving of a certificate under subsection 53(42) stating that a co nsent has been given, as t he case may be, does not and shall be deemed never to have had the effect of preventing the conveyance of or creation of any interest in the land, but this s ubsection doe s not affect the rights a cquired by a ny pe rson f rom a judgment or order of any court given or made on or before December 15, 1978.

Note t hat t his s ubsection a lso ha s t he e ffect of c uring contraventions of t he s ection occurring prior to the registration of a Registered Plan of Subdivision or a description registered under t he Condominium Act, 1998. I n each case, pl anning i ssues would have be en de alt w ith prior t o t he P lan or d escription, s o t hat f or pl anning pur poses a ny pr ior c ontravention w ould seem i rrelevant. O ne n eed not s earch b ehind a pl an of s ubdivision or condominium pl an f or Planning Act breaches.

The presence of a consent to a conveyance, mortgage or charge on title functions to erase contraventions prior in time to the consent, if the consent was granted after December 15, 1978, by virtue of subsection (14).

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7.5 The Effect of the Three Statements: Subsection 50(22)

In 1984, t he Land Registration Reform Act added a n ew curative p rovision t o t he Planning Act by p roviding t hat i f a de ed or t ransfer c ontains t he t hree s tatements s et out i n subsection 50(22) by t he g rantor, the g rantor’s s olicitor a nd t he g rantee’s s olicitor, a ny contravention of section 50 or its predecessors does not and shall be deemed never to have had the effect of preventing the conveyance of any interest in land.

As a result, if the three statements in the deed or transfer are completed, then the chain of title (not all prior transactions but conveyances only) of the property will not be affected by any contravention of the Act up to and including the registration of that deed or transfer.

Therefore, it appears that if, in the course of a t itle search to a p articular parcel of land, one e ncounters a de ed or t ransfer containing t he t hree s tatements, on e ne ed not s earch f or Planning Act contraventions prior to that particular conveyance.

A typical misunderstanding:

Some c ommittees d o not ap preciate t he ef fect o f a t ransfer o f l and t hat co ntains t hese three s tatements. E ven though t he Act m ay have be en c ontravened, i f a t ransfer i ncludes t he three statements, good title passes.

8. SEARCHING TITLE TO ABUTTING LANDS

A common error occurs because lawyers do not know how far back in time that they must search for prior Planning Act contraventions. You may be asked to grant consent or validate title because the lawyer did not discover an old breach of the Act.

8.1 When can you ignore Planning Act and not search abutting lands?

(a) Your l and i s t he whole of a l ot on a r egistered plan of subdivision that has not been deemed deregistered, or

(b) Your l and i s t he r emainder of a whole lot on a r egistered pl an of s ubdivision where the other part is owned by a body with the power to expropriate, or

(c) Your land is the identical land previously conveyed with an unstipulated consent. Read t he C ertificate o f C onsent car efully t o e nsure t hat i t d oes not say t hat subsections (3) or (5) “shall continue to apply to any such subsequent conveyance or transaction”.

8.2 If you cannot ignore the Planning Act and have to search abutting land, how far back do you have to search?

In o rder to d etermine if th e tit le h as a ny p rior Planning Act contravention t hat w ould nullify t he o wner’s title or th e o wner’s a bility t o c onvey o r ot herwise de al w ith t he l and, one must search the ownership of all abutting lands backwards to the first to be encountered in your owner’s chain of t itle of the following possible “start dates”, pr ior to which date Planning Act contraventions are irrelevant:

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1. The date that the lands became Land Titles Converted Qualified Title provided that the parcel register specifically excepts subsection 44(1) paragraph 11 of the Land Titles Act.

2. a conveyance with Consent, provided i ts reliability i s assured under subsections 50(12) and (14);

3. a transfer or deed with the three subsection 50(22) Planning Act statements;

4. the registration of a plan of subdivision (assuming the land is not the whole lot or block and the plan is not deemed “deregistered” under subsection 50(4));

5. June 27, 1970, pr ovided that no subdivision control by-law has been passed prior to this date;

6. the da te of t he passage of a subdivision control by-law passed be tween J une 15, 1967 , and June 27, 1970;

7. June 15, 1967, if a subdivision control by-law was passed prior to June 15, 1967.

The above dates are s ignificant i n t hat i n e ach case, Planning Act contraventions for a particular parcel of land are irrelevant if they occurred prior to the most recent start date. Once you determine your start date, you search the chain of owners of all abutting lands from the start date to the present. If there is no similarity of ownership between the owner’s lands and abutting lands from the start date to the present, that is, if no past owner of your land also simultaneously owned abutting land, one is assured that there has never been a conveyance or other dealing with the land while abutting lands were under the same ownership or control, and therefore one can rely on paragraph 50(3)(b) or 50(5)(a) as protecting any prior dealings from being contraventions of the Act.

Where similarity of ownership arises at the time of a conveyance or other transaction, one is forced to look to the other exceptions or otherwise requisition compliance.

Finally, one is reminded that there have been many amendments to the Act since 1967, especially as the Legislature has struggled to close the “loopholes”. A transaction which appears to be a contravention under the current version of the Act may not have been prohibited under the legislation in force when i t was completed. Therefore, one must consider the effective dates of the a mendments, a s w ell a s c ase de cisions, i n o rder t o de termine t he va lidity of a t ransaction according to the form of the legislation or the common law at that earlier time.

9. CONCLUSION

The Planning Act has a wide range of applications and contains numerous traps for the unwary. The Act is technical and one must be prepared to follow the tortuous course of section 50 a nd i ts pr edecessors c arefully. A dopting a nd pr actising a de fensive a ttitude t owards t he Planning Act may be time consuming, but is, in the long run, the only way to protect adequately oneself and one’s clients.

With r espect to th e l aw, one m ust be f ully c onversant w ith t he i mplications of a ll the subsections of s ection 50 a nd pa st j udicial i nterpretation, e ven i f t his i s of ten of que stionable

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comfort. R egarding t he f acts o f a pa rticular t ransaction, an e ver vi gilant s tate of m ind i s necessary.

In particular, whatever the type of transaction, one should never hesitate to conduct extra sub-searches o f abutting l ands t o confirm t hat t here ha s be en no worrisome change i n surrounding ownership since the last full search. Where a client is mortgaging the property, you must confirm that he or she has not acquired any interest in the surrounding lands since the last full search. Where a client is purchasing land in reliance on the “no abutting lands” exception, a sub-search of t he a butting pr operties s hould be i ncluded i n t he i mmediate pr e-closing procedures.

The effect of a contravention being so extreme, compliance with the Act is essential.

STROISTE/1773949_.1

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TAB 2

Abutting Land Searches

Ronald Melvin Rose, Persiko, Rakowsky, Melvin LLP

April 3, 2017

14TH ANNUAL

Real Estate Law Summit

ABUTTING LANDS SEARCHES

BY

RONALD B. MELVIN

ROSE, PERSIKO, RAKOWSKY, MELVIN LLP

Presented1 For The

14th Annual Real Estate Summit Law Society of Upper Canada

April 3, 2017 What is an abutting lands search?

“Abutting lands” are also often referred to as “adjacent lands” or “adjoining lands”. The phrases are used interchangeably in the real estate industry and in this paper. An “abutting l ands search” is a ny t ype of f ull o r pa rtial i nvestigation of t itle t o one or m ore parcels of land which are immediately adjacent to the lands that are the subject matter of a transaction in real e state ( herein r eferred t o as t he “ subject property”) a nd u ndertaken for one o r m ore o f v arious purposes as outlined in this paper.

Very often, reference to an abutting lands search is meant to refer to a P lanning Act Sub-search (described below); however, it is important to understand that a Planning Act Sub-search is only one of the purposes of undertaking an abutting l ands s earch. As out lined in t his paper, t here a re a number of other important reasons why one would undertake an abutting lands search beyond ensuring compliance with the s ubdivision c ontrol p rovisions o f t he P lanning A ct ( Ontario). The di stinction s hould be appreciated, and the lawyer i s cau tioned to p ay at tention t o this when reviewing i nstructions f rom mortgage lenders and other clients. If not specifically set out, what is intended is usually contextual and the lawyer should obtain clarifying instructions if necessary.

An abutting lands search is most often only a partial investigation of or sub-search of title to the abutting lands. Title Insurance While a relatively recent phenomena, the use of title insurance in commercial and residential real estate transactions in Ontario (and for that matter throughout Canada) has become common place to the point of being almost universally obtained for most purchasers and almost universally required by most lenders.

The advent of title insurance (and in fact an important selling factor for it) brought the relaxation or elimination of certain title and off-title search requirements, thereby saving both time and expense for lawyers and their clients. For residential transactions in the lower range of values (not so low anymore),

1 Originally presented as “Title Searching Refresher - Abutting Lands Searches” for Practice Gems: Title and Off-Title Searching 2017 held by the Law Society of Upper Canada on January 16, 2017

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the title insurance premium represented a significant cost savings over the title and off-title due diligence that would be otherwise required for a traditional solicitor’s opinion on title. For residential transactions of more s ignificant value and for most commercial transactions, the cost savings is less significant, but title insurance is usually desired and justified for other reasons which are beyond the scope of this paper. Chief am ongst t he r elaxed d ue d iligence r equirements w hen using t itle i nsurance i s t hat P rior Planning A ct S ub-searches a re no t required, t hat only C urrent P lanning A ct S ub-searches need b e undertaken and the title insurance companies will accept reliance upon similar name searches only. See below for a detailed explanation of these phrases. For bot h ow ner’s a nd lender’s t itle insurance p olicies o f an y v alue, t he current “Search Guidelines” published by First Canadian Title Insurance Company require an “Adjoining lands search, if applicable (similar name search only)”. On discussion with in-house counsel for FCT, the writer has been advised t hat this r eally m eans that onl y a C urrent Planning A ct S ub-search (as d escribed b elow) i s required an d t hat the title i nsurance p olicy w ill p rovide co verage f or d efects t hat m ight h ave b een disclosed by a n a butting l ands s earch und ertaken f or a ny of t he ot her reasons out lined i n this pa per. Although the “Report on Title” required by the title insurers in connection with each application for title insurance i ncludes a c ertification to the e ffect t hat “I h ave d isclosed a ll t itle m atters w hich w ould otherwise qualify my opinion on title”, the writer has been advised that this is limited to searches which ought to have been undertaken pursuant to the Search Guidelines and does not imply that the solicitor has undertaken abutting l and searches for one o r more of t he other reasons described i n t his paper beyond merely c onfirming c urrent c ompliance w ith t he subdivision c ontrol pr ovisions of t he P lanning A ct (Ontario).2

Is an abutting lands search always required?

If title insurance is being obtained

YES, but only to the extent of undertaking a Current Planning Act Sub-search (as described below) unless an exception thereto applies

OR NO, if an exception to a Current Planning Act Sub-search applies

OR YES, i f r equired by t he c lient for a ny of the p urposes an d r easons outlined i n this pa per other than for o r in a ddition t o d etermining compliance with the subdivision control provisions set out in Section 50 of the Planning Act (Ontario).3

If title insurance is not being obtained

YES, for all of the purposes and reasons outlined in this paper

2 The comments in this paragraph are based upon the title insurance policies and guidelines of First Canadian Title Insurance Company as of the date of this paper. The writer has not verified and has assumed that similar policies and guidelines apply to the other title insurance providers operation in Ontario. 3 The lawyer should explain to the client what due diligence will be omitted when obtaining ti tle insurance in lieu thereof, and should obtain specific instructions if necessary.

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Surveys It is always preferred to have in hand a current and up-to-date survey for review and analysis in connection w ith an y r eal estate t ransaction. A discussion o f s urveys an d t heir u ses a nd i mportance i s beyond the scope of this paper, and the reader is encouraged to review the many available books, articles and other writings on the subject. The foregoing said, one can appreciate that a survey, whether or not it is current and up-to-date, can be qui te us eful f or t he pur poses of l ocating a butting l ands, the bui ldings a nd ot her improvements thereon, determining w hether there a re any m aterial easements o r en croachments, d etermining accessibility from public highways and generally how the subject property relates to its surroundings. In particular, the existence of any encroachments t o or from abutting l ands can of ten only be determined from a survey. The title insurance companies do not require a survey and the currently available title insurance policies offer coverage for many of the discrepancies that might have been disclosed by a su rvey if one had be en available. B ut t hat m ay be c old c omfort, a nd i n c ertain circumstances m ay not pr ovide a n adequate remedy to, the purchaser or mortgagee of real estate that has to rely upon a title insurance claim to deal with a subsequently d isclosed t itle d iscrepancy, along with the related delays and costs thereof. For this reason, the real estate solicitor is urged to take reasonable efforts to inquire as to the existence of a survey of the subject property and obtain it for review. If no survey is available, the real estate solicitor is urged to so advise the client in writing and obtain specific instructions in such regard, including those aspects relating to abutting lands which might not be disclosed in the absence of a current and up-to-date survey. Purposes of abutting lands searches and exceptions 1. Planning Act Sub-search

• To determine compliance with the subdivision control provisions set out in Section 50 of the

Planning Act (Ontario), herein referred to as “Section 50”.

• Discussion of Section 50 is beyond the scope of this paper; however, subdivision control is imposed to ensure rational and orderly subdivision and development of lands in Ontario and is accomplished, subject to many exceptions and conditions, by prohibiting the conveyance of lands w here the transferor r etains title t o l ands w hich a but the l ands to b e c onveyed. T he reader is encouraged to review the many available books, articles and other writings on t he subject.

• Non-compliance with Section 50 results in a void transfer, mortgage or other conveyance.

• Sub-search only and not a full search of title to adjacent lands.

• Limited scope, only so as to determine the location and boundaries of each adjacent parcel of

lands an d w ho t he r egistered o wners o f t hose p arcels w ere running b ack t o the ap plicable Planning Act non-compliance forgiveness date (June 15, 1967, the date of the part-lot control by-law or June 25, 1970, whichever is applicable).

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• Two categories of Planning Act Sub-search:

• Prior Planning Act Sub-search

• Current Planning Act Sub-search 2. Prior Planning Act Sub-search

• To determine that there was no prior non-compliance with the subdivision control provisions

set out in Section 50 of the Planning Act (Ontario).

• This concerns de alings w ith the s ubject p roperty w hich o ccurred pr ior t o the current transaction giving r ise to a t itle search, being generally a t ransfer and/or a m ortgage of the subject property.

• The s ub-search ex ercise involves t racing al l co nveyances o f t he su bject p roperty an d each

adjacent property from the current date back to the applicable Planning Act non-compliance forgiveness da te (June 15, 1967 , t he date of t he pa rt-lot c ontrol by -law or June 25, 1 970, whichever i s ap plicable) and a nalysing whether, at the ti me o f each t ransfer of t he s ubject property, the transferor t hereof w as t he o wner o f a ny ad jacent l ands u nder c ircumstances whereby such transfer contravened Section 50 or its predecessor.

• Required for all transactions that are not title insured, unless an exception applies. • Detailed discussion of Section 50 exceptions is beyond the scope of this paper; however, the

most common exceptions include the following:

• Transfer or mortgage of the whole of a lot or block on a registered plan of subdivision.

• Transfer o r easement w ith co nsent of the local C ommittee o f A djustment or L and Division Committee.

• Title as r egards compliance with Section 50 i s assured up to t he date of conversion to

Land Titles Conversion Qualified (LTCQ) or Land Titles Absolute Plus (LT+).

• Title as regards compliance with Section 50 was assured by completion of the “Planning Act Statements” in a prior Transfer. See Sub-sections 50(22) and (23) of the Planning Act (Ontario).

• Generally not required where the transaction is to be title insured unless expressly required by

the title insurance company. This is and always has been a key selling feature for all of the title insurance companies providing their services in Ontario in lieu of a traditional solicitor’s opinion on title, and thereby avoiding the additional legal fees and disbursements associated with conducting a Prior Planning Act Sub-search.

3. Current Planning Act Sub-search

• To determine that completion of the transaction(s) at hand will not result in non-compliance

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with the subdivision control provisions set out in Section 50 of the Planning Act (Ontario).

• This c oncerns the c urrent transaction w hereby t he s ubject p roperty w ill be d ealt w ith, as opposed to de alings w ith t he pr operty t hat oc curred pr ior t o completion of t he c urrent transaction (see above regarding Prior Planning Act Sub-search).

• Such t ransactions include a t ransfer or m ortgage o f the subject pr operty or gr anting of a n easement upon the subject property or part thereof.

• Required for all transactions, including those that are to be title insured. • The sub-search exercise then involves reviewing current the PIN for each abutting property.

The simplest way t o do this is t o first obtain a Property Index Map from the Teraview System, which will disclose the PINs for each adjacent property. Such PINs would then be pulled f rom the Teraview System to determine the registered ownership t hereof and assess compliance or non-compliance with Section 50.

• There a re many e xceptions t o the r equirement f or a C urrent P lanning A ct Sub-search. Detailed discussion is beyond the scope of this paper; however, the most common exceptions include the following:

• Transfer or mortgage of the whole of a lot or block on a registered plan of subdivision.

• Transfer or e asement with consent of t he l ocal Committee o f A djustment or Land

Division Committee.

• In lieu of a Current Planning Act Sub-search, by undertaking a “similar name search” in the applicable Land Registry Office (“LRO”) to determine that the registered owner(s) of the PIN(s) to be dealt with does/do not own any other PINs in that LRO.4

NOTE OF CAUTION: If the subject property lies on the boundary of the lands within the applicable L RO, it may b e n ecessary t o conduct a similar name search i n t he adjacent LRO in order to catch all possible abutting lands. Generally, this is probably an unlikely circumstance b ecause i n most cases t he d ifferent LRO d ivisions a re separated b y municipal or regional roads; however, the writer does not know whether such is the case throughout the entire Province.

• Solicitor for a m ortgagee ( that is n ot a cting f or t he m ortgagor) i n a financing of a

purchase transaction relies upon t he “Planning Act Statements” made in the t ransfer of the m ortgaged property by t he v endor to the pu rchaser/mortgagor5 and, by a “si milar name search”, confirms that the purchaser/mortgagor does not own any other PINs in the relevant LRO.

4 Technically, a “similar name search” is not an abutting lands search as one is not undertaking an investigation of title to one or more parcels of land which are immediately adjacent to the subject property. If other PINs are found in the name(s) of the existing or intended registered owner(s) of the subject property, then a Current Planning Act Sub-search is required and each such PIN must be reviewed to determine that its property description does not abut the subject property or, if it does, that there will be no non-compliance with Section 50. 5 Note that this does not relieve the solicitor acting for the purchaser/mortgagor from undertaking the appropriate Planning Act Sub-searches.

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4. Ascertain descriptive inconsistencies

• Note the footer qualification on every Parcel Register which states:

“NOTE: AD JOINING P ROPERTIES S HOULD B E I NVESTIGATED T O AS CERTAIN DESCRIPTIVE I NCONSISTENCIES, IF A NY, W ITH D ESCRIPTION R EPRESENTED FOR THIS PROPERTY”

• The exact origin and intention of this qualification in the Teranet System is not entirely clear.

The Director of Titles has a dvised t hat t he qua lification i s i ncluded on a ll P INs t o r emind solicitors that the Land Titles System does not guarantee boundaries.

• Note t hat t he qua lification a ppears to b e a recommendation on ly a nd no t a s pecific qualification of the description represented for the subject property.

• In the context of compliance with Section 50, this could have significant implications in the event t hat d escriptive inconsistencies b etween the P IN f or t he subject p roperty an d one o r more P INs f or a djacent p roperties s how a g ap or po rtion of lands i n r espect o f w hich the registered titleholder cannot be ascertained or a proper chain of title cannot be accounted for. This type of situation, although quite rare, is not readily apparent from a Property Index Map which assumes that adjacent PINs are indeed abutting one another with no gaps. In cer tain rare instances it co uld b e the case that in fact there i s a g ap b etween w hat a ppear t o b e otherwise ad jacent P INs thereby gi ving r ise to possible issues c oncerning c ompliance w ith Section 50. This issue i s mentioned in general t erms only to call the matter to the reader’s attention; however, a detailed discussion and analysis would have a great many variables and complexities which are certainly beyond the scope of this paper.

• Apart from other factors elsewhere discussed in this paper, there are certain situations where

adjoining properties may not need to be investigated to ascertain descriptive inconsistencies, such as the following:

• The subject property is the whole of a lot or block on a registered plan of subdivision.

• The legal descriptions of the subject property and the adjacent lands are based upon one

or more parts laid out on the same Reference Plan.

• The dealing with the subject property is a transfer or easement made with the consent of the Committee of Adjustment or Land Division Committee.

5. Verify easements, rights-of-way and other attendant rights

• A subject property which is “together with” an easement or right-of-way must be supported by t itle to the abutting property being “subject to” the same easement or right-of-way. This can only be verified through an abutting lands search.

• Abutting l ands s earch is required t o co nfirm t hat title to e ach adjacent p roperty i s n ot “together w ith” an easement or right-of-way over the s ubject property where title to the

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subject pr operty i s no t “subject to” t he sam e easement or r ight-of-way. Paragraph 2 of subsection 44 (1) of the L and Titles A ct ( Ontario) p rovides that a ll Land T itles lands ar e subject to “Any r ight of way, watercourse, and right of water, and other easements”. In 923424 Ontario Limited v. 1695850 Ontario Inc.6, the Ontario Superior Court confirmed that an owner’s l and r emains s ubject t o a r ight-of-way which i s only referenced on the Parcel Register for abutting property even though reference to the same did not appear on the Parcel Register for the owner’s land.

• Abutting lands search is required to ascertain the location of each easement or right-of-way

that benefits the subject property. • If no survey is available or if not ascertained by a survey, an abutting lands search may assist

to asc ertain whether any bui ldings or o ther i mprovements t hereon e ncroach upon a ny easement or right-of-way that benefits the subject property.

• Note that the foregoing principles do not only apply to easements and rights-of-way disclosed

by t he thumbnail property description. The same pr inciples (other than subsection 44(1) of the L and Titles A ct ( Ontario)) would a lso a pply t o c ertain r egistered ag reements, n otably being c ost-sharing o r sh ared f acility ag reements amongst o wners o f ad jacent l ands. Where any such agreement is registered on the subject property, it should likewise be registered on each adjacent property as applicable, so that a subsequent purchaser of the adjacent property will have proper notice of the rights and obligations that come with such agreement (whether or not the agreement “runs with the lands”, a discussion of which is beyond the scope of this paper).

6. Verify access to public highway

• Fundamental to satisfactory title is to determine that the subject property has legal access to

and from one or more publ ic highways. If a survey or Reference Plan is not available that clearly discloses this, i t may be necessary to undertake certain supplementary abutting l and searches.

• The exercise involves determining the closest lands owned by a governmental authority that are d esignated as p ublic h ighway, an d t hat t he s ubject p roperty h as a ccess thereto e ither directly or indirectly. In some cases such access may be by way of a temporary right-of-way over adjacent lands until such adjacent lands themselves are conveyed to the governmental authority a nd de dicated as publ ic h ighway. T his can of ten a rise i n conjunction w ith n ew residential subdivisions.

7. Investigate encroachments

• An encroachment is a situation where a building or other improvement that belongs to and is

intended for the use of one property exists in whole or in part upon an adjacent property.

• Generally, an encroachment can only be disclosed by a survey or other available plan (such as some Reference Plans) of either or both of the properties involved.

6 2015 ONSC 3343

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• Once d isclosed, the p roblem will usually require a s ub-search o f ab utting l ands. In so me

cases it may be necessary to undertake a more extensive or even a full search of the abutting lands in order to understand the history f rom which the encroachment arises and determine how it might be fairly resolved between the owners of the subject property and the adjacent property.

• There may be knowledge or a suspicion of an encroachment from an adjacent property, or of hydro, w ater or ot her s ervices e manating f rom a n a djacent pr operty f or the b enefit of t he subject p roperty, w hich c annot be u nderstood or clarified w ithout unde rtaking a n a butting land search. In some cases this becomes something of a fishing expedition based upon the incomplete ev idence av ailable an d looking f or more co ncrete ev idence f rom a ny a vailable registered plans or instruments.

8. Issue of concern disclosed by survey or registered plan

In searching title to the subject property, whether or not title insured, the real estate solicitor is urged t o u ndertake car eful r eview o f al l av ailable su rveys, r eference p lans, b oundary plans a nd o ther available plans. In particular, a careful inspection should be made of the subject property boundaries as disclosed by such surveys and plans so as to disclose any possible discrepancies of concern. There are too many su ch p ossible d iscrepancies t o r eview i n t his paper, b ut common di screpancies i nclude m inor encroachments of buildings or fences, locations of easements and driveways, locations of hydro poles and lines, locations of water pipes, sewage pipes and other services to and from the property, and overhangs of roofs and eaves troughs. Any matter which appears to be out of place in the context of the title search for t he s ubject p roperty may n ecessitate a su b-search o f the a djacent p roperty f or f urther av ailable information.

By way of example, if a survey disclosed a sewage pipe leading from the subject property to an adjacent property that is not municipally owned, then one must consider what the purpose of that pipe is, how i mportant it m ight b e t o the us e of t he p roperty a nd w hether a n e asement i s required ov er the adjacent property.

Of course, there are an infinite number of other possibilities in this regard that might give rise to the need for an abutting l ands sub-search. The important point to remember is that the t itle to abutting lands can be very relevant to a search of title to the subject property and, as outlined in this paper, goes far beyond merely determining whether there has been compliance with the subdivision control provisions of Section 50 of the Planning Act (Ontario).

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TAB 3

“Please Satisfy Yourself” and Other Passive Aggressive Answers to Invalid

Requisitions

Simon Crawford Carolin Jumaa, Student at Law

Bennett Jones LLP

April 3, 2017

14TH ANNUAL

Real Estate Law Summit

“Please Satisfy Yourself”

(and other passive aggressive answers to invalid requisitions)

Simon Crawford, Partner, Bennett Jones LLP

Carolin Jumaa, Student at Law, Bennett Jones LLP

Title requisitions, and responses to title requisitions, are often evidenced by two simple letters

back and forth between solicitors; and yet, in the content of those two letters is the meat of the

real estate transaction. Those letters evidence that two solicitors have put their mind to the

fundamental issue of whether the seller of the real estate can convey what it bargained to convey

in the purchase agreement.

In fact, so important is the content of the requisition letter and the response to the requisition

letter, that the Law Society of Upper Canada has set out in Commentary 5.3 to Rule 6.1-1 of its

Rules of Professional Conduct that “a lawyer may not assign to a non-lawyer the ultimate

responsibility for review of a title search report…or signing a letter of requisition”.

The reason why the letter of requisition, and a response to such letter, are fundamental lawyer

tasks, is because they are anything but routine. They are anything but standard. And they are

anything but obvious. There are, in fact, highly customized.

The problem however, is the answers given to requisitions are so often, the same stock answers,

that practitioners have forgotten (or become indifferent to) the meaning behind the words.

This paper, although it may wind in various directions, has at its heart, the question: “How does

one respond to an invalid requisition?”. And the circuitous route that we will take to get to that

answer, starts with understanding the nature of requisitions, and what makes a requisition valid

in the first place.

But before we get there, I would like to write one message on a piece of paper for you and ask

that you fold it in tuck it in your pocket for when you next respond to a requisition letter, and the

message is this: “Do not, by your response to requisitions, prejudice your client’s rights, or

adversely modify its obligations, under the purchase agreement”. This really, is the golden rule.

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A solicitor can, by wrongly addressing a requisition, inadvertently change the deal for the seller,

and to do so may amount to negligence.

When it comes to title matters, commercial real estate purchase agreements generally fall into

two categories: (a) those that afford the buyer a period of time to investigate title and in which

to make valid requisitions (in which case the seller is afforded an opportunity to respond, subject

to an underlying obligation to deliver so-called good title);1 and (b) those that afford the buyer

with a due diligence period for all manner of investigation, including title, in which period the

buyer investigates title, raises its concerns, and ultimately, subject to interim negotiation, either

"takes it or leaves it" on the due diligence date.

This paper ignores the former, as those transactions invariably lead to a due diligence date

“discussion” to resolve title matters in the context of waiver and possible transactional

concessions. This discussion is focused instead on the requisition structure.

A Valid Requisition Letter

Being as we are focused on how to respond to invalid requisitions, it follows that we should

appreciate what makes a requisition valid in the first place. There is no shortage of confusion and

debate over what constitutes a valid requisition, and more particularly, what constitutes a valid

title requisition.

Firstly, in order to be valid, a title requisition must identify a specific problem or deficiency with

respect to title, and should set out a solution or action that, if implemented by the seller, would

correct that problem or deficiency.2 The Court in Doross Construction Co. v. Kaiser informed us

that a buyer:

1 For the sake of clarity, "buyer" and "seller" are used in this paper, except when directly quoting from others that use "purchaser" or "vendor".

2 Stykolt v, Maynard, [1942] O.R. 250 [Stykolt]. Here, the court held that a letter containing multiple requisitions did not contain any valid objection

to title because it had been written without any reference to the particular contract or title.

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"must be specific as to requisitions and is required to make searches and

cannot in a general way require assurances."3

The number of the instrument, its date, its description, what it purports to do, a description of

the particular deficiency, and a request for a specific solution, are all required for a valid

requisition, and should the requisition be disputed, would be required to support an application

under the Vendors and Purchasers Act.4 Under section 3 of the Vendors and Purchasers Act, a

vendor or purchaser “may at any time and from time to time apply to the Superior Court of Justice

in respect of any requisition or objection or any claim for compensation or any other question

arising out of or connected with the contract, except a question affecting the existence or validity

of the contract, and the court may make such order upon the application as may be considered

just.”5 These determinations will bind the immediate transaction but have no effect on future

dealings concerning the same transaction.6

Secondly, the purchase agreement must set out a time period for such requisition to be made in

order to be valid, failing which, the buyer must accept such deficiency, unless it goes to the root

of title. If the purchase agreement does not set out a time period, Section 4 of the Vendors and

Purchasers Act injects into the contract a thirty day period from the date of the contract.

Requisitions must be delivered within the specified time, not just mailed by then.7

3 1981 CarswellOnt 3227, 11 A.C.W.S. (2d) 114 at 9. In this case, the newly constructed building was .1 of a foot too close to the property line as

set out in the municipal zoning bylaws. The buyer's solicitor sent a "boilerplate" letter requesting assurances that all bylaws and

statutes were complied with on the day of closing. The court held that the buyer could not rely on the vague language of the

requisitions.

4 Donahue, Quinn and Grandilli, Real Estate Practice in Ontario, 8th ed (Toronto: LexisNexis, 2016) at 253.

5 RSO 1990, c V.2, s 3.

6 Ibid.

7 Stykolt, supra at note 2.

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So, based upon these two simple rules, a prudent response to any requisition that does not satisfy

these criteria, should start with the words to the effect of: “Your requisition is invalid and the

Seller denies the Buyer’s right to make such requisition”. The answer is not “please satisfy

yourself”. The answer is not “The Buyer does not wish to satisfy your requisition”. In providing

an answer to an invalid requisition, the Buyer’s counsel should be careful to hit “on the nose”

that the basis for the denial is that the underlying requisition is flawed and invalid, not that the

Seller is unable or unwilling to satisfy it. Furthermore, even if the Seller is willing to accommodate

the Buyer on the requested point, a prudent lawyer will still expressly deny the validity of the

requisition, reserve the Seller’s right to do nothing about the requisitioned issue, and set out

what the Seller proposes to do, without liability for failure to do so.

Title Requisitions and other Permitted Requisitions

It helps to consider the standard requisition language, and for illustrative purposes we will use

the 2016 title and requisition language from Ontario Real Estate Association ("OREA") form for

the purposes of this discussion.

The OREA form provides for two types of requisitions: title requisitions and other contractual

requisitions, which is to say, requisitions as to matters that are not title, but are specifically

included in the contract and stated to be the subject matter of a valid requisition. Section 8 of

the OREA form agreement sets out the investigation and requisition regime as follows:

8. TITLE SEARCH: Buyer shall be allowed until 6:00 p.m. on the ..................... day

of.................................................................., 20................, (Requisition Date) to

examine the title to the property at his own expense and until the earlier of: (i)

thirty days from the later of the Requisition Date or the date on which the

conditions in this Agreement are fulfilled or otherwise waived or; (ii) five days prior

to completion, to satisfy himself that there are no outstanding work orders or

deficiency notices affecting the property, that its present use

(................................................................) may be lawfully continued and that the

principal building may be insured against risk of fire. Seller hereby consents to the

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municipality or other governmental agencies releasing to Buyer details of all

outstanding work orders and deficiency notices affecting the property, and Seller

agrees to execute and deliver such further authorizations in this regard as Buyer

may reasonably require.

The first thing that you will notice is that two types of examinations are contemplated by the

contract, and two time frames in which to conduct them. Title examinations are allowed to be

made until the set requisition date. Examinations as to outstanding work orders, deficiency

notices, the insurability of the property, and as to whether its present use may be lawfully

continued, may be made for a period after that, and in any event not later than five days prior to

the completion date. The additional time period is considered reasonable given that some of

these so-called "off-title" investigations require third party governmental authorities to process

written requests for information and to disclose the contents of their file on the property to the

buyer.

The purpose of Section 8 of the Agreement is primarily to set out the dates for the various periods

of investigation. Section 10 of the Agreement then sets out how these dates trigger contractual

rights and obligations of the parties:

10. TITLE: Provided that the title to the property is good and free from all

registered restrictions, charges, liens, and encumbrances except as otherwise

specifically provided in this Agreement and save and except for (a) any registered

restrictions or covenants that run with the land providing that such are complied

with; (b) any registered municipal agreements and registered agreements with

publicly regulated utilities providing such have been complied with, or security has

been posted to ensure compliance and completion, as evidenced by a letter from

the relevant municipality or regulated utility; (c) any minor easements for the

supply of domestic utility or telephone services to the property or adjacent

properties; and (d) any easements for drainage, storm or sanitary sewers, public

utility lines, telephone lines, cable television lines or other services which do not

materially affect the use of the property. If within the specified times referred to

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in paragraph 8 any valid objection to title or to any outstanding work order or

deficiency notice, or to the fact the said present use may not lawfully be

continued, or that the principal building may not be insured against risk of fire is

made in writing to Seller and which Seller is unable or unwilling to remove, remedy

or satisfy or obtain insurance save and except against risk of fire (Title Insurance)

in favour of the Buyer and any mortgagee, (with all related costs at the expense

of the Seller), and which Buyer will not waive, this Agreement notwithstanding

any intermediate acts or negotiations in respect of such objections, shall be at an

end and all monies paid shall be returned without interest or deduction and Seller,

Listing Brokerage and Co-operating Brokerage shall not be liable for any costs or

damages. Save as to any valid objection so made by such day and except for any

objection going to the root of the title, Buyer shall be conclusively deemed to have

accepted Seller's title to the property.

Good Title is a Condition of Closing

In order to understand Section 10, we first need to parse its grammar. The Ontario Superior Court

of Justice held that "provided that" can convey "the creation of a condition precedent that is to

attach to an earlier provision, an exception to such a provision, a qualification of it, and

clarification by excluding a specific inference that might possibly be drawn from its terms."8 So,

if we accept then, that Section 10's opening proviso constitutes a condition of closing in favour

of the buyer,9 then we might paraphrase it as stating "the obligation of the Purchaser to complete

the transaction is conditional upon title to the property being good and free…".

8 John Gardner & Karen Gardner, 5th ed, Sanagan's Encyclopedia of Words and Phrases Legal Maxims, (Toronto: Thompson Reuters, 2016), sub

verbo “provided that”, citing Midas Realty Corp. of Canada Inc. v. Galvic Investments Ltd. (2008), 2008 CarswellOnt 3087 (Ont. S.C.J.).

9 Blacks Law Dictionary - The word used in introducing a proviso (which see.) Ordinarily it signifies or expresses a condition; but this is not

invariable, for, according to the context, it may import a covenant, or a limitation or qualification, or a restraint, modification, or

exception to something which precedes. See Stanley v. Colt 5 Wall. 166. 18 L. Ed. 502; Stoel v. Flanders, 68 Wis. 256, 32 N. W. 114;

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The words "provided that the title to the property is good" are a reiteration of what exists at

common law despite this provision, as the common law has long held that any sale of land is

conditional upon the seller's good title, even if it is not explicitly stated in the contract. Which is

to say, the condition of good title is always implied by the common law.10

The balance of that sentence then states that title must be two things. Firstly, title must be good,

and secondly it must be free from all restrictions and encumbrances except for the four

categories of permitted encumbrances described in subparagraphs (a) through (d). So it is a two

part test. The second part of the test is more concrete within the four corners of the agreement,

as it says that title shall be subject to no encumbrances other than a list of so-called permitted

encumbrances. However, the first part of the test, requiring that title also be good, means that

we must look at the common law. The court in Joydan Developments Ltd. v. Hilite Holdings Ltd.

tells us that the failure to deliver good title occurs when “the purchaser could not have that which

he contracted for and, as such, could not be compelled to take that which he did not mean to

have.” 11

Good Title: More than Just Semantics

When determining what constitutes good title, the courts look primarily into whether title

can actually be transferred as promised, and stems from the fundamental common law rule that

“if a vendor contracts to sell land without any saving condition as to the nature of the title he is

Robertson v. Caw, 3 Barb. (N. Y.) 418; Pasehall v. Passmore, 15 Pa. 308; Carroll v. State, 58 Ala. 396; Colt v. Hubbard, 33 Conn. 281;

Woodruff v. Woodruff, 44 N. J. Eq. 349, 16 Atl. 4, 1 L. R. A. 380.

10 McNiven v. Pigott, [1914] O.J. No. 8, 22 D.L.R. 141 at 14 and 16 (H.C.Div.). The court cited from Flureau v. Thornhill (1776), 2 W. Bl. 1078 to hold

that "the principle is laid down that a contract for sale of land is merely upon condition, frequently expressed, always implied, that

the seller has a good title. If the seller has no title or a defective title, and is acting without collusion, the prospective buyer is entitled

to no satisfaction for the loss of his bargain." This was supported by Bain v. Fothergill (1874), L.E. 7 H.L. 158, where "it was laid down

that the rule in the earlier case must be taken to be without exception, unless the plaintiff could shew sufficient to entitle him to

recover damages in an action for deceit."

11 [1972] O.J. No 2008 [1973] 1 O.R. 482 (H.J.C.) at 16.

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to confer upon the purchaser, the law implies that it is incumbent on him to make out a good

title in fee simple.”12

As with most tests, it is dependent upon the facts of each particular case; however, the

common thread is determining whether the seller is actually able to grant that for which the

purchaser bargained. A defect in title relates to the quality of the seller's ownership and not the

quality of the actual land.13 Good title is title that can be forced upon an unwilling future buyer

of the property,14 does not have palpable defects, grave doubts, clouds, or the reasonable threat

of litigation or hazard to mar peaceful possession. 15

Pennel J. in Zender put it this way:

"The vendor must show a good title, that being a marketable title. A marketable

title is one which can at all times and under all circumstances be forced upon an

unwilling purchaser who is not compelled to take a title which would expose him

to litigation or hazard".16

12 Armstrong v. Nason (1895), 25 SCR 263 at 268.

13 Armitage v Liptay, [1976] O.J. No. 2144, 12 O.R. (2d) 543 (Ont. H.C.J.) at 15, aff'd Armitage v Liptay, [1977] O.J. No. 2278, 16 O.R. (2d) 223 (Ont.

C.A.). The court cites and adopts the unreported decision in Frank Street Holdings Ltd. v. Caravatta et al to hold that "A vendor must

show a good title. This means a merchantable or a marketable title: one which at all times and under all circumstances can be forced

upon an unwilling buyer who is not compelled to take a title which would expose him to litigation or hazard: one which is free from

litigation, palpable defects and grave doubts and couples a certainty of peaceful possession with a certainty that no flaw will appear

to disturb its market value."

14 Zender v Ball, (1975) 5 O.R. (2d) 747 at 17 [Zender];.

15 Armitage, supra note 13. Similarly, Paul Perell, Real Estate Transactions, 2d ed (Toronto, Ontario: Thomson Reuters Canada Ltd., 2014) at pg.

78 [Real Estate Transactions] mentions the following cases: Pyrke v. Waddingham (1852), 68 E.R. 813 (Ch.); 663865 Ontario Ltd. V.

Docherty, [1995] O.J. No. 956 (Ont. Gen. Div.); Holmes v. Graham (1978), 90 D.L.R. (3d) 474 (Ont. C.A.); and Caruana v. Duca Community

Credit Union Ltd. (1994), 20 O.R. (3d) 563 (Ont. C.A.). One point that should be noted however, is that, while the obligation to deliver

good title is in the contract and is implied by common law, it can be contracted out of: Zender, supra note 14.

16 Zender, supra at note 14.

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Di Castri would add that good title is also one which is free from palpable defects and grave

doubts and couples a certainty of peaceful possession with a certainty that no flaw will appear

to disturb its market value.”17

Marketable Title v. Marketable Property

As we discuss under the context of the analysis of the Macdonald v. Chicago Title case later in

this article, there has to be a bright line drawn between title and non-title issues when reading

this marketability test. With respect to Pennel J., I would almost want to further clarify the test

as follows (emphasized words mine):

"The vendor must show a good title, that being a marketable title, which for

clarity, is to be distinguished from a marketable property. A marketable title is

one a title to a property which can at all times and under all circumstances be

forced upon an unwilling purchaser who is not compelled to take a title which

would expose him to litigation that relates to the validity of such title or peaceful

possession or hazard that relates to the validity of such title or peaceful

possession".

There are many reasons why a property can be rendered unmarketable, including physical

defects, non-compliance with zoning setbacks or safety requirements, faulty construction,

ongoing litigation with tenants or neighbours, or other deficiencies. However, these are not title

matters, with the possible exception of litigation which goes specifically to title. So, if you are

answering a requisition that purports to characterize a matter that goes the marketable nature

of the property, instead of the marketability of title (and such matter is not otherwise permitted

to be requisitioned by the agreement) the appropriate response of buyer’s counsel is to expressly

deny the validity of such requisition. This is not to say that all non-title requisitions are invalid

under the standard form language.

17 JV Di Castri, The Law of Vendor and Purchaser, 3d ed (Toronto: Thomson Reuters, 2016) at Ch 14, Div VIII, §625.

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Title Requisitions v. Non-Title Requisitions

If you recall, I have taken the position that while the obligation of the vendor to deliver "good

title" is set out in the contract of purchase and sale, it is also an implied condition of the sale of

real estate at common law. Consequently, although it can be a matter of contract, the right to

make a requisition as to title exists at common law, and failing an express provision of the

purchase agreement, is to be made within 30 days of the agreement date, as set out above.

Accordingly, title requisitions, and the right to make them, can be distinguished from other types

of requisitions on the simple basis that they are inherent in every contract for the purchase and

sale of real estate. Therefore, it becomes particularly important that we are able to distinguish a

title requisition from a non-title requisition.

Contractual Requisitions vs. Title Requisitions

Section 10 permits requisitions on only two subject matters: title (to the extent that it is not

"good"), and a specific list of non-title matters, such as work orders and deficiency notices; which

is to say, that the contract has "elevated" these specifically listed items to the level of importance

of title matters, for the purposes of allowing the buyer to requisition their rectification, failing

which, the right of termination is triggered. We generally include these other, contractually

permitted, non-title requisitions, under the banner "matters of contractual requisitions".

Section 10 of the OREA form contains only four matters of contractual requisition: "any

outstanding work order or deficiency notice, or to the fact the said present use may not lawfully

be continued, or that the principal building may not be insured against risk of fire". That's it.

That's all. And so where a requisition is neither one of title nor goes to one of the four issues, it

is not a valid requisition under the terms of the contract.

As a consequence, there has been more than a little judicial confusion over the years as to what

constitutes a valid title requisition. The underlying problem, generally speaking, is that there are

things that can affect the value or usefulness of a property for a buyer, and which are not title

matters, and where they are not specifically listed in the contract as being a matter of contractual

requisition, the buyer is not able to requisition their rectification or removal.

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And so, as a general matter, what the courts have said is that there is title, and then there is the

list of off title (contractual requisition) matters that are set out in the purchase agreement, and

if you haven't added them to the list, they do not constitute valid requisitions. So, if you are

buyer's counsel, consider that the list:

1. does not include open building permits;18

2. does not include a lack of building permits if no deficiency notice has been issued;19

3. does not include zoning matters, unless the facts are that the said present use may not

lawfully be continued. Which means that if the buyer has different intentions for the

property, or the zoning matters do not go to the issue of the lawfulness of the current

use, they may not be validly requisitioned.

4. does not include restrictions under conservation authorities restricting further

development on the land.20

These matters are neither title matters, nor are they matters that, by virtue of the contract, have

been elevated to the level of title matters.

For example, the court in Brar v. Smith found that the fact that the seller was using the property

for business when it was not appropriately zoned for that was not an issue that went to title

because the buyers should have done their own due diligence, checked what the land was zoned

for, and not assumed that because a commercial-looking sign was on the property that the zoning

18 Thomas v. Carreno 2013 ONSC 1495 [Carreno], discussed in further detail below.

19 MacDonald v. Chicago Title 2015 ONCA 842 [MacDonald], discussed in further detail below.

20 Palen v. Millson (1987) 63 O.R. (2d) 89 (Ont. Dist. Ct.); 665284 Ontario Ltd. v. Ricci (1992) 23 R.P.R. (2d) 221 (Ont. Gen. Div.). In both of these

cases, the courts held that restrictions placing the land under the power of a conservation authority were not valid grounds to refuse

to complete the purchase because they did not go to the root of title if they are not explicitly mentioned in the contract.

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would be adequate for their purposes without asking anyone.21 On its face, this decision is

correct, which is why the modern form of OREA agreement specifically provides for the

contractual requisition "or to the fact the said present use may not lawfully be continued", so

that a purchaser has the ability to conduct its due diligence on permitted uses and to requisition

the vendor should the existing use not be permitted by existing zoning. In Kolan v. Solicitor, the

Court stated that:

"in the case of zoning by-laws or planning controls, and in my opinion also in the

case of failure to conform with housing by-laws, to affect the marketability of the

title they must be expressly mentioned in the contract of sale as grounds for

avoidance".22

And so, the general position of the courts is that zoning matters are not title matters and may

only be requisitioned if expressly mentioned in the agreement, or as some courts put it, if

elevated by the contract to the level of importance as title matters. 23

21 [2014] OJ No 4959.

22 Kolan v. Solicitor, [1970] 1 OR 41; aff'd by the Court of Appeal, [1970] 2 OR 686 [Kolan].

23 Kolan, Ibid; Jackson v. Nicholson, [1979] O.J. No. 4321 [Jackson]; Innes v. Van de Weerdhof, [1970 ] O.J. No. 1453 [Innes]. In Jackson, the deal

to purchase a house fell through when it turned out that an earlier owner had added a sunroom without municipal permission. The

request for specific performance was upheld by the court because "the authorities are clear that a requisition for non-compliance with

a zoning is not a matter of title, let alone a matter going to the "root of title" (…) At best, a zoning by-law is a "matter affecting the

land." In Innes, the solicitors acting for the buyers of a house and a 48.5 acre Christmas-tree farm in Collingwood found out from the

municipality that there was a zoning by-law in effect on the property. This took the form of a 400 foot frontage buffer zone requirement

on each boundary road. Because of discussions around this by-law, the buyers refused to close. The court rejected the proposition

that a by-law issue goes to title and the buyers could not rescind the contract on that basis. However, see Ridgely v. Nielson [2007]

O.J. No. 1699, 53 R.P.R. (4th) 1 (SCJ) in which case the court took into consideration the buyer's future intended use of the property in

determining whether a valid title requisition had been made.

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Then in 2013 there was a judicial hiccup (or two).

The Superior Court of Justice in 2013 heard the case 1854822 v. Estate of Manuel Martins24 which

involved the urgent request from the buyer of the real estate for an order of the Court that the

seller had "not shown good title in the premises" on closing because there was an active building

permit regarding work proposed to be done to the garage. During the requisition period, the

buyer had requisitioned that the open building permit be closed, and the seller had responded

that that request was not a valid requisition. The seller took the position that, having regard to

the language in the standard form of OREA purchase agreement, an open building permit is

neither a work order nor a deficiency notice, inasmuch as a building permit constitutes

permission to do work, not a requirement to do that work. The seller also stressed that not only

was a permit purely permissive in nature, but that no work had actually been commenced by the

seller in furtherance of the open building permit.

The Court found that a building permit, even if not acted upon (or even if only acted on to a small

extent), not only affects title but goes to the "root of title". Its rationale was that "the existence

of an open building permit which enables the city to inspect premises and make work orders does

make a difference to the buyer" ... and "clearly an inspector has the authority under the Building

Code Act to make an order that certain work be undertaken immediately to bring the garage into

compliance with the code". The implications of this finding are significant, because it not only

stands for the proposition that open building permits can be validly requisitioned as title matters,

but that they are not merely clouds on title or minor defects — they go to the "root of title".

With deference, hogwash. An active building permit can only be validly requisitioned under the

contract if the parties have added it to the list of matters that can be validly requisitioned.

Another 2013 case from the Ontario Superior Court considered a situation in which, in

accordance with a customary requisition process, the buyer requisitioned, in a timely fashion,

24 2013 ONSC 4310 [Estate of Manuel Martins].

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evidence that an open building permit had been closed.25 The seller made efforts to close the

permit in time but was unable to prior to closing. The standard OREA form purchase agreement

would have allowed the buyer to terminate the agreement had there existed "valid objections to

title, or to any outstanding work order or deficiency notice" made by the buyer within the

requisition period (or any requisition after such period that went to the root of title) that the

"Seller is unwilling or unable to remove, remedy or satisfy or obtain [title] insurance" for. At

closing, the seller denied that the buyer could refuse to close because of the open building permit

on the basis that an open building permit is not a "valid objection to title, or to any outstanding

work order or deficiency notice", but in any event (despite such denial) the seller obtained a

commitment from a title insurer (for the benefit of the buyer) to insure over the issue. The seller

obtained this policy by agreeing with the title insurer to set aside in escrow $100,000 to attend

to the problem.

The Court found in favour of the seller (and the buyer lost their deposit) on the basis that title

insurance was made available, and that the requisition provision in the agreement did not permit

termination where the valid requisition was insurable by title insurance. What the Court

appeared to do in this case, was to accept that an open building was a valid requisition

(presumably, either as a title matter or as a "precursor to a work order"). Interestingly, on appeal,

the Ontario Court of Appeal dismissed the buyer's appeal for the return of its deposit, and found

that the lower Court had concluded correctly that "the requisition in relation to the open building

permit could be satisfactorily answered by a commitment to provide title insurance as

contemplated by the Agreement of Purchase and Sale", which is to say, that the Court of Appeal

also tacitly acknowledged the validity of the underlying requisition.

So what happened in 2013? Results-based legal decisions. These decisions are a direct result of

courts struggling to find a way in which to shoehorn building permits into the "title" category.

Bad law. And being as we are on the topic of bad law, our discussion of title and building permits

25 Carreno, supra at note 18.

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would not be complete without a rant on the 2014 case of MacDonald26 which was based on the

following undisputed facts:

(a) the MacDonalds acquired a home without knowledge that the seller had removed

load bearing walls in the home without a building permit;

(b) the MacDonalds had purchased an owner's policy from Chicago Title;

(c) some years later, the City of Toronto determined that the home was unsafe as a

consequence of such wall being removed, and issued an order to the MacDonalds

to remedy the problem by installing shoring to "temporarily support the floor

structure"; and

(d) Chicago Title refused coverage.

The Court considered coverage under Section 11 of the policy which provided coverage where:

"[y]our title is unmarketable, which allows another person to refuse to perform a contract to

purchase, to lease, or to make a mortgage loan." The Ontario Superior Court found that the Title

Marketability Coverage did not cover the MacDonalds for their loss, but this was reversed at the

Court of Appeal which held that the lower court had adopted an "an unduly restrictive

interpretation of the coverage provisions in the Title Policy".

The Court stated that marketable meant, under the terms of Section 11, that "a potential buyer

can refuse to close an agreement of purchase and sale on learning of the defect". The Court found

that Chicago Title had not disputed that the condition of the property would allow a potential

buyer to refuse to close a purchase transaction, implying that the insurer had effectively

conceded that the test was met. And in addition, the Court denied Chicago Title's position that

the cause of the problem was the faulty construction (a "latent defect in construction") and

26 MacDonald, supra at note 19.

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instead found that the "unmarketability" of title was the direct result of the failure of the prior

owner to obtain a building permit.

The court's approach in MacDonald has effectively blended the two concepts of unmarketability

of title and unmarketability of property. The latter is more often associated with ancillary building

or land defects (work orders, zoning compliance, deficiency notices and the like). Returning to

basics, title to real property is different from the real property itself. Putting aside historical

semantics of property law for a moment, there remains a difference between what constitutes

one's title to land, and the land and building itself. And the marketability of title and the

marketability of land and building are two very different things.

Curiously, in this case, even though it was a matter of the interpretation of an insurance contract,

the same thing happened as has been happening in the canon of title requisition law cases – the

court labelled a non-title issue (in this case building permits, or lack thereof) as a title issue

because it could not find a place where it had been separately addressed in the contract.

So, to salvage the purpose of this paper, which is to consider responses to invalid requisitions,

what is buyer’s counsel to do with a requisition that is not a valid title requisition but otherwise

is addressing a matter of real estate-related diligence such as zoning or permits? The short

answer is deny, deny, deny. But the better reasoned answer is to first determine if the non-title

requisition is with respect to a matter that has been “elevated” by the contact to the level of

importance of title, such that it may be validly requisition. If it hasn’t, buyer’s counsel should then

carefully consider the case law to determine if the scope of “title issues” and the “marketability

of title” has been broadened (rightly or wrongly) by the courts to capture the requisitioned issue.

The answer to this enquiry is neither always intuitive nor consistent, which of course is why we

get paid to consider it, and to take a position.

Root of Title

Much of this discussion has been focused on the distinction between title and contractual

requisitions. But there is a subcategory of "title matters" that we cannot ignore. Returning once

more to the OREA form, we note that matters that go "to the root of title" may be requisitioned

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up to closing and, if not remedied, can give right to contractual rescission. What then is the

difference between a title issue and a root of title issue?

If you recall, the Estate of Manuel Martins (in which the court determined that the lack of building

permit constitutes a "root of title" issue) provided us with an example of how the courts have

confused matters of title generally. In Jakmar Developments Ltd. v. Smith, the court analyzed a

line of cases determining requisitions and held that:

"[i]n all the cases ... where an objection to title is made after the date for

requisitions was permitted it was a case where the seller could give no title at all

and the defect could not be discovered as a result of the usual search of title".27

Which is to say, that a failure in the root of title is a fundamental failure of the seller to be able

to convey title. Think of such fundamental problems as: the seller does not exist, does not have

the authority to sell the property, does not own and cannot compel the sale of the property, or

is prevented by law from selling the property. It amounts to a lack of consideration, which is why

it is a matter that can ultimately frustrate the contract up to closing. While the jurisprudence has

not yet articulated a universal rule as to what constitutes a requisition going to the root of title,

some judicial interpretations of particular circumstances include violations of the Planning Act or

zoning by-laws,28 property that has escheated to the Crown, vendors without proper authority

or capacity to confer title29, undisclosed encroachments onto common roadways or railways,30

and outstanding executions. It is also important to note that the defect may only concern part

of the property and may still go to the root of title.31Again, returning to the purpose of this paper,

27 Jakmar Developments Ltd. v. Smith, [1973] 1 O.R.(2d) 87 at 43.

28 Innes v Van de Weerdhoff, [1970] 2 O.R. 334.

29 Re Tanqueray-Williamson a Landau, (1882), 20 Ch. D. 465.

30 Martin v. Kellogg 1932] O.R. 274; Heifetz v Gural, 1950] O.W.N. 854.; Re Mountroy Limited and Christiansen, [1955] O.R. 352; Brow v Laffradi,

[1961] O.W.N. 263.

31 Zender, supra at note 14.

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any requisition that is made following the date permitted by the agreement of purchase for

requisitions should be expressly denied by the Seller’s counsel, unless such requisitions go to the

root of title.

Requisitions that are a Matter of Conveyancing

This is a subject that most real estate practitioners have either forgotten or never knew existed,

although (for good measure) in preparing this discussion I went back and looked at my 2001 LSUC

materials from when I taught the bar admission course, and this subject merited its own

paragraph in those materials. So if you don't know this, sadly you have no excuse.

There is a seldom-invoked common law line of cases that have described a category of valid

requisitions that are a matter of conveyancing. These are extra-contractual requisitions that can

be made as a matter of common law. They are requisitions that do not arise from the requisition

provisions of the contract, and are therefore not constrained by the periods set out therein or in

the Vendor and Purchaser's Act, for valid requisitions. They can be made up to closing.

In O’Neil v Arnew, the court explained: “A matter of conveyance as opposed to one of title is an

encumbrance which the vendor is able to pay off and discharge by virtue of his own interest in,

or his own power over the property, or by the concurrence of a party which the vendor can

compel.”32 If the vendor is unable to obtain the relevant discharge as of right, the requisition

must be an objection to title according to the principles espoused in Sidebotham v. Barrington:

“Where an interest is vested in a party to secure a right, the satisfaction of which right entitles

the party who has sold the estate to call for a conveyance, then the Court considers it a question

of conveyance only."33 What we know about these requisitions is:

1. they are not title requisitions;

32 Practical Property: Requisitions – Objections to Title (1982), Lawyers’ Insurance Association of Nova Scotia at 2-3.

33 Sidebotham v. Barrington (1841), 3 Beav. 524 at p. 528

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2. they do not go to the root of title;

3. they are not requisitions that could have been made as matters of contractual

requisition; and

4. they are requisitions "which the vendor alone or with other persons whose

concurrence he can require is in a position to convey the title to the property. They

assume that the vendor has a right to make title or to cause it to be made and are

concerned with the satisfaction of the right."34

Which is to say, that (for example) if there is an offending instrument registered against title to

the property that is within the unilateral authority of the seller to delete from the title, the matter

need not be raised by the requisition date.

Paul Perell in Real Estate Transactions, has determined that following have been held to be

matters of conveyance: 35

• Obtaining the discharge of an open mortgage. In Toth v. Ho, where the court distinguished

an open mortgage from a closed one because the latter "is by its very nature not one

which the mortgagor can compel a discharge be granted," unlike an open mortgage.36

34 Law Society's Special Lectures by William Howland, as quoted in Majak Properties Ltd. v. Bloomburg, (1976) 13 O.R. (2d) 447 (Majak). In Majak,

the court looked at three main requisitions (1) a right of way over the property; (2) a consent of all mortgagees to registration of a

plan of subdivision; and (3) a bar of dower of the wives. The court held that contractual limitation of time for delivery of objections to

title do not apply to matters of conveyance nor to objections going to the root of title, but that those three main requisitions did not

fall into either category.

35 Real Estate Transactions, supra at note 15 at 104.

36 (1998), 26 R.R.R. (3d) 76 (Ont. Gen. Div) at 7. In this case, the agreement of purchase and sale had an annulment clause for cases where the

seller could not make title as well as a separate schedule providing that the sellers would discharge all mortgages on title. There was

a closed mortgage on title; the question was whether the sellers could therefore invoke their annulment clause – i.e. whether the

existence of a closed mortgage constituted a requisition on title or a requisition on conveyance.

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• Obtaining an affidavit of execution on a mortgage discharge.37

• Lifting a writ of execution against the seller.38

• Obtaining an estate tax release, or an estate or succession duty release.39

• Producing a mortgage statement where the seller has undertaken to produce it.40

• Obtaining a survey.41

• Obtaining a discharge of a construction lien.42

Answering Performance Requisitions

So we are clear, I have made up the term “Performance Requisitions” and I differentiate these

requisitions from contractual requisitions as follows. Contractual requisitions, as I use the term

above, refers to matters that, in the requisition section of the purchase agreement are non-title

matters that are specifically permitted to be the subject of a requisition. They are built into the

requisition provision as being matters that are as important as title matters, for the purposes of

37 Zender, supra at note 14.

38 Farantos Development Ltd. v. Canadian Permanent Trust Co. (1975), 7 O.R. (2d) 721 (Ont. H.C.) at 60. Here, the court stated that "[i]n my view

the obtaining of succession duty and estate tax releases or consents, and the discharging or lifting of the two executions, are matters

of conveyance only and are not matters of title. They relate to encumbrances which the estate had the right to pay off and discharge

before the closing date."

39 Ibid.

40 272393 Ontario Ltd. v. 225596 Holdings Ltd. (1976), 1 R.P.R. 101 (Ont. H.C.) at 31, aff'd (1977), 2 R.P.R. 245 (Ont. C.A.), leave to appeal refused

(1978), 20 N.R. 449 (note ) (S.C.C.). In this case, the buyer was held to be entitled to rely on the seller's solicitor's undertaking to

produce the mortgage statements. Since he had not done so, the buyer was entitled to refuse to close.

41 McCauley v. McVey, [1980] 1 S.C.R. 165 (S.C.C.) at 5. Here, McVey unintentionally did not give the surveyor enough time to produce a survey

by the closing date, but the court held that the survey obligation was "more a matter of conveyancing than of title, and it is clear that

a seller cannot justify a refusal to complete by relying on a matter of conveyancing that is within his power to correct."

42 Grant v. Tiercel Digital Ltd. (1993), 32 R.P.R. (2d) 51 (Ont. Gen. Div) aff'd 1994 CarswellOnt 4539 (Ont. C.A.). There were several construction

liens registered against the property, the buyer was aware of them and the closing was postponed several times as the seller

attempted to settle the liens. The seller eventually cancelled the agreement on the basis that the liens had not been settled on time

and the court held that construction liens were a matter of conveyance and not a matter of title.

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the rescission provision of the agreement. Performance requisitions, on the other hand, are

requests in a requisition letter that the Seller perform provisions of the contract on or before

closing (sometimes with modifications or requests as to how such performance is to occur). No

doubt, in a few, years, when this paper has been cited a half dozen times (as good or bad

commentary) the term “performance requisitions” will engrain itself in the legal lexicon.

In any event, I think of performance requisitions as written requests in a requisition letter

to deliver closing deliveries or to otherwise satisfy closing conditions that are otherwise

specifically contemplated by the purchase agreement. It is not uncommon for a requisition letter

to requisition any number of closing deliveries or documents that are otherwise mandated by or

addressed by the purchase agreement, and I would venture that a seller’s solicitor who does

anything other than deny these requisitions on the basis of being invalid, opens the door to

inadvertently amending or modifying the terms of the purchase agreement or the terms of the

Seller’s performance thereof. For example, if the purchase agreement contains a description of

a seller delivery (let us say, a declaration of possession) to be delivered on closing, and the buyer’s

requisition letter requisitions any number of (non-possession) statements to be inserted in that

declaration, the seller’s counsel runs the risk of expanding the scope of what the seller has agreed

to deliver if it does not deny the buyer’s requisition. Buyers’ counsel often take the kitchen sink

approach to requisition letters. They ask for everything that they might want delivered or

performed on or before closing, whether or not it constitutes a valid requisition, in effect making

their requisition into something of a closing agenda.

In my view, these types of requisitions should be answered something like this: “The Seller

hereby denies your right to make this requisition pursuant to Section __ of the Agreement, as it

is an invalid requisition pursuant to such section. To the extent that the Seller has any obligation

with respect to the subject matter of such requisition, such obligation is as set out in in the

Agreement and is not to be modified hereby”.

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Negotiating the Requisition Provision

Let us return to the OREA form then. As you will recall, we discussed in the context of Section 8,

that there were two categories of investigations that the Buyer is permitted to make and two

different timelines in which the Buyer is permitted to make them, with the exception of "root of

title" matters, which can be raised up to the date of closing.

Section 10 sets out what the rights of the buyer and the seller are in this requisition process:

If within the specified times referred to in paragraph 8 any valid objection to title

or to any outstanding work order or deficiency notice, or to the fact the said

present use may not lawfully be continued, … is made in writing to Seller and

which Seller is unable or unwilling to remove, remedy or satisfy or obtain

insurance save and except against risk of fire (Title Insurance) in favour of the

Buyer and any mortgagee, (with all related costs at the expense of the Seller), and

which Buyer will not waive, this Agreement notwithstanding any intermediate acts

or negotiations in respect of such objections, shall be at an end and all monies

paid shall be returned without interest or deduction and Seller… shall not be liable

for any costs or damages.

Here is a recap of this provision:

1. Contractually, the buyer is allowed to make a valid objection to title (which means that

title is either not "good title" or is subject to an encumbrance that was not permitted) or

to the four other specified issues: outstanding work orders, deficiency notices,

(un)insurability of the property, or to the fact that the present use may not be continued;

2. The objection must be in writing; and

3. The seller must be unable or unwilling to remove, remedy or satisfy it or to obtain title

insurance to address it; and

4. The Buyer shall not have waived its objection; then

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5. The agreement is terminated, the deposit is returned to the buyer, and the buyer has no

further liability for costs and damages.

Now that we understand the mechanics of the OREA form of agreement respecting requisitions,

it is important to be aware that the provision is, in its standard form, inherently seller friendly,

and we will pause here to identify a couple of things that buyer's counsel must be mindful of each

time this provision is tabled.

Firstly, the right to terminate the agreement only arises if a valid requisition has been made. One

might make the argument that if a seller has made the business decision to sell a commercial

property, then that seller should be prepared to address, at its cost, all valid requisitions. If the

seller wanted the Buyer to accept any encumbrance that did not fit neatly into the (a) through

(d) categories of permitted encumbrances, then it had opportunity to otherwise specifically set

out those additional encumbrances in a schedule and rely on the preambular language of

Section 10 that says "except as otherwise provided in this agreement."

So in going to market with such title, and having had the opportunity to add to the general

permitted encumbrances of Section 10, it stands to reason that the seller should not be able to

avoid the cost of rectifying a requisition because it is "unwilling" to remedy or satisfy the

situation. Buyer's counsel is well advised to consider removing "unwilling" on this basis, so as to

reinforce the positive obligation on the seller to deliver what it has bargained for, at its cost. The

notion of it being able to skewer the transaction because it is "unable" to remedy the situation is

likely reasonable, although a buyer may want to qualify "unable" as not including "unable" due

to any requirement to pay or expend monies to do so.

Secondly, the manner of rectification in Section 10 has been broadened in recent years to allow

the seller to remedy or rectify the issue by buying title insurance for the buyer and its mortgagee.

Again, buyer's counsel would do well to consider striking this out. While title insurance often

facilitates closing, it is not always the right fix, and the effect of the "fix" depends not only on the

facts of the deficiency, but on the intentions of the buyer for the property. This provision also

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encourages a seller to do a cost analysis to determine whether fixing the deficiency or insuring

over it is the cheaper response: again, not necessarily what is in the buyer's best interest.

Lastly, and I have alluded to this above, seller's counsel in signing off on this form of

purchase and sale agreement, must recognize that this is its opportunity to ensure that all

encumbrances on title to the property, or otherwise that the seller is aware of, are (if not covered

squarely in Section 10(a) through (d)), set out in a schedule, so as to be captured by the list of

permitted encumbrances. Of course, buyer's counsel has a reciprocal duty in this regard. A buyer

may well argue that a standard form OREA purchase agreement should contain no specific list of

encumbrances, because that forces the purchaser to conduct its title and encumbrance due

diligence before executing the purchase agreement.

Good Faith

This is a good place to interject and remind ourselves of that there is a duty of good faith that

informs the obligations of the parties. The purchaser has a duty of good faith when sending

requisition letters;43 and the seller has a duty of good faith when responding. In the seminal case

Mason v. Freedman, a seller who sought to repudiate his contract because his wife had not

provided a bar of dower was not able to rely on the rescission clause because he had made no

efforts to ask her to do so. The court said that a "vendor who seeks to take advantage of the

clause must exercise his right reasonably and in good faith and not in a capricious or arbitrary

manner."44 Therefore, notwithstanding the language "unwilling" in the contract, a buyer who has

made a valid requisition still has stable footing to argue that the seller must act in good faith in

its determination that it is unwilling to rectify a matter set out in a valid requisition. As Middleton

J. in Hurley v. Roy so eloquently put it:

43 Halsbury's Laws of Canada, "Real Property", (Markham, ON: Lexis Nexis Canada, 2012) at para HRP-199, "(b) Requisitions".

44 Mason v. Freedman, [1958] S.C.R. 483, 14 D.L.R. (2d) 529 ( S.C.C.) at para 6, as cited in Bhasin v. Hrynew 2014 SCC 71 at 51 when the court

considered the duty of good faith arising where a contractual power is used to evade a contractual duty.

3 - 24

25

"this provision was not intended to make the contract one which the vendor can

repudiate at his sweet will. The policy of the Court ought to be in favour of the

enforcement of honest bargains…".45

The test for whether the seller has satisfied its obligation to perform its obligations in respect of

valid requisitions was explored in 11 Suntract Holdings Ltd. v. Chassis Service & Hydraulics Ltd.,46

and was distilled in to two main concepts. The seller may only rescind the contract for failing to

satisfy a valid requisition if (1) the seller's conduct doesn't evidence recklessness in entering into

the contact (i.e. knowingly bargaining for something it could not satisfy) and (2) if the seller made

bona fide efforts to remedy the validly requisitioned issue. This reminds us of our discussion

above. Sellers should not knowingly bargain to deliver "good title" subject only to certain

encumbrances if they are aware that they will be unable to satisfy certain valid requisitions,

should they be made. A court may subsequently disentitle them from repudiating the contract

no matter whether they are "unwilling or unable" to remediate the issue, on the basis of this

overriding common law duty to act in good faith.

A rigid adherence to the rule in Re Dai and Kaness Investment Ltd. may no longer be pragmatic:

"performance of the contract of purchase and sale must be precise and exact and ... the vendor

is entitled to insist strictly upon the transaction described in the agreement".47 More recently,

courts have relaxed Re Dai, focusing instead on the substance of the agreement, i.e.

“substantially what the purchaser has contracted to get”,48 and framing the test as follows: “In

determining whether a purchaser should take subject to a defect, it is not helpful to classify the

defect as latent or patent. The correct test to apply is whether the purchaser, if required to accept

45 50 O.L.R. 281, 64 D.L.R. 375.

46 [1997] O.J. No. 5003, 36 O.R. (3d) 328 (Gen Div).

47 Re Dai and Kaness Investment Ltd, 1979 CarswellOnt 1462.

48 Bowes v Vaux, (1918) 43 O.L.R. 521 quoting from Rutherford v Acton-Adams, [19151 A.C. 866.

3 - 25

26

the title, would be purchasing property which is materially different from that which he

bargained for ... ”.49 Which is to say, that in the context of both requisitioned issues, and the

responses thereto, courts may consider whether the parties have acted in good faith with a view

to causing the conveyance of an interest that is “not materially different” from that bargained

for.

However, all this said, there is no suggestion that duty to act in good faith imposes on a Seller the

obligation to address invalid requisitions in order to accommodate the Buyer, which is why in any

response to a requisition letter, Seller’s counsel is well advised to draw a bright line between

those requisitions that it believes to be invalid and those that it considers to be valid.

49 Re Stieglitz and Prestolite Battery Division, (1981) 31 O.R. (2d) 655.

WSLEGAL\000850\00997\17740176v1

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TAB 4

"It's Your Opinion, You Sign It" and other Valid Reponses from Clerks to Lawyers

Simon Crawford Scott Azzopardi, Articling Student

Bennett Jones LLP

April 3, 2017

14TH ANNUAL

Real Estate Law Summit

"It's Your Opinion, You Sign It"

and other Valid Responses from Clerks to Lawyers

Simon Crawford, Partner, Bennet Jones

Scott Azzopardi, Articling Student, Bennett Jones

NOW that the turmoil attendant upon the transference of power from one great

party in the State to another has subsided, people may be permitted to devote

their minds to a consideration of those sectional questions which are not less

important for the welfare of the persons concerned, than are the great national

issues upon which they have just pronounced judgment. Among such persons we

count the considerable body of clerks who pursue their careers of usefulness in

the law offices of the kingdom. No set of workers does better work for the

community, or does it with less display and with less hope of material reward. The

law clerk spends his life in unselfish devotion to the interests of his principal and

of his principal's clients. His labours are arduous, his responsibilities are great, but

his pay is comparatively small, and his glory nil. No one who knows him and his

work with any degree of intimacy would venture to assert that the position he

occupies in the estimation of the public is commensurate with the services that

he renders to the public, or that his remuneration reasonably approximates to the

value of such services.1

It is no secret that non-lawyer staff do an incredible amount of the heavy lifting in law firms of all

sizes and specialties. However, of all areas of law, real estate likely relies most heavily on

delegating specific tasks to skilled non-lawyer staff. There is nothing wrong with delegation. In

1 "Know All Men by These Presents" (1906) 1:1 The Law Clerk IV at IV.

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fact, delegation is a precondition to, not a consequence of, success in practice;2 and a properly

implemented systematized approach to delegation can reduce risk.3 That said, however heavily

we rely on our clerks, it is not appropriate to delegate to them all facets of real estate work. In

2016, real estate was the costliest and second most claimed in area of law for LawPRO. Clerical

and delegation errors accounted for 8% of all claims in this area.4

The rationale of upholding public confidence in the regulation of the real estate system, and

promoting the public confidence in the role of lawyers requires that delegation be managed very

carefully.5 Our obligation as lawyers is to ensure that clerks are appropriately trained and

supervised for work that can be delegated, and to bear the ultimate responsibility for our

practices.

Part I: The Supervisory Framework

(a) Clerks are not Independently Regulated

Unlike paralegals, law clerks are not separately regulated. They are indirectly regulated,

and from the perspective of the Law Society, the supervising lawyer is responsible for

their actions.

2 Edward Poll, "The Nuts and Bolts of Delegation in Law Firms: Build the Right Relationships for the Best Results" Canadian Bar Association

(September 18, 2014), online: https://www.cba.org/Publications-Resources/CBA-Practice-Link/Young-Lawyers/2014/The-Nuts-and-Bolts-of-

Delegation-in-Law-Firms-Buil.

3 See e.g. Kathleen A. Waters and Maurizio Romainin, :the Law Society of Upper Canada Residential Real Estate Transactions Practice Guidelines:

A Systematized Approach to Residential Real Estate" Quirky Conveyancing – Tools for the Modern Real Estate Lawyer (Ontario Bar Association,

February 4, 2016), online: http://www.practicepro.ca/information/doc/A-systemized-approach-to-residential-real-estate.pdf.

4 LAWPRO, "Real Estate Claims: Malpractice Fact Sheet", online: https://www.practicepro.ca/information/doc/RealEstate-FactSheet.pdf.

5 Law Society of Upper Canada v Martin Ronald Zaretsky, 2013 ONLSHP 54 at para 121.

4 - 2

Law clerks may voluntarily join the Institute of Law Clerks of Ontario ("ILCO"). ILCO clerks

are subject to a Code of Ethics, which creates the following duties:

• Clerks are at all times subject to the supervision of their employing lawyer or firm, and

shall at no time represent themselves to a client as a lawyer. Clerks will not give legal

advice without the authority of the supervising lawyer;

• Clerks must discharge their duties to their lawyer and to the ultimate client with

honesty and integrity;

• Clerks should provide services to the lawyer at a minimum quality of what a lawyer

would generally expect of a competent law clerk;

• Clerks are subject to hold all information acquired in the course of the professional

relationship in strict confidence, and should not divulge any information unless

expressly authorized or required to do so;

• Clerks owe a duty to their lawyer to observe all rules and laws regarding the

preservation and safekeeping of client property entrusted to the lawyer;

• Clerks should assist in maintaining the integrity of the legal profession, and participate

in its activities to the extent permitted by the Law Society or other governing body;

• Clerks' conduct toward lawyers must be characterized by courtesy and good faith; and

• The law clerk must observe the rules set out in the Code of Ethics in spirit and in the

letter.6

By contrast, paralegals are the subject of mandatory regulations under the Law Society

Act. The license required to practice as a paralegal (P1), is one of four licenses which may

be granted under the Act.7

6 Institute of Law Clerks of Ontario, By-Law No. 16, s 1.1, online: http://www.ilco.on.ca/docs/default-source/ilco-bylaw/bylaw16.pdf?sfvrsn=4.

7 See By-Law 4, last amended February 23, 2017, ss 1(1), 5 made under s. 62(0.1) of the Law Society Act, RSO 1990, c L 8. ("LSA). Unless

otherwise noted, hereafter all references to By-Laws are to those made under the LSA.

4 - 3

In 1999, when there was no entrenched distinction between clerks and paralegals,8 the

Government of Ontario invited the Law Society of Upper Canada (and others) to assist it

in analyzing issues regarding the delivery of legal services by non-lawyers, including the

issue of regulation.9 In 2000, the Law Society's Paralegal Task Force issued a report

recommending that non-lawyers be regulated for the purposes of appearing before a

court or tribunal, in accordance with procedures established by the court or agency

itself.10 Importantly, the Task Force justified its position with recourse to the rationale

that non-licensees do not generally require regulation because they are directly

supervised, and therefore regulated through, the supervising lawyer.11

From the outset, the Task Force recommended that independent paralegals be prohibited

from practicing in the area of real estate.12 The reason for this is that real estate engages

a number of complex and intersecting areas of law (often for clients who are unable to

assess the level of expertise required for their transaction), particularly where on title

risks arise. Such risks almost invariably require the provision of expert legal advice.13 In

addition to the complexity of the field, the Task Force viewed the growing risk to the

public posed by faulty or fraudulent transfer of title to be unacceptable for paralegals to

8 See Paralegal Task Force, "Final Report" Law Society of Upper Canada (March 2000) at 185, online:

http://www.lsuc.on.ca/media/paralegalfinalrept_en.pdf

9 Ibid at 4.

10 Ibid at 173-175.

11 Ibid at 173, 185.

12 Ibid at 134-135.

13 Ibid (task force final report). The Task Force provided a number of non-title or off-title risks which may arise in the context of real estate

transactions: a) whether the consumer should or should not close a deal; b) examination of the survey and advising clients of irregularities, c)

advice about mortgage terms such as, pre-payment clauses, d) advice on title insurance policies, e) building Code and variance problems; f)

Land Transfer Tax problems including possible refunds; g) sales tax. issues; h) the vendor’s liability in certain contractual situations; i) the

legality of rental income from a separate apartment in the dwelling; and. j) construction lien problems.

4 - 4

assume. Importantly, the report specifically identifies that the economics of conveyancing

might necessitate delegation, and accepts that supervised delegation, for example, in title

searching and closing, is appropriate by virtue of the supervision and ultimate

responsibility of a lawyer.14

In the course of determining the appropriate regulatory framework for paralegals, the

Task Force considered and rejected ILCO's proposal that it become the formal regulator

of clerks. The Task Force rejected this proposal, because:

"law clerks are already regulated because lawyers supervise them. They

are covered by the lawyer’s insurance and the supervising lawyer is

responsible for their conduct and competence. Lawyers who fail to

adequately supervise their law clerks are in breach of the Rules of

Professional Conduct."15

Given this pervasive rationale for not regulating clerks at the professional level, it

becomes important to identify the regulatory framework under which the lawyer may (or

may not) delegate certain tasks.

(b) The Trickle-Down Regulation of Lawyers

Rule 6.1-1 of the Rules of Professional Conduct ("Rules") is the starting point for effective

delegation in the practice of real estate.16 Under this rule, a lawyer must fulfil two

foundational duties with respect to their practice of law, "assume complete professional

14 Ibid at 135.

15 Task Force on Paralegal Regulation, "Report to Convocation" Law Society of Upper Canada (Policy Secretariat: September 23, 2004) at paras

146-147, online: http://www.lsuc.on.ca/media/convsept04_paralegal_report.pdf.

16 It is beyond the scope of this paper to exhaustively discuss how each rule might impact a given task in a real estate transaction. For a brief

overview on how more broadly applicable rules can effect a real estate practice, see Caterina Galati, "Update on the Amended Rules of

Professional Conduct" Six Minute Real Estate Lawyer (Law Society of Upper Canada: Continuing Professional Development 2014).

4 - 5

responsibility for their practice" and "directly supervise non-lawyers to whom particular

tasks and functions are assigned." The lawyer remains responsible to review this work,

and must do so frequently to ensure it is complete, timely, and correct.17

Generally, if a non-lawyer is competent to do work in connection with a law practice, and

supervised by a lawyer, it is permissible for the lawyer to delegate such work.18 Sole or

part time practitioners must ensure that matters which require professional skill or

judgment are dealt with by competent lawyers, and that legal advice is not provided by

unauthorized persons in connection with their practice.19

The Federation of Law Societies of Canada's Model Code of Professional Conduct, on

which the current Ontario Rules are based expressly recognizes that if "a non-lawyer has

received specialized training or education and is competent to do independent work

under the general supervision of a lawyer, a lawyer may delegate work to the non-

lawyer."20 However, this Commentary is not included in the current Ontario Rules.

For real estate lawyers, Commentaries 5.3 and 5.4 to rule 6.1-1 (to which we will return

below) set out the scope of permissible delegation. The commentaries read:

[5.3] Real Estate - A lawyer may permit a non-lawyer to attend to all

matters of routine administration, assist in more complex transactions,

17. Rules of Professional Conduct, rule 6.1-1 ("Rules"). Unless otherwise noted, hereafter all citations to rules are to the Rules of Professional

Conduct

18 Ibid, Commentary [1]

19 Ibid, Commentary [2]

20 In Gavin MacKenzie's view, such recognition is also present in the Ontario Rules. He writes the "Ontario rules recognize that there exists a

category of non-lawyers, generally referred to as law clerks, who have received specialized training or education and are therefore capable of

doing independent work under the general supervision of a lawyer." It appears Mackenzie is resting this conclusion in part upon the

commentary which is only contained in the Model Code. Gavin MacKenzie, Lawyers and Ethics: Professional Responsibility and Discipline

(Thomson Reuters, Loose Leaf, 2016 Rel 3) at 25-22.

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draft statements of account and routine documents and correspondence

and attend to registrations. The lawyer must not assign to a non- lawyer

the ultimate responsibility for review of a title search report or of

documents before signing or for review and signing of a letter of

requisition, review and signing of a title opinion or review and signing of a

reporting letter to the client.

[5.4] In real estate transactions using the system for the electronic

registration of title documents ("e-reg"™) only a lawyer may sign for

completeness of any document that requires compliance with law

statements.21

In addition, rules 3.2-9.4 through 3.2-9-7 govern the lawyer's obligation to neutrally

assess all reasonable options to secure title in a conveyancing transaction, and if TitlePLUS

is discussed, to advise the client of the relationship between the profession and, the law

Society and LawPRO. Rules 3.2-9.8 and 3.2-9.9 require a lawyer acting for a lender of a

loan secured by real property to finally report on the transaction, with a copy of a

registered mortgage, to the lender within 60 days of registration, or as otherwise

instructed by the client. Even if the lawyer has paid to satisfy prior encumbrances to

insure the priority of the mortgage, and the lawyer has obtained an undertaking to

register the discharge thereof, the lawyer must deliver the report within the specified

time where the discharge remains unregistered.

Rules 6.1-5, 6.1-6 (for the electronic registration of title documents), 6.1-6.1 (Title

Insurance) and 6.1-6-2 (the permissible use of the electronic registry) essentially govern

the integrity of the electronic land registry. These are discussed below, but for ease of

reference are reproduced here:

21Rule 6.1-1., Commentaries [5.3] and [5.4].

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Electronic Registration of Title Documents

6.1-5 When a lawyer has a personalized specially encrypted diskette to

access the system for the electronic registration of title documents ("e-

reg" ™), the lawyer

(a) shall not permit others, including a non-lawyer employee, to use the

lawyer's diskette; and

(b) shall not disclose their personalized e-reg ™ pass phrase to others.

6.1-6 When a non-lawyer employed by a lawyer has a personalized

specially encrypted diskette to access the system for the electronic

registration of title documents, the lawyer shall ensure that the non-

lawyer

(a) does not permit others to use the diskette, and

(b) does not disclose their personalized e-reg ™ pass phrase to others.

Title Insurance

6.1-6.1 A lawyer shall not permit a non-lawyer to

(a) provide advice to the client concerning any insurance, including title

insurance, without supervision,

(b) present insurance options or information regarding premiums to the

client without supervision,

(c) recommend one insurance product over another without supervision,

and

(d) give legal opinions regarding the insurance coverage obtained.

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Signing E-Reg™ Documents

6.1-6.2 A lawyer who electronically signs a document using e-reg™

assumes complete professional responsibility for the document.22

These real estate specific rules are particular instances of the overarching principle of

delegation from rule 6.1-1: the lawyer is wholly responsible for their practice. The Law

Society appreciates that it would be impractical to run a viable conveyancing practice

without the delegation of routine matters. This reality does not relieve the lawyer of the

burden of their ultimate responsibility.

There is one additional rule which should be kept in mind when a lawyer is determining

whether to delegate a given task: the lawyer is under a positive duty to assist in

preventing the unauthorized practice of law and the unauthorized provision of legal

services.23 The rationale for this rule is the same used to prevent paralegals from

practicing in real estate – the protection of the public.24

In addition to the Rules, a lawyer must also comply with the Law Society By-Laws. By-Law

7.1, allows the lawyer to assign tasks to non-lawyers in connection with their practice.25

It reiterates the lawyer's ultimate responsibility for their practice, and ensures non-

lawyers are appropriately supervised.26 The By-Law clarifies the general rule permitting

the delegation of tasks to non-lawyers. A lawyer (or other licensee) shall:

22 Rules 6.1-5, 6.1-6, 6.1-6.1, and 6.1-6-2

23 Rule 7.6-1.

24 Ibid, Commentary [1]. As explained by Gavin MacKenzie, the duty to assume complete responsibility for one's practice is a corollary of the

duty assist in the prevention of unauthorized practice. Gavin MacKenzie, supra note 20 at 25-21.

25 See By-Law 7.1, s 3(1).

26 Ibid, s 3(2).

4 - 9

(a) not permit a non-licensee to accept a client on the licensee’s behalf;

(b) maintain a direct relationship with each client throughout the

licensee’s retainer;

(c) assign to a non-licensee only tasks and functions that the non-licensee

is competent to perform;

(d) ensure that a non-licensee does not act without the licensee’s

instruction;

(e) review a non-licensee’s performance of the tasks and functions

assigned to her or him at frequent intervals;

(f) ensure that the tasks and functions assigned to a non-licensee are

performed properly and in a timely manner;

(g) assume responsibility for all tasks and functions performed by a non-

licensee, including all documents prepared by the non-licensee; and

(h) ensure that a non-licensee does not, at any time, act finally in respect

of the affairs of the licensee’s client.27

In addition, the By-Laws require a lawyer to verify the identity of most clients.28 There are

additional client identification requirements where the lawyer engages in or gives

27 Ibid, s 4(2). The By-Law further prohibits the following tasks from being delegated: (a) to give the licensee’s client legal advice;… (c) to conduct

negotiations with third parties, other than in accordance with subsection 5 (2); (d) to sign correspondence, other than correspondence of a

routine administrative nature; or (e) to forward to the licensee’s client any document, other than a routine document, that has not been

previously reviewed by the Licensee. Further, a lawyer may not allow permit a non-licensee to use their personalized diskette to access to the

electronic registration system, and except under certain circumstances a non-lawyer may not send a collection letter. See Ibid, ss 6-7. It is of

course permissible for a non-lawyer to have individualized access to this system. In such cases, it is incumbent upon the lawyer to emphasize the

importance of the security of the personalized diskette and pass phrase. See rule 6.1-6, Commentary [1].

28 Ibid, s 21, 22. Lawyers who do not have to verify the identity of clients at the beginning of the retainer, or meet the enhanced requirements

relating to the transfer of funds include those (a) acting on behalf of their employer; (b) acting as agent for another licensee or lawyer who has

already complied with the requirements; (c) received a referral for the client from a licensee or lawyer who has already complied with the

requirements; or (d) duty counsel under the Legal Aid Services Act, 1998 (except where the transfer of funds is concerned. See By-Law 7.1, s.

23.

4 - 10

instruction is respect of the receipt, payment, or transfer of funds (that is to say, virtually

all real estate transactions).29

The underlying concern, which is evident throughout the regulatory framework, is to

ensure that the general public is protected from unregulated staff through the highly

regulated legal profession. The lawyer is, in all circumstances of permissible delegation,

required to ensure non-lawyer staff members are: (1) competent for a given task; and (2)

appropriately supervised. Most importantly, the final responsibility for their practice rests

with the lawyer.

(c) Supervision Gone Wrong

Before we turn to identifying areas of appropriate delegation in a real estate transaction,

it is useful to situate the discussion by first looking at circumstances which do not

represent appropriate delegation to non-lawyer staff.

While the majority of our clerks are and will remain essential pillars of our practices, a

lawyer must remain vigilant to the possibility of being the "dupe" of a non-lawyer,

regardless of whether that non-lawyer is an employee.30 At worst, a non-lawyer employee

turned fraudster can prey upon vulnerable clients seeking legal assistance, and may do so

through their connection to an otherwise legitimate law practice.31

29 See By-Law 7.1, s 22(1)(b).

30 This obligation stems from rules 3.2-7 and 3.2-7.1, and Commentaries [1] and [2] thereunder. Note that the commentaries specifically avert to

the need for the lawyer to guard against being used in connection with, inter alia, mortgage fraud. In addition, because a competent lawyer is

expect to comply with both the spirit and the letter of the Rules, a minimum requirement of competency is that a lawyer conduct himself or

herself in a manner that guards against unwittingly participating in fraud. See Law Society of Upper Canada v Selwyn Milan McSween, 2012

ONLSAP 3 at para 41.

31 See e.g. R v Kassam, 2017 ONSC 74 ("Kassam"), where a non-lawyer employee, Inayat Kassam, essentially functioned as a paralegal (though

not being licensed to do so), possibly without the knowledge of his employer. Kassam first robbed his employer, and then defrauded potential

clients by holding himself out to be licensed to practice law. He managed to find employment with three separate firms, and had even appeared

4 - 11

In the context of disciplinary actions relating to mortgage fraud, where a lawyer fails to

properly supervise their non-lawyer staff, the Law Society decisions term such failures

"abdication" and "dupe" cases. These cases represent situations where a lawyer or other

licensee engages in misconduct short of participation or assistance in the fraud.32

Generally, abdication is a more pervasive pattern of misconduct, whereas being "duped"

is professional misconduct only where the lawyer's conduct is otherwise blameworthy.33

Even within the category of abdication there is a spectrum of blameworthiness, where

the "extent of moral blameworthiness attributed to abdicating one's professional

responsibilities is informed by the extent to which a lawyer abdicates his or her

professional responsibilities."34 While these terms are useful analytical tools for analyzing

the abrogation of a lawyer's responsibility, they should not be employed too strictly.35

Of course, a licensee clearly abdicates their responsibility where they wholly cede the

practice of real estate law to their clerk.36 For example, in Dillon, a technologically

illiterate lawyer expanded his practice to include real estate. The lawyer's wife and law

clerk assumed functional responsibility for the real estate practice, and the practice's

finances. After Ontario moved to the electronic registration system, unbeknownst to the

lawyer, the clerk obtained a Teranet key on his behalf. While the lawyer reviewed cheques

and requisition letters, he made only cursory inquiries into the propriety of the

in court as counsel of record by misappropriating one of his former employers' :LSUC numbers. Note that, for the purposes of Kassam's sentencing,

the court explicitly held that at least one of his employers failed to properly supervise him. See ibid at para 4.

32 Law Society of Upper Canada v Karen Rosalee Caroline Cunningham, 2012 ONLSAP 0031 at para 16 ("Cunningham").

33 Ibid at paras 16-19, 20-21.

34 Law Society of Upper Canada v Martin Ronald Zaretsky, 2013 ONLSHP 54 at para 117.

35 Cunningham, supra note 31 at para 22.

36 See e.g. Law Society of Upper Canada v Dillon, 2016 ONLSTH 167 ("Dillon").

4 - 12

transactions he acted in.37 After it was discovered the lawyer's wife was misappropriating

client funds held in trust, the hearing panel found the lawyer's conduct was an "almost

total abdication of professional responsibilities which goes to the core of the [l]awyer's

ability to practice",38 and he "purported to carry on a real estate practice without any

appreciation, training, or knowledge of real estate law…".39

It is unlikely that anyone reading this paper will be surprised that the situation in Dillon

was found to be professional misconduct in violation of current rule 6.1-1. Apart from

confirming that a modicum of specialized knowledge is required to hold oneself out as a

real estate lawyer, Dillon helpfully identifies the contours (albeit at their most extreme)

of appropriate supervision. It was not alleged that the lawyer knowingly participated in

any wrongdoing, and the lawyer even admitted he failed to properly supervise his

practice. However, the hearing panel confirmed this conduct was both inherently

dishonest (as the clients were not receiving the services they expected) but also a

necessary precondition to the wife's ultimate criminality.40 Therefore Dillon shows us that

the failure to supervise one's employees is intricately connected with the importance of

protecting the public confidence in the practice of law generally.

There are less dramatic iterations of a lawyer's failure to properly supervise employees.

For example, LawPRO has noted a "sharp increase in 'inadequate investigation'

claims…[resulting] from busy lawyers not spending enough time on a file."41 There is an

increasing number of errors, not because a lawyer has assigned a task to a person not

37 Ibid at paras 30-34.

38 Ibid at para 81.

39 Ibid at 82.

40 Ibid at paras 92-93.

41 LawPRO, LAWPRO, "Real Estate Claims: Malpractice Fact Sheet", supra note 4.

4 - 13

qualified to perform it, but potentially because they are assuming non-lawyer staff can

function as a safeguard to ensure a transaction is properly closed. While LawPRO does

not provide any detail into the resolution of these claims, real estate lawyers should

remember that even work delegated to competent and supervised staff requires the

lawyer's final review.42

In addition, a lawyer is liable for the negligence of their non-lawyer employees. In Fram

Developments Corp., the court determined a lawyer was negligent where he instructed

his secretary to fax a notice of extension for a service permit to another firm. While the

court found the secretary did not follow those instructions, it still held the lawyer was

negligent in not taking steps to confirm that the fax was received, including by again

following up with the secretary.43 Importantly for present purposes, liability does not flow

from the lawyer to the non-lawyer staff.44

How can a lawyer prevent these types of issues? Before we engage with the particular

elements of a real estate transaction, there is one point which must be emphasized:

effective delegation can and should be structural. For example, ensuring staff have

comprehensive and specific job descriptions is an essential precondition for effective

delegation.45 Similarly, ensuring work is delegated with clear instructions (for example,

42 See e.g. Raymond Leclair, "Ways Title Insurers Can Respond to Claims", Six Minute Real Estate Lawyer (Law Society of Upper Canada: Continuing

Professional Development, November 21 2012). Interestingly, Leclair points out that the general indemnity under the Release and Indemnity

Agreement protecting lawyers from above limit claims is limited to transactions in Ontario, and does not protect a grossly negligent lawyer. Ibid

at 4-10.

43 835039 Ontario Inc v Fram Development Corp, 1994 CarswellOnt 4224 at paras 81-82, 245-246 (Gen Div).

44 See 1013952 Ontario Inc v Sakinofsky, 2009 CarswellOnt 6870. In this case, Pierce RSJ held that a student was not bound to supervise the end

work product of the principal.

45 See Kassam, supra note 31 at para 4, where the Court noted that the scope of Kassam's work for his first employer was known to the employer.

This situation could have been avoided with a clear and concise job description.

4 - 14

by employing shared priority management systems) ensures that the lawyer is able to

consciously discharge his or her duties under the Rules.46

Ensuring there are structural protections which inhere in all delegated work ensures that

the non-lawyer is, among other things, appropriately prepared for the tasks which are

assigned to them. Encouraging or facilitating a clerk's ILCO membership is another way to

help ensure staff is adequately prepared and able to make meaningful contributions to

your practice.47 Such structural protections routinize the essential elements of

delegation, including ensuring the employee is competent, appropriately instructed and

regularly reviewed.48 Structural protections may also assist in the most efficient

delegation. For example, a lawyer can properly instruct a non-lawyer to give or accept

undertakings, or take instructions from a client, as long as they are authorized to do so in

advance.49

In addition, so-called "red flags" may arise at any stage in a client file, and therefore,

addressing red flags at a structural level will help ensure you are complying with your

obligations concerning mortgage fraud. At their simplest, red flags are pieces of

information which alert the lawyer to impropriety or an increased likelihood of fraud or

other wrongdoing in connection with their practice. Commentaries [4.1] and [4.2] to Rule

3.2-7.3 identify common indicia of fraud in real estate transactions:

46 See e.g. JoAnn Alberstat, "Working Effectively with Support Staff Worth the Time, Effort" Canadian Bar Association (April 12, 2016), online:

https://www.cba.org/Publications-Resources/CBA-Practice-Link/2015/2016/effectively.

47 Stephanie Sroka, "Using Law Clerks Effectively: Five Ways to Effectively Use Your Law Clerk" Six Minute Real Estate Lawyer (Law Society of

Upper Canada: Continuing Legal Education, 2005).

48 See Real Estate Practice Guide for Lawyers (Law Society of Upper Canada, June 2010) at 23 ("Practice Guide").

49 See By-Law 7.1, s 5(1)(a) and (c).

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[4.1] A lawyer representing any party in a real estate transaction should be

vigilant in identifying the presence of "red flags" and make inquiries to

determine whether it is a bona fide transaction. Red flags include such

things as

(a) purchase price manipulations (revealed by, for example, deposits

purportedly paid directly to the vendor, price escalations and "flips" in

which a property is sold and re-sold within a short period of time for a

substantially higher price, reductions in the balance due on closing in

consideration of extra credits or deposits not required by the purchase

agreement, amendments to the purchase price not disclosed to the

mortgage lender, the acceptance on closing of an amount less than the

balance due, a mortgage advance which approximates or exceeds the

balance due resulting in surplus mortgage proceeds, and so on);

(b) a nominal role for one or more parties (fraud is sometimes effected

through the use of "straw people", who may not exist or whose identities

have either been purchased or stolen, as well as through the suspicious

use of powers of attorney);

(c) the purchaser contributes no funds or only a nominal amount towards

the purchase price or the balance due on closing;

(d) signs that the parties are concealing a non-arm's length relationship or

are colluding with respect to the purchase price;

(e) suspicious or repeated third-party involvement (for example, giving

instructions, supplying client directions or identification, and providing or

receiving funds on closing); and

(f) the proceeds of sale are disbursed or directed to be paid to parties who

are unrelated to the transaction.

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[4.2] The red flags listed above are not an exhaustive list. Further

information regarding red flags is available from many sources, including

the "Fighting Real Estate Fraud" page within the "Practice Resources"

section of the website of the Law Society. Fraudulent real estate schemes

and the red flags associated with such schemes are numerous and

evolving. Lawyers who practise real estate law have a professional

obligation therefore to educate themselves on an ongoing basis regarding

the red flags of real estate fraud

Ensuring staff are equipped to recognize potential red flags, (once discovered), and to

bring them to your attention will help you discharge your duty to bring any red flags to

your client's attention.50 Indeed, in the disciplinary context, the hearing panel has

accepted, inter alia, the lawyer must "train staff about the indicators of mortgage fraud"51

The failure to adequately identify red flags (and therefore discover a fraud) can give rise

to an action in professional negligence against the lawyer responsible for identifying

them.52

Part II: Delegation, Supervision, and Responsibility in a Real Estate Transaction

While every real estate transaction is unique, there are a set of common features required to

effectively convey title to a given real property. In order to formulate broadly applicable guidance

to lawyers practicing in all areas of real estate, I have commented on some of the common

50 Law Society of Upper Canada, "Red Flags that Should Prompt Questions and Due Diligence When Dealing with Real Estate Transactions", online:

http://www.lsuc.on.ca/For-Lawyers/Manage-Your-Practice/Practice-Area/Real-Estate-Law/Fighting-Real-Estate-Fraud/; see also Becky Rynor,

"Avoiding Commercial Mortgage Fraud: Sweat the Small Details" Canadian Bar Association (May 1, 2013), online:

https://www.cba.org/Publications-Resources/CBA-Practice-Link/Business-and-Corporate/2013/Avoiding-commercial-mortgage-fraud-‘Sweat-

the-smal.

51 See Law Society of Upper Canada v Renata Snidr, 2013 ONLSHP 108 at para 27.

52 See Stephen Grant, Linda Rothstein & Sean Campbell, Lawyers' Professional Liability, 3rd ed (Markham: LexisNexis, 2013) at 174).

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features of real estate transactions, and indicated where delegation to non-lawyer staff is usually

appropriate, and where it is clearly prohibited. As the particulars of a given transaction will make

it impossible to definitively state whether a given task may be delegated in all circumstances, the

information that follows should be employed concurrently with, and is not a substitute for, your

professional judgment.

For our purposes, there are three main elements to a real estate transaction. First, the

Agreement of Purchase and Sale ("APS") is negotiated and drafted. Second, the purchaser will

perform due diligence. Third, the transaction will close.

(a) The Agreement of Purchase and Sale

In a perfect world, lawyers would have a hand in negotiating and drafting the clients' APS.

In practice, at least for residential real estate transactions, many APSs are prepared by a

real estate agent.53 However, in those transactions in which the APS is drafted after the

lawyer is retained (or in any event, at the beginning of the retainer) the lawyer must

usually take steps to verify the client's identity.54 It is impermissible to delegate the task

of accepting a client to a non-lawyer,55 and the lawyer remains ultimately responsible for

verifying the client's identity. As seen above in commentary [4.1] to rule 3.2-7.3,

complying with the client verification rules may assist in the early detection and

prevention of mortgage fraud.

53 See Peter D. Quinn and Danny C. Grandilli, Real Estate Practice in Ontario, 7th ed (Markham: LexisNexis Canada, 2011) at 225.

54 For the pertinent exceptions, see By-Law 7.1, s 22(3), which exempts, inter alia, financial institutions and funds received from other lawyers'

trust accounts from the enhanced verification requirements normally applicable to organizations. These exceptions mean a lawyer who is

concurrently acting for a financial institution in respect of a conveyance need not take additional steps to verify the names directors of an

organization.

55 By-Law 7.1, s 4(2)(a).

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A retainer letter can be an indispensable tool for setting the tone with the client, and

where necessary, can request client consent to delegate certain work. It should also set

out the client's options to secure title, which is, as discussed above, a requirement under

the Rules.56 Like the APS itself, the letter can be largely standardized. This means that,

with appropriate instruction, preparing and sending the letter can be delegated to staff.57

However, where special circumstances arise, the lawyer is responsible for identifying and

addressing them. Speers notes that a retainer letter might also serve a dual purpose as a

memo-to-file, confirming his discussions with clients, and can also identify the risks with

the client's proposed course of conduct.58 While memorializing the former may be

properly delegated, at least from a practical perspective, the latter should be dealt with

by the lawyer.

If the lawyer is satisfied that a proposed APS is routine, and that the document will not

be substantially redrafted, it may be permissible to delegate the drafting of the APS to a

suitably skilled law clerk.59 Nothing in delegating the drafting alleviates the lawyer's

obligation to ensure, pending the remaining stages of a real estate transaction, the

contract is capable of formation, execution and performance. In addition, the lawyer must

ensure that the APS is legally sufficient for the needs of the client. But notwithstanding

who holds the drafting pen, the ultimate responsibility for navigating the clients' needs

cannot rest upon non-lawyer support staff.

56 See rules 3.2-9.4 through 3.2-9.7; see also Ian Speers, "Retainer Letters – How to Cover your Bases in Residential Conveyancing" The Six Minute

Real Estate Lawyer 2014 (Law Society of Upper Canada: Continuing Professional Development, November 18, 2014) at 6-3.

57 Speers, supra note 56 at 6-6.

58 Ibid. Note that a lawyer may not delegate the ability to forward to the client any document that has not been previously reviewed lawyer,

unless it is of a routine nature. See By-Law 7.1, s 6(1)(e).

59 See rule 6.1-1, Commentary [5.3].

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A more interesting question is the concept of the clerk's involvement in a "battle of the

forms". If a clerk is appropriately supervised, and the client accepts, a clerk may negotiate

with parties (here the counterparty or their counsel), and any negotiated term(s) are

subject to the final approval of the lawyer.60 To the extent that the subject matter of the

negotiation is, for example, a choice between two conventional standard charge terms in

a Vendor Take Back Mortgage.

In principle, the same rule permits a trained and supervised clerk to draft documents

which are also required depending on the role of the client in the proposed transaction.

For example, many purchasers require title directions, which have the effect of

substituting the purchaser for the individual named in the direction. Obviously, it would

be inappropriate for the clerk to advise how multiple purchasers might want to jointly

hold or transfer property.

In sum, except for formally accepting the client, a trained and supervised law clerk may

perform many of the tasks required in connection with a standard APS. However, any and

all legal advice, determinations, and finally negotiated terms, are within the sole purview

of the lawyer.

(b) Due Diligence

(i) Title Insurance

A lawyer must assess a client's options regarding title insurance (and must inform

the client that title insurance is not mandatory or the only option to protect the

client's interest).61 In order to fulfil this broad obligation, where non-legal staff are

involved in the title insurance process, the lawyer must carefully supervise them.

60 By-Law 7.1, s 5(2).

61 Rule 3.2-9.4 and the commentary made thereunder.

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A lawyer must not permit a non-lawyer to advise a client about appropriateness

of title insurance, discuss any potential premium, or to recommend a specific

insurance product without appropriate supervision.62 A lawyer must understand

the specific elements of the transaction in question, and insurance products in

order to fulfil their obligations under the rule.63. It is of course inappropriate for a

non-lawyer to render a legal opinion on any insurance coverage the client

obtains.64

LAWPro has received errors and omissions claims in circumstances where,

"possibly due to improper delegation or inadequate supervision of support staff,

the wrong type of title insurance was obtained."65 One reason a lawyer needs to

supervise this process (apart from a their clear obligation in the rules) is to identify

the consequences from using title insurance as an alternative to title searches

(regardless of whether those searches are waived by the insurer).

(ii) Searching and Letter Enquiries

As a matter of course, a non-lawyer will likely perform the title search. As we

know, the precise searches will depend on the property and the applicable

insurance requirements, if any. Generally, a solicitor is obliged to search for

outstanding work orders under the governing municipal by-laws.66 As discussed

above, the lawyer must review the contents of the searches conducted on the

62See rule 6.1-6.1.

63 See e.g. Ray Leclair, "Title Insurance Coverage is Like a Box of Chocolate" (2014) 13:2 LAWPRO Magazine at 31-32, online:

https://www.practicepro.ca/LawPROmag/Title_Insurance_Different_Policies.pdf.

64 Rule 6.1-6.1(d).

65 Leclair, "Ways Title Insurers Can Respond to Claims", supra note 42 at 4-9.

66 Grant, Rothstein & Campbell, supra note 52 at 188.

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property. While searching itself is generally routine, a lawyer must be live to rarer

circumstances which will require additional diligence. For example, if the

circumstances indicate specific non-standard searches be conducted, it may be

negligent to proceed without those searches.67

Apart from being the primary source of information about the property the parties

intend to convey, searches are a good example of why a lawyer must not rely too

heavily on non-lawyer staff in a transaction.

If, in response to a letter enquiry search, it becomes apparent a property is not in

compliance with a local by-law, or is encumbered with outstanding municipal

taxes, the appropriate resolution for the client likely requires the application of

specialized legal knowledge and judgment. As the resolution of either situation

would likely require substantive legal advice, such tasks should not be assigned by

a lawyer. Where certain documents are requisitioned because of a potential issue

with the property, or disclose new information about the property (for example,

a survey in the absence of insurance), the lawyer should communicate this with

the client for the same reason.68

In addition, apart from determining the scope of necessary searches and

subsearches to perform, documents registered on title may provide an important

opportunity to assess some of the most obvious red flags, including a rapid

increase in purchase price.

67 Ibid at 189.

68 Note that the lawyer may not ultimately bear responsibility for the contents of a survey, or the physical condition of a property generally. See

Ibid at 186-188.

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(iii) Title Requisitions

A properly supervised non-lawyer can draft title requisitions, with the same

qualifications of appropriate training and supervision. However, such requisitions

and requisition responses require the final approval of a lawyer with a good

understanding of the results of the appropriate searches and letter enquiries.

Therefore, all such delegated work should be lawyer reviewed.

The potential importance of title requisitions renders the language used to make

or reply to requisitions equally important. While requisitions often employ

boilerplate language, it is imperative to insure that the underlying inquiries are

appropriately tailored to the results of the searches and compliant with the terms

of the APS. Again, in principle such letters may be drafted by competent non-

lawyers, but they also must be reviewed diligently to ensure the client retains any

rights and remedies they may possess in connection with the APS.

Recall that the lawyer is prohibited from assigning the ultimate responsibility for

a review of a title search report or of documents before signing or for review and

signing a letter or requisition, title opinion, or reporting letter to a client.69 Simply

put, the lawyer may finally review the performance of such tasks himself or

herself, or they can be liable under the Rules as if such tasks had not been

performed. It should be noted that the hearing panel has held allowing a clerk to

prepare and sign requisition and reporting letters can constitute an abdication of

responsibility, at least in conjunction with evidence of inconsistent supervision.70

69 Rule 6.1-1, Commentary [5.3].

70 See e.g. Law Society of Upper Canada v Jarvis Yap Ortega, 2013 ONLSHP 91 at para 41.

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Closing

Assuming the property in question is registered under the Land Titles Act, this stage involves the

most specific framework for delegation in the entire transaction. As reproduced above, rules 6.1-

5, 6.1-6, and 6.1-6.2 govern the lawyer's use of the electronic registry. Recall, where a lawyer

signs a document on the electronic system, they assume complete responsibility for it, so it is

equally important to review any work which has been delegated (even for typographical errors).

While clerks have an integral role in the electronic registry, only lawyers may complete

compliance with law statements, and cannot delegate their access to do so to non-lawyers.71

Indeed, such a statement is quintessentially the practice of law in that it represents the exercise

of legal judgment on a given state of affairs (being the preconditions to closing). Since the

inclusion of this statement requires that only a licensee of sign for the completeness of the end

product, a lawyer, this task may not be delegated to a clerk.

In the absence of a compliance with law statement, a clerk authorized by the client may sign for

the completeness and sign for the release of a document prior to registration,72 and assuming

they are authorized to access the registry, but, as emphasized above, the lawyer remains

ultimately responsible for that document.

A law clerk may also participate in many of the necessary events prior to closing. They may

provide valuable assistance in preparing the statement of adjustments, when working for the

vendor. A clerk is entitled to provide post-closing undertakings on behalf of their supervising

lawyer, if they are expressly instructed and authorized to do so. As the clerk is giving your

undertaking in this circumstance, it would be inappropriate to instruct the clerk to disclaim

personal liability where possible. This is because there is no exception in By-Law 7.1 which would

71 See By-Law 7.1, 6(2).

72 Ontario, Ministry of Government and Consumer Services, Bulletin 2009-01(April 15, 2009), online: https://www.ontario.ca/land-

registration/2009-02-teraview-version-60-and-phase-2-system-changes-and-fraud-action-plan.

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allow the lawyer to delegate the ability to give the client's undertaking.73 However, where the

client has confirmed the lawyer should accept a specific undertaking, it would appear appropriate

for a clerk to do so.74

Apart from the exceptions to electronic closing noted above, there is another important area

which should be attended to by lawyers only. A non-licensee is allowed to cosign for a trust

account as an internal measure, but may not have signing authority for the account, save in

exceptional circumstances.75 It is of course possible to transfer funds through Teranet, but

depending on the structure of the closing, a lawyer should ensure that the funds are held in

accordance with the written instructions of the client.

A reporting letter is required in order for a lawyer to release payment into the lawyer's general

account. Rule 6.1-1, Commentary [5.3] allows the clerk to draft the reporting letter, but not to

take responsibility for the final product. Even absent this prohibition, where a lawyer is acting

for a purchaser, the title opinion portion of the letter would render it impermissible to delegate.

As discussed, a non-lawyer is not permitted to give directions as to funds held in trust, which

would include disbursing them to the general account after the sale has closed and the reporting

letter has been sent to the client.

Conclusion

There is a level of redundancy in determining the scope and content of permissible delegation in

the Rules and By-Laws. They are understandably general in their formulation. Ironically, given

that real estate can be a formulaic and volume oriented field of practice, the fact specific nature

of delegating almost any portion of a file, even in a systematized approach will require some level

73 See By-Law 7.1, s 5(1)(a).

74 As noted above, a clerk may be authorized to take instructions from the licensee's client. See ibid, s 5(1)(c).

75 See By-Law 9, s 11(b).

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of critical thought on your part. However, we can see that no system will relieve us of the ultimate

responsibility for our practices, or from the obligations to train and supervise our staff. However,

a well-planned delegation system will help your staff gain the confidence to perform their work

and assist in improving your shared practice. Properly implemented in light of the principles

discussed above, it should also free up more of your time to ensure your client is receiving the

value contracted for in the retainer.

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TAB 5

Super Priorities: Lending and Enforcement Issues

Amanda Jackson James Riewald

Gowling (WLG) Canada LLP

April 3, 2017

14TH ANNUAL

Real Estate Law Summit

1

Super Priorities – Lending and Enforcement Issues

Amanda Jackson and James Riewald Gowling WLG (Canada) LLP April 3, 2017 ______________________________________________________________________

“I shall never use profanity except in discussing house rent and taxes.” – Mark Twain

Several provincial and federal statutes provide for priority claims over the assets of

taxpayers where there has been a failure to remit amounts properly payable to the Crown.

Where such priority claims apply notwithstanding the security interests of other creditors

they become super priorities. Super priorities can be a significant concern for financial

institutions and other creditors in both the lending and enforcement contexts especially

where real estate is involved since real estate is an effective and relatively easy asset for

the Crown to target for enforcement. This paper will outline the various federal and

provincial super priorities that exist and provide suggestions for dealing with them in the

lending and enforcement contexts.

Super Priorities and How They Work

A statutory deemed trust arises when an amount required to be remitted to the Crown

pursuant to statute is, depending on the wording of the applicable legislation, collectable

and/or collected, deducted, or withheld by a taxpayer. The operation of the deemed trust

is triggered when the taxpayer fails to remit. With very limited exception the deemed trust

confers a super priority to the Crown in relation to the assets of the tax debtor, and also

makes secured creditors personally liable to pay to the Crown proceeds realized from the

tax debtor’s assets.

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2

In the 1997 decision of Royal Bank v. Sparrow Electric Corp.,1 the Supreme Court of

Canada considered the concept of federal Crown super priority in the context of a priority

dispute between a bank’s security agreement and the then deemed trust provision in the

Income Tax Act. The Court held that the statutory provision in question, which deemed

unremitted amounts to be held in trust for the Crown, did not create a claim for the Crown

in priority to the bank’s security agreement. The Court went on to set out the type of

language necessary to create an absolute priority for a Crown deemed trust:

Finally, I wish to emphasize that it is open to Parliament to step in and assign absolute priority to the deemed trust. A clear illustration of how this might be done is afforded by s. 224(1.2) ITA, which vests certain moneys in the Crown “notwithstanding any security interest in those moneys” and provides that they “shall be paid to the Receiver General in priority to any such security interest”. All that is needed to effect the desired result is clear language of that kind. In the absence of such clear language, judicial innovation is undesirable, both because the issue is policy charged and because a legislative mandate is apt to be clearer than a rule whose precise bounds will become fixed only as a result of expensive and lengthy litigation.2

Equipped with the magic words necessary to create a super priority for Crown deemed

trust claims, several federal and provincial statutes were thereafter amended to include

the language approved by the Supreme Court or language similar.

The following is a list of the various federal and provincial (Ontario) statutory super

priorities in their current form.

Excise Tax Act, R.S.C., 1985, c. E-15 – Canada

222 (1) Subject to subsection (1.1), every person who collects an amount as or on account of tax under Division II is deemed, for all purposes and despite any security interest in the amount, to hold the amount in trust for Her Majesty in right of Canada, separate and apart from the property of the person and from property held by any secured creditor of the person that, but for a security interest, would be property of the person, until the amount is remitted to the Receiver General or withdrawn under subsection (2).

1 [1997] 1 S.C.R. 411 2 Ibid., at para. 112

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3

Income Tax Act, R.S.C., 1985, c. 1 – Canada

227 (4) Every person who deducts or withholds an amount under this Act is deemed, notwithstanding any security interest (as defined in subsection 224(1.3)) in the amount so deducted or withheld, to hold the amount separate and apart from the property of the person and from property held by any secured creditor (as defined in subsection 224(1.3)) of that person that but for the security interest would be property of the person, in trust for Her Majesty and for payment to Her Majesty in the manner and at the time provided under this Act.

Canada Pension Plan, R.S.C., 1985, c. C-8 – Canada

23 (3) Where an employer has deducted an amount from the remuneration of an employee as or on account of any contribution required to be made by the employee but has not remitted the amount to the Receiver General, the employer is deemed, notwithstanding any security interest (as defined in subsection 224(1.3) of the Income Tax Act) in the amount so deducted, to hold the amount separate and apart from the property of the employer and from property held by any secured creditor (as defined in subsection 224(1.3) of the Income Tax Act) of that employer that but for the security interest would be property of the employer, in trust for Her Majesty and for payment to Her Majesty in the manner and at the time provided under this Act.

Employment Insurance Act, S.C. 1996, c. 23 – Canada

86 (2) Where an employer has deducted an amount from the remuneration of an insured person as or on account of any employee’s premium required to be paid by the insured person but has not remitted the amount to the Receiver General, the employer is deemed, notwithstanding any security interest (as defined in subsection 224(1.3) of the Income Tax Act) in the amount so deducted, to hold the amount separate and apart from the property of the employer and from property held by any secured creditor (as defined in subsection 224(1.3) of the Income Tax Act) of that employer that but for the security interest would be property of the employer, in trust for Her Majesty and for payment to Her Majesty in the manner and at the time provided under this Act.

Retail Sales Tax Act, R.S.O. 1990, c. R.31 – Ontario 22 (1) Any amount collected or collectable as or on account of tax under this Act by a vendor shall be deemed, despite any security interest in the amount so collected or collectable, to be held in trust for Her Majesty in right of Ontario and separate and apart from the vendor’s property and from property held by any secured creditor that but for the security interest would be the vendor’s property and shall be paid over by the vendor in the manner and at the time provided under this Act and the regulations.

Gasoline Tax Act, R.S.O. 1990, c. G. 5 – Ontario

18 (1) Any amount collected or collectable as or on account of tax under this Act by a collector or registered importer shall be deemed, despite any security interest in the amount so collected or collectable, to be held in trust for Her Majesty in right of Ontario and separate and apart from the person’s property and from property held by any secured creditor that but for the security interest would be the person’s property and

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4

shall be paid over by the person in the manner and at the time provided under this Act and the regulations.

Fuel Tax Act, R.S.O. 1990, c. F. 35 – Ontario

3.6.1 (1) Any amount collected or collectable as or on account of tax under this Act by a collector, distributor or registered importer shall be deemed, despite any security interest in the amount so collected or collectable, to be held in trust for Her Majesty in right of Ontario and separate and apart from the property of the collector, distributor or registered importer, and from property held by any secured creditor that but for the security interest would be the property of the collector, distributor or registered importer, and shall be paid over by the collector, distributor or registered importer in the manner and at the time provided under this Act and the regulations.

Tobacco Tax Act, R.S.O. 1990, c. T.10 – Ontario 24.1 (1) Any amount collected or collectable as or on account of tax under this Act by a collector or registered importer shall be deemed, despite any security interest in the amount so collected or collectable, to be held in trust for Her Majesty in right of Ontario and separate and apart from the person’s property and from property held by any secured creditor that but for the security interest would be the person’s property and shall be paid over by the person in the manner and at the time provided under this Act and the regulations.

The deemed trust has broad reach and has been described as similar to a “floating charge”

over a tax debtor’s assets:

I find that the s. 227(4.1) deemed trust is similar in principle to a floating charge over all the tax debtor’s assets in favour of Her Majesty. The trust arises the moment the tax debtor fails to remit source deductions by the specified due date, but is deemed to have been in existence from the moment the deductions were made. As long as the tax debtor continues to be in default, the trust continues to float over the tax debtor’s property. Thus, at any given point in time, whatever property then belonging to the tax debtor is subject to the deemed trust.

Viewed in this way, it is clear that, as property comes into possession of the tax debtor, it is caught by the trust and becomes subject to Her Majesty’s interest. Similarly, property which the tax debtor disposes of is thereby released from the deemed trust. This mutuality of treatment between incoming and outgoing property relating to the deemed trust is supported by both the plain language of the provisions as well as their purpose and intent. Most importantly, Her Majesty’s interest in the tax debtor’s property is protected because, while property which is sold to third party purchasers is released from the trust, at the same time, the proceeds of disposition of the alienated property are captured by the trust. Moreover, commercial certainty is promoted owing to the fact that third party purchasers are free to transact with tax debtors or suspected tax debtors

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5

without fearing that Her Majesty may subsequently assert an interest in the property so acquired.3

Accordingly, the Crown’s super priority will “extend”, at any given point in time, to

whatever property belongs to a tax debtor. This will include assets of the debtor, assets

of the debtor held by secured creditors (with a limited exception for any prescribed

security interest as discussed below), and any proceeds from the sale the debtor’s assets.

The federal and provincial super priorities listed above have in common the concept of

the “extended deemed trust” which arises at the time of deduction or withholding. In

practice it is this extended deemed trust that secured creditors will be concerned with.

For example, the Tobacco Tax Act provides at section 24.1 as follows:

Extension of trust

(2) Despite any provision of this or any other Act, where at any time an amount deemed by subsection (1) to be held in trust is not paid as required under this Act, property of the collector or registered importer and property held by any secured creditor of the person that but for a security interest would be property of the person, equal in value to the amount so deemed to be held in trust shall be deemed,

(a) to be held, from the time the amount was collected or collectable by the person, separate and apart from the property of the person in trust for Her Majesty in right of Ontario whether or not the property is subject to a security interest; and

(b) to form no part of the estate or property of the person from the time the amount was so collected or collectable whether or not the property has in fact been kept separate and apart from the estate or property of the person and whether or not the property is subject to such security interest. 1997, c. 43, Sched. E, s. 3.

Same

(3) The property described in subsection (2) shall be deemed to be beneficially owned by Her Majesty in right of Ontario despite any security interest in such property or in the proceeds of such property, and the proceeds of such property shall be paid to the Minister in priority to all such security interests.

3 First Vancouver Finance v. M.R.N., [2002] 2 S.C.R 720 (S.C.C.) at paras. 4 and 5

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6

Exception

(4) This section and subsection 26 (2.1) do not apply in proceedings to which the Bankruptcy and Insolvency Act (Canada) or the Companies’ Creditors Arrangement Act (Canada) apply.

Each of the federal and provincial statutes referenced above contains similar provisions.

Issues for Lending and Enforcement

Understanding and addressing priorities is essential for those acting for secured parties

in both the lending and enforcement contexts. Unfortunately, deemed trusts are typically

invisible and, absent a parcel register search revealing the registration of a Crown lien

which can then be investigated further, there is usually no way to determine the existence

of a deemed trust before advancing funds. Similarly, in the enforcement context the

existence of, and obligation to satisfy, a super priority claim may not become known until

long after enforcement proceedings have been completed and the security discharged.

Lending

Those acting for lenders should assess each proposed transaction independently to

determine what searches are required based on client instructions and factors such as

the nature of the borrower (e.g., for a corporate borrower a corporate search will be

necessary, etc.). Client instructions will typically include any specific searches the lender

requires in addition to the standard searches such as title, insolvency, execution,

corporate, and PPSA. On large transactions a lender may also require something more

in the nature of due diligence such as an in depth review of financial records and tax

returns. Due diligence reviews of a borrower’s financial records in the possession of

federal and/or provincial agencies will require the borrower’s consent and completion of

the necessary forms and response times will generally make this option impractical at the

time of lending for smaller, more routine transactions. In addition, any response provided

will be limited to claims known at the time and will provide no protection from future claims.

Within the credit documents themselves, a lender may also consider having the borrower

execute a covenant/agreement specifically addressing super priority claims in which the

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7

borrower warrants compliance with all obligations in relation to payment of taxes,

deductions, and withholdings, etc. To the extent possible the lender may also want to

satisfy itself that the borrower has the financial means to support the indemnity

understanding that the protection afforded by such a covenant/agreement may be limited

since typically at the time of any priority dispute the borrower may be insolvent or

financially distressed.

Title insurance should also be obtained with the understanding that it will not cover super

priorities under an owner policy but will, depending on the circumstances, cover super

priorities under a loan policy. In the context of mortgages, title insurance will generally

provide coverage against any deemed trust liabilities that were in existence at the time

the mortgage was registered but not known to the insured lender. Title insurance

coverage generally excludes deemed trusts arising after the date of the policy.

A lawyer providing an opinion on title should ensure that the opinion is sufficiently qualified

to reflect the fact that deemed trust claims may be unknown and may have priority.

Practically, beyond completing the basic searches and obtaining title insurance, there is

little else that can be done to protect a lender against potential liability for a super priority

claim made after advance.

Enforcement

In the enforcement context, secured creditors confronted with Crown liens registered on

title or other communication received in relation to a deemed trust will need to establish

whether the Crown is claiming a super priority. If it is, a complete breakdown of the

amount claimed in super priority should be requested in order to assess the extent of the

secured creditor’s obligation to make payment. Careful consideration will also need to be

given to calculating any prescribed security interest.

The Prescribed Security Interest Exception

A feature common to super priorities is that “security interest” is defined not to include a

prescribed security interest. A prescribed security interest is a mortgage on land or a

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8

building given and registered before the deemed trust arose.4 Note that no security

interests have been prescribed under the various provincial statutes, the effect being that

the deemed trust amount will not be limited to the arrears owing at the date of the granting

of the mortgage.5

A mortgagee with a prescribed security interest will rank in priority to a deemed trust claim

up to the amount of the prescribed security interest. The prescribed security interest is

calculated in accordance with the regulations. It is equal to the amount outstanding under

the mortgage at the time the deemed trust arose minus any payments made by the debtor

towards the mortgage after the deemed trust arose and minus the value of any alternate

security where such alternate security is available to the secured creditor. The Canada

Revenue Agency’s website provides the following example of the calculation of a

prescribed security interest in the context of a deemed trust arising from the failure to

remit HST6:

Example

A mortgage is registered on a tax debtor's land and building when a deemed trust debt exists.

ABC Company operates a home renovation business in Ontario and owns its premises.

This company obtained a mortgage of $175,000 from a bank in July 2013.

ABC Company's owner also provided the bank with a personal guarantee of $100,000 as collateral security.

As of May 2013, ABC Company owed $70,000 in deemed trust for unremitted HST.

After the mortgage was registered, the HST deemed trust debt increased by $20,000.

The CRA reviewed the bank's records. The bank received $17,500 in mortgage payments.

In this example, today's date is February 1, 2015:

The HST deemed trust debt due to the CRA is $90,000.

4 For example, see Security Interest (GST/HST) Regulations, SOR/2011-55 for the regulation relating to a “prescribed security interest” under the Excise Tax Act and its parallel provision at section 2201 of the Income Tax Regulations for the prescribed security interest under the Income Tax Act. 5 Toronto-Dominion Bank v. Comrie and Comrie, 2014 ONSC 1924 at para. 32 6 http://www.cra-arc.gc.ca/gncy/cllctns/dmdtrst-eng.html

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9

The amount due to the bank on the mortgage is $157,500.

The bank is foreclosing against the mortgage. The closing date of the sale is February 23, 2015.

The sale price is $225,000. The closing costs are $10,000.

Calculation

Description Amount

Mortgage amount at the time of the deemed trust default $175,000

Payments made by the taxpayer for the mortgage ($17,500)

Alternate security available to the bank for the mortgage ($100,000)

Value of the bank's prescribed security interest $57,500

As the above example illustrates, the impact of having alternate security available to

satisfy a debt is potentially considerable when determining the amount of a prescribed

security interest exception.

Bankruptcy Considerations

Petitioning a borrower into bankruptcy may defeat a super priority deemed trust claim

depending on the legislation giving rise to the deemed trust. The Income Tax Act, Canada

Pension Plan, and Employment Insurance Act super priorities all apply notwithstanding

the provisions of the Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3 (“BIA”). The

sole federal exception is the Excise Tax Act super priority which is subject to the BIA.

The BIA provides at section 67 as follows:

Deemed trusts

(2) Subject to subsection (3), notwithstanding any provision in federal or provincial legislation that has the effect of deeming property to be held in trust for Her Majesty, property of a bankrupt shall not be regarded as held in trust for Her Majesty for the purpose of paragraph (1)(a) unless it would be so regarded in the absence of that statutory provision.

Exceptions

(3) Subsection (2) does not apply in respect of amounts deemed to be held in trust under subsection 227(4) or (4.1) of the Income Tax Act, subsection 23(3) or (4) of

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the Canada Pension Plan or subsection 86(2) or (2.1) of the Employment Insurance Act (each of which is in this subsection referred to as a “federal provision”) nor in respect of amounts deemed to be held in trust under any law of a province that creates a deemed trust the sole purpose of which is to ensure remittance to Her Majesty in right of the province of amounts deducted or withheld under a law of the province where

(a) that law of the province imposes a tax similar in nature to the tax imposed under the Income Tax Act and the amounts deducted or withheld under that law of the province are of the same nature as the amounts referred to in subsection 227(4) or (4.1) of the Income Tax Act, or

(b) the province is a province providing a comprehensive pension plan as defined in subsection 3(1) of the Canada Pension Plan, that law of the province establishes a provincial pension plan as defined in that subsection and the amounts deducted or withheld under that law of the province are of the same nature as amounts referred to in subsection 23(3) or (4) of the Canada Pension Plan,

and for the purpose of this subsection, any provision of a law of a province that creates a deemed trust is, notwithstanding any Act of Canada or of a province or any other law, deemed to have the same effect and scope against any creditor, however secured, as the corresponding federal provision.

Since the provincial super priorities are not identified in section 67 of the BIA, they,

together with the federal Excise Tax Act super priority, do not extend where the debtor is

bankrupt and where the property is deemed to be held in trust for Her Majesty.

Therefore, creditors facing super priority deemed trust claims under the Excise Tax Act

or any of the provincial statutes may avoid a deemed trust claim by petitioning the debtor

into bankruptcy and any deemed trusts existing prior to the bankruptcy will be defeated

and will rank as unsecured claims.

The Federal Court has confirmed that the liability of a secured creditor under the deemed

trust provisions of the Excise Tax Act does not survive the bankruptcy of the tax debtor.

In Canada v. Callidus Capital Corporation7, the debtor owed unremitted HST to the Crown

of approximately $180,000.00. Callidus, a secured creditor, received net sale proceeds

of a real estate sale prior to the debtor making an assignment in bankruptcy. Callidus

was aware of the Crown’s deemed trust claim against the debtor at the time the sale

7 2015 FC 977

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11

proceeds were received. The Crown argued that the debtor’s bankruptcy did not affect

its deemed trust claim since Callidus was required to pay to the Crown the amounts it

received prior to the bankruptcy. The Federal Court ruled that the debtor’s bankruptcy

rendered the deemed trust ineffective against the sale proceeds that had been received

prior to the bankruptcy.8 Note, however, that attention should be paid to the use of various

enforcement remedies by the Crown. For instance, where the Crown issues a

Requirement to Pay to a creditor under section 317 of the Excise Tax Act, the creditor

becomes liable to pay the unremitted funds and that liability will survive bankruptcy.9

Insured Mortgages

For insured mortgages, the loss occasioned by the requirement to pay a deemed trust

claim may be included in a claim for mortgage insurance proceeds. The existence of the

deemed trust claim, the calculation of any prescribed security interest, and any

communication with the Crown should be fully communicated to the insurer as soon as

possible. Such claims under mortgage insurance will generally be reviewed by the insurer

on a case by case basis and it is recommended that, if reimbursement may be sought,

any payment be reviewed with the insurer before it is made.

8 The decision was appealed to the Federal Court of Appeal. The appeal was argued on January 19, 2017 and the decision reserved. 9 Ibid., at para. 37

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TAB 6

Recent Changes to the Residential Tenancies Act, 2006:

What Your Clients Need to Know

Joseph Hoffer Cohen Highley LLP

April 3, 2017

14TH ANNUAL

Real Estate Law Summit

RECENT CHANGES TO THE RESIDENTIAL TENANCIES ACT, 2006: WHAT YOUR CLIENTS NEED TO KNOW

Joe Hoffer, Cohen Highley LLP

TENANT’S 28 DAY NOTICE OF TERMINATION BASED ON DOMESTIC OR SEXUAL VIOLENCE

- This Notice creates substantial financial risk for “small landlords” and student housing operators due to rent turnover loss arising from “secrecy” provisions and from substantial fines that may be levied against landlords who, wittingly or unwittingly, breach the “secrecy” provisions. There is also a “civil liability” risk if the secrecy provisions are breached and a tenant suffers domestic violence as a consequence of the breach

- Grounds for serving notice: a bare (and vague) allegation in a “Tenant’s Statement About Sexual or Domestic Violence and Abuse” is sufficient grounds to effect termination on 28 days simple notice

- The tenant’s statement (see Landlord Tenant Board form attached to N151) must be given in support of the Notice unless there is a statutory order (ie: restraining order) in place

- The language in the Tenant’s Statement where there is no statutory order is as follows:

Reason for giving the notice to end my tenancy (Form N15): I or a child living with me has been a victim of domestic or sexual violence and/or abuse and we must move out of the rental unit. I believe we may be at risk of harm or injury if I continue to live here, based on one or both of the following reason(s):

One of these people: • my spouse or my former spouse • someone I live with, or lived with in a conjugal relationship • a person that I am dating or I used to date • someone who lives in my unit that is related to me or the child by blood, marriage or adoption

has caused me or a child living with me: • to suffer bodily harm or damage to our property by intentional or reckless behaviour or actions. • to fear for our safety because of their behaviour and actions or threatened actions. • to be held by force against our will. • to fear for our safety because of a series of actions, including following, contacting, communicating with, watching, or recording us.

1 LTB Form N15 and Tenant’s Statement attached at p. 10-12

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AND/OR I or a child living with me was a victim of sexual violence as defined in section 47.3(2) of the Residential Tenancies Act, 2006. [Author’s note: the basis for the notice can be one or more of the above, but does not have to be specified]

- Section 47.3 (6) RTA: the Landlord and Tenant Board “…may not inquire into or make any determination as to the truth of or the belief in the truth of any allegation or assertion referred to… [in the form].

- Landlords, therefore, cannot challenge the bona fides of the Notice, but instead must accept it and follow the protocols relative to termination and secrecy.

- If the sole tenant of a tenancy gives the notice and fails to move, the termination notice can be enforced by eviction (but your clients may not want to do this for practical reasons). Any unused portion of the Last Months’ Rent deposit must be returned to the tenant

- If the tenancy is a joint tenancy and all of the tenants assert violence or abuse, then the entire tenancy is terminated and can be enforced by eviction if they refuse to vacate

- If fewer than all of the tenants in a joint tenancy serve the 28 day notice, then only their interest in the tenancy is terminated: the remaining tenants are liable for the full rent due under the tenancy agreement; the last month’s rent deposit stays with the tenancy; and, at any point in future, the remaining tenants can terminate the tenancy on 60 days simple notice regardless of the balance of a fixed term remaining on the lease (some students and “lease breakers” are cheering!)

- The landlord or landlord’s agent (on-site superintendent?) must maintain absolute secrecy with respect to the notice and can only disclose its existence to people who “need to know”

- A breach of the secrecy provision is an offence punishable by a fine for individuals of $25,000 or a fine of $100,000 for corporations

- Until the tenancy is terminated, the Landlord cannot advertise the unit as being available for rent as to do so would breach the secrecy provisions: Landlord must wait to see if the tenant actually leaves before the unit can be shown to prospective tenants

- With joint tenancies where a person terminates their interest in the tenancy, if they change their mind and decide not to vacate prior to the 28 day termination date, then the notice is void and the tenant continues with their legal status as a tenant

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- If the tenant terminates their joint tenancy by moving out before the termination date and then moves back in, their interest in the tenancy agreement is terminated; however, they can remain in the unit as an “occupant” with no legal obligations to the landlord

- The 28 day notice will be particularly useful for tenants who simply want to “break a lease” because there is no ability to challenge their good faith in giving the notice

- Small landlords and operators of student rental housing are most financially vulnerable to the financial consequences of these amendments (turnover loss and fines if secrecy provisions breached; legal proceedings in the case of tenants left behind either on the basis of “unauthorized occupancy” in the case of a single tenant tenancy with occupants or on the basis of unpaid rent when some, but not all, tenants of a joint tenancy terminate their interest)

Landlord/Staff/Client Training Issues Regarding 28 Day Notice

- Ensure recipient (landlord, property manager) knows what the form looks like; what it means; and, what to do with it

- Make sure the statement meets the basic requirements such as: o Asserts “violence or abuse” or “sexual violence”; o Caused by a member of the “abuser class”; o That has been experienced; o By a tenant or a child residing in the unit

- The abuse need not have been experienced at the rental unit - Have clear written instructions available to all staff - Written instructions should clearly set out the following:

o process for what to do with the form (who it may be given to) and assign a person to receive and review it

o that absolute secrecy about the fact that a notice has been given is paramount, and communicate consequences of breach of secrecy or breach of process (ie. Discipline of employee to and including termination of employment)

o process for determining whether the Tenant has vacated the rental unit on or before the termination date

o process for communication with remaining tenant(s) after termination date if tenant giving the notice has vacated

o process for unit inspection after termination date o process for entry if entire tenancy is terminated o process for determination of termination of interest by one tenant where there is a joint

tenancy (caution is required due to secrecy requirement) o process for documentation of, and continuity of evidence and movement of the Notice

within landlord’s operation o process for handling LMR deposit (Deposit remains to credit of the landlord unless the

tenancy is fully terminated. In a joint tenancy, the vacating tenant cannot claim an

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interest in LMR. Since the tenancy can be terminated mid-month, if a portion of the LMR is left over, it must be credited/returned to the tenant(s) who vacated).

- Landlord cannot list the unit for rent until after the tenancy is terminated, if and when it is terminated

- Landlord can advertise that a unit “might” be available (not recommended in a small building because it may result in breach of secrecy)

- Landlord who wishes to challenge the validity of the Notice, can disclose the fact the Notice has been given, but only to:

o Legal representatives o A “ministry” employee in connection with investigation or prosecution of an offence o Police, but only if they request it from you o To an employee of the Board if you have started a proceeding (ie. Arrears owed, ss. 87,

88) where an issue is whether the Notice is valid (but no section of the RTA permits the landlord to file a separate application on this basis)

o The problem with a challenge to the validity of the notice is the Board cannot assess or determine the validity of the allegations, so what is the point?

INCLUSION OF NON-PROFIT HOUSING SECTOR IN EVICTION PROCEEDINGS

- In the non-profit housing sector, eviction orders previously had to be obtained through the Superior Court of Justice under the provisions of the Co-operative Corporations Act of Ontario

- Now, sections 94.1 through 94.17 of the RTA deal with termination of occupancy rights by the housing co-op, including a process to apply to the Landlord Tenant Board for termination of occupancy rights and eviction of the occupant

- Most of the procedures for termination of occupancy rights occur at the housing co-op level and it is only when the internal process is exhausted without resolution that the co-op may give its member notice of termination for reasons specified in section 94.2 of the RTA

- The Superior Court of Ontario no longer has jurisdiction to terminate occupancy rights of a member of a non-profit housing co-op

AIRB’NB: PREVENTING ITS OPERATIONS IN MULTI-RESIDENTIAL SETTINGS

- Most rental housing industry leases prohibit commercial uses and restrict occupancy to “residential” uses

- If a tenant rents out the rental unit by way of Airb’nb, the tenant is engaging in a commercial use and is therefore in contravention of the tenancy agreement

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- The enforcement process begins with service of an N5 Eviction notice based on “interference with the Landlord’s legal interest”

- The Divisional Court has held that a breach of a material covenant of a tenancy agreement amounts to an interference with the landlord’s legal interest and may warrant issuance of an eviction order2

- For greater certainty, landlords can insert a specific clause (or add a rule) to their leases prohibiting the use of the rental unit for Airb’nb and other commercial purposes

- Condominium corporations can enact a by-law and/or a rule prohibiting a unit owner from granting short term tenancies3

- Section 58 of the Condominium Act gives condo board directors the authority to make rules to: (a) Promote the safety, security or welfare of the owners and of the property and assets

of the corporation; or (b) Prevent unreasonable interference with the use and enjoyment of the common

elements, the units, or the assets of the corporation - Rules preventing short term leasing that are not so overly restrictive as to completely

negate or fundamentally alter the right of owners to lease their units to traditional tenants have been found valid and in compliance with section 58 of the Act. Specifically, rules requiring that leases be in excess of four months have been found to be valid and enforceable4

OHSA: EMPOWERING LANDLORDS TO EVICT HARASSING TENANTS

- Occupational Health and Safety Act (OHSA) amendments came into force September 8, 2016

- Requires employers to adopt a workplace harassment policy along with related protocols including investigation, action, results-based reporting to the employee

- Prior to the amendments to OHSA, tenant harassment of landlord’s onsite staff was unlikely to warrant sufficient grounds for termination of tenancy

- OHSA amendments make it clear that harassment of landlord’s employees is “serious”

2 Stanbar v. Joseph Rooke [2005] Court File No. 04-212DV, Hamilton (http://cohenhighley.com/wp-content/files/Stanbar-v.-Joseph-Rooke-Court-File-No.-04-212DV.pdf) 3 Ottawa-Carlton Standard Condominium Corporation No. 961 v. Menzies 2016 ONSC 7699 at paras. 53-54 (https://www.canlii.org/en/on/onsc/doc/2016/2016onsc7699/2016onsc7699.pdf) 4 Ballingall v. Carlton Condominium Corporation No. 111, 2015 ONSC 2484 at paras. 73-74 (https://www.canlii.org/en/on/onsc/doc/2015/2015onsc2484/2015onsc2484.pdf)

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- OHSA amendments also make it mandatory for a landlord to take appropriate action to address employee harassment, including harassment of on-site employees by tenants

- Employee harassment policies and obligations are found in ss. 32.0.1 to 32.0.8 of the OHSA

“TICKING TIME BOMBS”: ADVERSE IMPACT OF RENT INCREASE ORDERS ON REVENUE STREAM

- Landlord Tenant Board orders for above-guideline rent increases based on capital expenditures contain provisions which provide for reductions in rent once the capital expenditure item has reached the end of “useful life”5

- The “costs no longer borne” provision of the RTA was introduced in 2007 and the minimum useful life of capital expenditure items allowed in orders is 10 years (ie. 2017)

- Beginning in 2017, costs no longer borne provisions will be triggered with respect to some orders that issued in 2007 and, on a going forward basis, the frequency of the triggering of costs no longer borne provisions will increase dramatically

- The effect of these provisions is to impose a rent reduction (and therefore a reduction in revenue stream) but only on rental units where the tenant was a party to the original order granting a capital expenditure allowance and where the landlord actually took all or part of the above-guideline rent increase based on the capital expenditure allowance

- The Superior Court in 669283 Ontario Ltd v. Reilly6, Court equated an impairment of revenue in a multi-res building with an impairment of title and held the purchaser’s lawyer liable for failing to identify and draw the purchaser’s attention to rent reduction factors which could foreseeably and permanently impair revenue stream

- Purchasers and operators of multi-residential property should ensure that they have a record of all AGI orders based on capital expenditures that were issued between May of 2017 and the present, together with the names of all tenants who were parties to those orders and a record of the percentage increase that was levied to those tenants when the orders took effect

- Purchaser’s lawyers should specifically, in writing, restrict the scope of their retainer to exclude an obligation to conduct inquiries relative to past capital expenditure orders issued for the property and make it clear that such orders do pose serious financial risk.

- Purchasers should seek representations and warranties relative to the vendor’s production of past Orders (May 2007 onward) based on capital expenditures and should

5 See excerpt from Above-Guideline Increase Order based on Capital Expenditures attached to this paper at p. 13-14 6 669283 Ontario Ltd. V. Reilly, [1996] O.J. No. 273 (http://cohenhighley.com/wp-content/files/Stanbar-v.-Joseph-Rooke-Court-File-No.-04-212DV.pdf)

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conduct their own due diligence by making inquiries at the Landlord and Tenant Board (authorization from the vendor is required) to ensure that any relevant orders based on capital expenditures are produced

- If the purchasing lawyer fails to address and allocate responsibility for securing disclosure of such orders, there is a high likelihood that the lawyer who acted on the purchase will be liable for damages flowing from a reduction in revenue stream caused by the triggering of the costs no longer borne provisions.

- Most above guideline applications based on capital expenditures have been secured for buildings located in the GTA. With GTA cap rates hovering between three and five, the financial liability to the lawyer (and the insurer) whose client is unexpectedly a victim of a rent reduction based on costs no longer borne may be substantial

ANOTHER “TICKING TIME BOMB”: THE PRECARIOUS STATUS OF THE “POST NOVEMBER 1991” EXEMPTION FROM RENT CONTROLS

- A multi-residential building which was not previously occupied for residential purposes on or after November 1, 1991 is currently exempt from certain “rent control” provisions of the RTA (section 6 (2) (c) RTA) a.k.a. the “new construction” exemption

- Every version of rent control legislation in Ontario since its inception in 1974 has had a “new construction” exemption which is intended to encourage the development of new rental housing

- The principle behind the new construction exemption is to permit a developer to “lease up” a building relatively quickly in order to take out high cost construction financing costs with lower cost, long term institutional financing. In such cases, the initial rental of suites is typically well below market. The rent control exemption allows the operator to increase rents by more than the annual prescribed guideline so as to bring the rents up to market over several years

- The explosion in the market place of new condominium development and attendant condo rentals since the early 2000’s has resulted in a substantial number of “post November 1991” rentals, especially in the GTA

- There is an increased frequency of landlords taking rent increases in excess of the annual Provincial Rent Control Guideline (the Guideline is always less than 3%) relying on the post November, 1991 exemption to take increases of 5% to 50% or more

- Tenant advocacy groups have pointed to the use of the post November 1991 exemption as a means of “economic eviction” of tenants or, alternatively, as a means by which landlords are taking unconscionable rent increases

- Landlords argue that, following turnover of a condominium complex, the budgets often have to be dramatically increased based on the developers “lowballing” of budgets and

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the actual needs of the corporation, and without the exemption each owner must “eat” the increased operating costs if rent controls are imposed on post November 1991 rentals

- There is no provision in the RTA for the owner of a condo rental unit to increase rent based on increases in condominium assessments

- There is currently substantial public pressure on the provincial government to revoke the post November 1991 exemption and it is unknown at this time whether such an exemption would be replaced with a more up to date “new construction” exemption

- For recently built condo complexes where there is a high percentage of rentals, revocation of the post November 1991 exemption may have substantial adverse financial consequences for the owners, including a loss of value of the unit itself

- The same is the case for new apartment construction where rentals are below market due to the reliance on the new construction exemption to lease up the building

- Lawyers and clients involved in new construction or infilling at existing developments should be careful not to rely heavily on the new construction exemption at this time as a key component of revenue planning given its uncertain status at the present time

- Purchasers and prospective purchasers of recently constructed multi-res (condo or purpose built) buildings should, likewise, consider the impact of the uncertainty relative to the new construction exemption from rent controls when assessing value and future business plans for the development

MEDICAL MARIJUANA GROW-OPS IN APARTMENTS: ARE LANDLORDS HELPLESS?

- Federal legislation for issuance of a medical marijuana license for personal use previously required that the “owner” consent to the use of property as a grow-op

- Federal legislation and rules changed in August of 2016 and as a result, some tenants have taken the position that owners’ consent is no longer required where marijuana is grown in a rental unit for medical, personal use

- The Landlord Tenant Board has, in at least one case, treated an illegal act of growing medical marijuana in a rental unit as being not “serious” enough to warrant eviction7

- By contrast, insurers of rental units will generally decline coverage for marijuana grow-ops, regardless of their legality, because marijuana grow-ops in a residential building present inherent insurance risks: that seems “serious”

- Landlords should still be able to terminate a tenancy based on a tenant’s operation of a grow-op in a rental unit; however, proper evidence must be tendered at the hearing in order to satisfy the Board that the use of the rental unit for a personal grow-op constitutes an inherent risk to the tenant; to the property; and, to other tenants at the property. This

72016 CanLII 37469 (ON LTB) (https://www.canlii.org/en/on/onltb/doc/2016/2016canlii37469/2016canlii37469.pdf)

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together with loss of insurance coverage should be sufficient to show “serious interference” with legal interests of the Landlord and other Tenants

- There is ample objective evidence available to demonstrate the seriousness and adverse consequences of a grow-op in a multi-residential setting; however, in the absence of such evidence, a grow-op may be permitted to continue

ELECTRICITY SUB-METERING: GIVE PROSPECTIVE TENANTS USELESS FORMS OR FACE CONSEQUENCES

- The RTA (s. 137 (7)) requires that a landlord give to a prospective tenant information which will be of no value to the tenant in determining what the monthly electricity consumption costs to the tenant will be once they occupy the unit8

- The “prescribed” form requires that notice be given of the number of Kilowatt hours of electricity used in the rental unit for the 12 months prior to the date the notice is given be provided to the prospective tenant. There is no requirement to tell the tenant what the monthly electricity costs were.

- The age of the refrigerator also has to be disclosed - If the Landlord fails to provide the information required to be given, then the tenant can

apply to the Board for an abatement of monthly rent based, among other things, on the tenant’s assertion of an expectation that the monthly hydro costs would be lower. The tenant will get the “benefit of the doubt”

This paper is presented for informational purposes only and not as legal advice. For legal advice on the issues covered by this paper, contact your Lawyer or Licensed Paralegal. If you can’t find the case referenced in this paper via search engines, contact the author, hoffer@cohenhighley.com

8 LTB Form Information to Prospective Tenant About Suite Meters or Meters attached at p. 15-16

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Tenant's Notice to End my Tenancy Because of Fear of Sexual or Domestic Violence and Abuse

N15

To: (Landlord's Name) From: (Tenant's Name) include the names of all tenants giving this notice

Address of Rental Unit:

I am giving you this notice to end my tenancy.

The last day of my tenancy will be .-1 ...,1---,1-/.--1 -.1-r-1/.,...1--,lr--r-1--rl--,1 . dd/mm/yyyy

I will move out of the rental unit on or before this date.

The law states that I must include one of the documents listed below with this notice. I have included:

0 a completed LTB form "Tenant's Statement About Sexual or Domestic Violence and Abuse"

OR

0 a copy of a restraining order or peace bond issued by a court within the last 90 days that orders the alleged abuser not to contact me or the child and/or not to enter the rental unit

Important Information from the Landlord and Tenant Board

When a tenant A tenant can give this notice if the tenant or a child living with them is a victim of sexual can give this or domestic violence and abuse and the tenant believes they or the child may be

notice harmed if they stay in the unit.

The termination

date

This process must be kept

confidential

v. 08/09/2016

If the tenant is in a joint tenancy with other tenants, some or all of the other tenants can choose to sign this notice and end their interest in the tenancy as well. If this notice is not signed by all the tenants, the tenancy will continue for those tenants who did not sign the notice.

The termination date is the day this tenancy will end. The termination date in this notice must be at least 28 days after the tenant gives their landlord this notice. The termination date does not have to be the last day of a rental period or of a fixed term lease.

A landlord cannot let other people know about these documents or about the information in them. This even includes the other tenants in the unit- if there are any.

It is against the law for the landlord to tell other people. If a landlord shares this information with others, the landlord may be taken to court and fined. The fine could be as much as $25,000 (for an individual landlord) or $100,000 (for a company landlord).

Note: There are some exceptions. The landlord may have to share this information with their employees such as a superintendent or property manager and they must also keep it confidential. Or, the landlord may be required by law to share information with other people who are investigating the situation. See section 47.4 of the Residential Tenancies Act, 2006 for the rules about the confidentiality of this information.

Page 1 of 2

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A landlord cannot

advertise the unit "for rent"

When the tenant moves

out

If the tenant(s) do not move

out

How to get more

information

0 Tenant

I Signature:

Until the termination date has passed and the tenant has moved out, a landlord cannot place a "for rent" advertisement if it identifies the rental unit or, if someone could identify the unit by reading the advertisement. The landlord also cannot show the unit to prospective tenants until the tenant moves out of the unit.

Once the termination date has passed and the tenant has left, the landlord can advertise the unit for rent and show it to prospective tenants- if there are no other tenants still living there.

The tenant must take all their property with them when they leave. After the termination date, the landlord can keep or dispose of any property the tenant leaves behind if there are no other tenants living in the unit.

If the tenant(s) do not move out by the termination date and this notice was given by: - all the tenant(s) of the unit, the landlord may apply to the L TB to have the tenant(s)

listed in this notice evicted. - some but not all of the tenants of the unit, the notice becomes void and the

landlord cannot apply to evict the tenant(s) listed in this notice.

For more information about this notice or your rights, you can contact the Landlord and Tenant Board (L TB). You can reach the L TB by phone at 416-645-8080 or 1-888-332-3234. You can visit the LTB website at sjto.ca/LTB.

0 Representative

I Date: (dd/mm/yyyy)

If multiple tenants are giving this notice, they can sign their names below:

Signature (Tenant 2): Signature (Tenant 3):

Representative Information (if applicable)

Name LSUC# Company Name

Mailing Address Phone Number

Municipality (City, Town, etc.) Province Postal Code Fax Number

Page 2 of 2

6 - 12

Tenant's Statement About Sexual or Domestic Violence and Abuse

To: (Landlord's Name) From: (Tenant's Name)

Address of Rental Unit:

Reason for giving the notice to end my tenancy (Form N15): I or a child living with me has been a victim of domestic or sexual violence and/or abuse and we must move out of the rental unit. I believe we may be at risk of harm or injury if I continue to live here, based on one or both of the following reason(s):

One of these people: • my spouse or my former spouse • someone I live with, or lived with in a conjugal relationship • a person that I am dating or I used to date • someone who lives in my unit that is related to me or the child by blood, marriage or adoption

has caused me or a child living with me: • to suffer bodily harm or damage to our property by intentional or reckless behaviour or actions. • to fear for our safety because of their behaviour and actions or threatened actions. • to be held by force against our will. • to fear for our safety because of a series of actions, including following, contacting, communicating

with, watching, or recording us.

AND/OR I or a child living with me was a victim of sexual violence as defined in section 47.3(2) of the Residential Tenancies Act, 2006.

I Signature:

The information must be the

truth

How to get more

information

v. 08/09/2016

I Date: (dd/mm/yyyy)

Important Information from the Landlord and Tenant Board

It is against the law for a tenant to give a landlord this statement if it does not apply to the tenant's situation. It is an offence and they could be taken to court.

If they are found guilty, the tenant could be fined up to $25,000.

For more information about this notice or your rights, you can contact the Landlord and Tenant Board (L TB). You can reach the LTB by phone at 416-645-8080 or 1-888-332-3234. You can visit the LTB website at sjto.ca/LTB.

6 - 13

File Number: SWL-83231-15

On consent of the parties, it is ordered that:

1. The Landlord may increase the rents charged by the percentage increases and within the time periods set out in Schedule 3.

2. The percentage increase set out in Schedule 3 may be taken in addition to the annl!al guideline in effect on the increase date for the unit.

3. The Landlord or the Tenants shall pay to the other any sum of money that is owed as a result of this order within 60 days of the date of the order.

4. If the Tenant's rent is increased pursuant to the percentage increase ordered for capital expenditures and the same Tenant remains in the unit after the expiration of the weighted useful life for capital expenditures, then the rent will be reduced. Refer to Schedule 4 for information about the date and amoun e rent reduction.

January 5, 2017 Date Issued

South West-RO 4th Floor, 150 Dufferin Avenue, Suite 400

London,ON,N6A5N6 Fax No: 519- 679- 7290

Esi Codjoe Member, Landlord and Tenant Board

If you have any questions about this order, call416-645-8080 or toll free at 1-888-332-3234. Important Notes:

1. The landlord may increase the rent charged by the ordered increase within the time period specified if at least 12 months have passed since the last rent increase or since the tenant moved in, and if the landlord has given the tenant at least 90 days proper Notice ofRent Increase. Any part of the ordered increase that is not taken within the time period specified cannot be added to subsequent rent increases in subsequent time periods.

2. If the landlord has given a Notice of Rent Increase for a rent increase that is less than the ordered increase, the landlord may only take the rent increase set out in the Notice.

3. The ordered increase does not affect tenants who moved into the complex on or after January 2, 2016. The landlord cannot add the ordered increase to the rents these tenants pay.

Order Page 2 of 2

6 - 14

File Number: SWL-83231:-15

Schedule 4- Rent Reduction related. to Capital Expenditures

A. Date of Rent Reduction

If the Tenant's rent is increased based on capital expenditures during the period 2016 then:

The date of the rent reduction will be the day before: • the date of the Tenant's first rent increase under this order, plus • the number of years for the weighted useful life for capital expenditures for the unit (set out in

Schedule 3).

Example:· If the Tenant's rent was increased on June 1, 2007 and the weighted useful life for capital expenditures is 10 years, then the rent will be reduced on May 31, 2017.

If the Tenant's rent was not increased based on capital expenditures during the period 2016 but was increased during the later periods set out in the order then: .

The date of the rent reduction will be the day before: • the First Effective Date of Rent Increase in this order, plus • the number of years for the weighted useful life for capital expenditures for the unit (set out in

Schedule 3).

Example: If the first effective date of increase in this order is April 1, 2007 and the weighted useful life for capital expenditures is 12 years, then the rent will be reduced on March 31, 2019.

B. Amount of the Rent Reduction

' • _1· ' ' ~-· • ' • ' ' " ' : . - •• • • • ) ~. . • . i_ ' ·. • ~. • . i ~· '. -.. - . . .

. If the Tenant's rent is increased hy the total percentage increase set out ii:t this order then: The rent must be reduced by the total percentage increase set out in this order for capital expenditures.

If the Tenant's rent is not increased by the total percentage increase set out in this order then: The rent must be reduced by an amount determined in accordance with the prescribed rules which may be equal to or less than the total percentage increase set out in this order for capital expenditures.

Schedule 4 - Page 1 of 1

6 - 15

Information to Prospective Tenant About Suite Meters or Meters

To: (Prospective Tenant's name) From: (Landlord's name)

Address of the Rental Unit:

The following information must be given to the prospective tenant if the landlord has installed a meter or suite meter in the rental unit and the landlord wants the prospective tenant to pay for their own electricity costs.

Amount of Electricity Used in the Rental Unit:

The landlord must provide the most recent information available to them about the electricity usage in the rental unit over the last 12 months. If the meter or suite meter was installed fewer than 12 months ago, then the landlord must provide the most recent information available about the electricity usage from the date the meter or suite meter was installed up to the date the tenancy is entered into.

Period: From I I I I I I I I I I I I I to I I I I I I I I I I I I I dd/mm/yyyy dd/mm/yyyy

Kilowatt hours of electricity used: (kWh)

Was the rental unit vacant during this period?

D The rental unit was not vacant during the period shown above.

or

D The rental unit was vacant during part of the period shown above. It was vacant from

I I I I I I I I I I I I I to I I I I I I I I I I I I I · dd/mm/yyyy dd/mm/yyyy

Refrigerator in the Rental Unit:

The landlord must provide the best information available to them about the refrigerator in the rental unit.

D The landlord does not provide a refrigerator for the rental unit.

or

D The landlord provides a refrigerator for the rental unit.

The date the refrigerator was manufactured is ------------------------

Other available information about the energy efficiency of the refrigerator:

v. 30/11/2015 Page 1 of 2

6 - 16

Important Information:

1. This information must be provided to the prospective tenant before the landlord enters into a tenancy agreement with the prospective tenant.

2. For more information about this notice or about your rights, you can contact the Landlord and Tenant Board. You can reach the Board by phone at 416-645-8080 or toll-free at 1-888-332-3234. You can also visit the Board's website at sjto.ca/LTB.

Signature 0 Landlord 0 Representative

Name of Person Signing Phone Number

Signature Date

Representative Information (if applicable)

Name LSUC# Company Name (if applicable)

Mailing Address Phone Number

Municipality (City, Town, etc.) Province Postal Code Fax Number

Page 2 of 2

TAB 7

Positive Covenants (Owen & Black Decision):

Where are We Now?

Andrew Fortis, C.S. Hummingbird Lawyers LLP

April 3, 2017

14TH ANNUAL

Real Estate Law Summit

1

Positive Covenants - Black v. Owen - Where Are We Now?

Andrew M. Fortis, C.S., HUMMINGBIRD LAWYERS LLP1

Introduction

Black v. Owen2 is a Divisional Court decision that weaves together the Ontario Court of

Appeal dissent in Amberwood Investments Ltd.,3 the Ontario Superior Court decision of

Wentworth Condominium No. 12,4 and the English Courts decisions in Tito5 and Wilkinson & Ors.6

In doing so, it imports the English Common Law conditional grant and the benefit and burden

exceptions into Ontario to the rule prohibiting the running of positive covenants with the land.7

Ultimately, it achieves a new level of fairness in those cases that is more reflective of Ontario

policies and practices.

The facts in Black involve the small community of Wychwood Park located southwest of

the corner of Bathurst and St. Clair, in Toronto. The community was created in 1891 and modeled

to be an artists’ colony. The land was therefore divided into irregularly shaped lots surrounding

a central park, built around a pond.8 The property is not maintained by the City of Toronto, but

rather maintained by the Trustees to a trust deed that was registered against the lands on July 3,

1891 (the “Trust Deed”).9

The Trust Deed provides that Wychwood Park is to charge its residents a monthly

maintenance fee, and in exchange, the Trustees of the park would see to it that the shared

facilities, such as the private roads, ravine, stream and tennis courts, are maintained.10

Sometime in 1911, the Owen Family acquired a parcel within the park and paid the

monthly maintenance fees until 2008.11 At that time, the owner was Ivon Owen, a man who

suffered from Alzheimer’s Disease and whose affairs were being managed by his son, Gerald, and

Gerald’s wife, Katherine Anderson. Gerald and Katherine had also been living with Ivon since

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2

1997. It should be noted that while most of the properties within the park required access

through the private roads, the Owen’s property was one of a limited number that was accessible

by public roads.12

First Proceeding

Sometime in 2008, the Owen Family ceased making payments as required under the Trust

Deed on the basis that they were not using the roads of the park. The Trustees for the park

commenced an action in the Small Claims Court seeking recovery of the outstanding maintenance

fees from 2008 to 2010. The First Proceeding is recorded as Black v. Owen, 2012 ONSC 400

(CanLII).

Deputy Judge Kilian presided at the trial of the First Proceeding and found that Ivon Owen

was bound by the Trust Deed because he had actual knowledge of the trust (given that the family

had paid monthly dues for the past 97 years) and rejected the argument that the Owen Family

did not derive any benefit from the Trust.13 The trial court determined that one does not have

to make use of a benefit in order to have benefited from it, as the benefits of the park were for

all of the property owners in the park. The action by the Trustees against Gerald and Katherine,

as agents of Ivon Owen, was dismissed, but findings of fact were made applicable to them.

The Owens appealed the decision to Divisional Court and were heard by Justice Swinton.

At the time of the appeal, the Owens raised the issue of whether or not the requirement to pay

the monthly maintenance fees constitutes a positive covenant and therefore would be incapable

of running with the land. The Trustees for the park argued that they would be prejudiced if this

new issue was considered at the time of the appeal, for they lacked notice of the argument, and

if the argument was entertained, it would cause an incomplete record.14 The new issue was not

considered, the Divisional Court dismissed the appeal, and the legal and factual conclusions of

the trial were confirmed.

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3

Sometime in 2010, Ivon Owen passed away and Gerald and Katherine became the

registered owners of the property. Once again, they ceased making the monthly maintenance

payments to the park. The Trustees commenced the Second Proceeding seeking the recovery of

the outstanding dues.

Background of Law

Before discussing the Second Proceeding, it is important to note the history and state of

the law in Ontario regarding the ability of positive covenants to run with the land.

Covenants regarding the use of real property can be either restrictive or positive, and like

easements, they are a matter of equity.

One of the first cases involving a covenant on title was Tulk v. Moxhay.15 In that case,

Charles Augustus Tulk, as the owner of several parcels of land in Leicester Square, England, sold

a plot of land to another party. In so doing, Tulk registered a restrictive covenant on title that

provided that the Garden Square would remain “uncovered with buildings” so that it could

continue as a pleasure ground. The restrictive covenant provided that the restriction was to

extend to the heirs and assigns of the property owners. Tulk continued to own an adjoining

parcel of land, and forty years later, a parcel of the property was sold to Moxhay.

When Moxhay acquired the parcel, he was aware of the covenant on title, but

notwithstanding, he refused to recognize same for he claimed there was no privity of contract

between him and Tulk and sought to build upon the square. Tulk brought an action seeking an

injunction to prevent any construction. The court ruled that the restrictive covenant could be

enforced in equity because the purchaser (Moxhay) had notice of the restriction and could not

stand in a different position from the owner from whom he purchased the property.

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4

Since the 1848 decision that restrictive covenants are enforceable and can run with the

land provided that the subsequent owner had notice of same, the law on restrictive covenants

has expanded and developed further principles.

Professor Bruce Ziff summarized the four principal requirements for a covenant to be

enforceable, which are: (a) the covenant must be negative in substance, (b) it must have been

intended that the burden was to run with the servient land, and that land must be sufficiently

described in the covenant, (c) the covenant must be taken for the benefit of dominant lands, and

those lands must also be sufficiently identified in the document; and (d) all general limitations

imposed on the availability of equitable remedies apply.16

It is an issue of the first element, that restrictive covenants must be negative in substance,

which is at the heart of the Second Proceeding. Under common law and the concept of privity

of contract, a positive covenant can only be enforced against the original covenantor and only by

the original covenantee or an assignee of the covenantee (for they would have acquired the

benefit). To ensure compliance by subsequent purchasers of the covenantor, the assignee of the

covenantor (much like each successor assignee) must agree to the same covenant. This is known

as the chain of events exception.

The limitation on the running of positive covenants and the unwillingness in Ontario to

enforce them has been described as a problem with a lack of adequate remedies. Specifically,

the apportionment of liability among the original covenantor and future owners of the burdened

land is worrisome. There is also concern with the potential infinite duration of positive

covenants.17

The decision in the Second Proceeding drew upon several historical cases, as well as

recent developments, for it to come to its conclusion and I summarize those cases here:

7 - 4

5

Austerbery v. Oldham Corp. (1885), 29 Ch. D. 750 (C.A.)

Austerberry stands for the basic proposition that positive covenants cannot run with the

land. In the case, land was conveyed to trustees and the trustees covenanted that they would

maintain and repair it as a road. The covenant was given to the owners and their heirs and

assigns. The court held that neither the benefit nor the burden ran with the land, for a covenant

to perform a positive act is not one of the burdens which runs with the land and cannot bind

future owners of the lands.

Halsall v. Brizell [1957], All ER 371

Halsall involved homebuyers on a Liverpool estate who enjoyed the use of estate roads,

drains, sea walls, and other amenities on the obligation that they contribute to repair and

upkeep. It was held that an owner could not exercise the rights without paying the share of costs.

This case formed the English exception to the rule in Austerberry and set out the benefit and

burden exception.

Amberwood Investments Ltd. v. Durham Condominium Corp. No. 12318

Amberwood Investments Ltd. is a well-known Ontario case involving the construction of

two condominium projects that contained a shared recreational facility. The first building was

completed, and a reciprocal agreement was registered on title to both parcels governing the use

and enjoyment of the shared facility. The second condominium was not constructed and fell into

financial difficulty. The second, undeveloped parcel was subsequently sold under power of sale.

The purchaser of the distressed property paid its shares of expenses for a few months and then

stopped.

The Court of Appeal in Amberwood Investments Ltd. affirmed the notion that positive

covenants do not run with the land, and further recognized that there are exceptions to the rule,

7 - 5

6

such as those found by statute (Planning Act, Condominium Act, and Surveys Act). The Court also

acknowledged that a conditional grant exemption exists in Ontario, but did not find the same to

apply to the facts of the case and further, did not adopt the English exemption of burden and

benefit principle. These exceptions are discussed in more detail in the Second Proceeding below.

The Court did not adopt the exception in benefit and burden exception of Halsall. The

Court acknowledged that it could impose a conditional grant that is determinable/defeasible on

non-compliance, but it is up to the Ontario Legislature to change the basic rule that positive

covenant do not run with the land, as is the rule in Austerberry.19 So, as of 2002, the law in

Ontario was that positive covenants do not run with the land and the only exceptions to same

are the chain of event and the conditional grant exceptions.

Second Proceeding

The Second Proceeding’s trial was heard before Deputy Judge Caplan in the Small Claims

Court. It was during this proceeding that the Owens raised the issue regarding whether or not

the obligation to pay constituted a positive obligation that could run with the land. Based upon

the majority decision in Amberwood Investments Ltd., Deputy Judge Caplan concluded that the

Owen Family did not have to pay annual levies for maintenance fees, as these obligations under

the Trust Deed resulted from a positive covenant that did not run with the land.

The Trustees appealed the Small Claims Court decision to the Ontario Superior Court of

Justice (Divisional Court), heard by Justice J. Wilson. This appeal is the basis of this paper.

Justice J. Wilson, in reviewing the trial judge’s decision wrote:

“The Second Decision appears to consider the legal issue of positive covenants in a vacuum. The trial judge failed to consider the context of the bindings of fact in the First Decision, when considering the applicability of the potential exceptions…

7 - 6

7

• He considers the new argument of positive covenants, without any regard to the factual and legal analysis of Deputy Judge Kilian and Swinton J. and the findings that Gerald and Katherine are bound by the findings in the First Decision as they were parties to that proceeding.

• He purports to make a decision affecting the rights of numerous third parties, without any proof that the third parties have adequate notice of this case.

• His decision is, in effect, a declaration that the Trust deed cannot be enforced. The Small Claims court is without jurisdiction to grant declaratory relief.

• He dismisses the burden and benefit principle in one line, without any consideration of the case law. His reasons are inadequate. He does not consider the other exception raised and argued of a conditional grant.”20

Justice J. Wilson’s decision discusses the case law on positive covenants, and draws

heavily upon the dissent of Amberwood Investments Ltd.21 The Court notes the differences

between the conditional grant and the benefit and burden exceptions in Tito22, and parallels the

facts in Wilkinson & Ors.23 In its decision to permit the exceptions to the general rule Justice J.

Wilson also relies on the Ontario Superior Court of Justice’s 2007 decision of Wentworth

Condominium No. 1224 and the writings of the academic community which argue that the benefit

and burden exemption ought to receive recognition in Ontario when required to achieve fairness.

Ultimately, Justice J. Wilson’s decision distills the conditional grant exemption as follows:

“By way of synthesis, I make the following observations as to the meaning of the two exemptions: “Conditional Grant Exemption. When being asked to enforce a positive obligation and the benefit is not clear, the courts will first look at the transaction between the parties to see if a benefit was clearly made on the conditional acceptance of a positive obligations. If such an intention can be made out on the fact of the transaction, the conditional grants exception is engaged.”25

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8

In further simplicity, it generally means that a right has been granted with an obligation

attached, such that one cannot take the benefit without accepting the connecting obligation. On

this principle, the enforcing party can terminate the benefit (the grant) but cannot sue the

defaulting party for damages or seek an injunction to compel performance.26

When discussing the benefit and burden exemption, Justice J. Wilson wrote:

“Benefit and Burden Exemption: If a conditional connection between the obligation and the benefit is not clear, the courts will then consider whether the benefit and burden exception applied. By looking at the circumstances of the transaction, the intentions and relationship of the parties, and the nature of the benefit and burdens at issue, the courts will determine if there is an implicit and necessary connection between formally separate obligations and advantages. Or, to repeat the words of Professor Ziff, this second exception looks to whether the courts should ‘tether previously separate promises’.”27

After discussing the two exemptions, Justice J. Wilson found that the majority in

Amberwood Investments Ltd. appeared to have endorsed the conditional grant exemption, but

rejected the application of the benefit and burden exemption in Ontario.28 Building upon Justice

MacPherson’s dissent in Amberwood Investments Ltd., Justice J. Wilson drew upon the two

recent decisions on positive covenants written since the decision in Amberwood Investments Ltd.:

Wentworth Condominium No 12. and Wilkinson.

Wentworth Condominium Corp No. 1229 was decided in 2007 and involved a shared storm

drain that was intended to be benefited from by two condominium corporations. One

condominium was built and the other was sold. While the new purchaser used the shared storm

drain, it refused to pay its share of repairs to the storm drain as was intended. Justice J. Wilson

cited Crane J., providing “since [condominium] No. 59 derived all the benefits from this

easement, the sale of [condominium] No. 59 to a new owner meant the owners of No. 59 had to

pay for the necessary repairs to the storm drain system located on the property owned by

[condominium] No. 12”30

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9

Justice J. Wilson also wrote:

“Although Crane J. refers to the conditional grants exemption as applying when referring to Amberwood, he appears to have adopted the benefit and burden as well as conditional grant exemptions. It appears that he has applied the dissenting decision of MacPherson, J.A., with respect to the benefit burden exemption, as opposed to the majority decision.”31

Justice J. Wilson then went on to call upon the 2013 English Court of Appeal case of

Wilkinson & Ors, whose facts are near identical to those in the case at bar. Wilkinson involved a

series of vacation bungalows with shared common features, including sidewalks, road, tennis

courts, etc. Some of the tenants, who were subsequent purchasers, argued the obligation to pay

levies to maintain these common features were no longer required. The English Court of Appeal

disagreed and found that the payment covenant was related to the use of the common elements

and they would have to continue to pay the fees.32

Justice J. Wilson further wrote:

“The common law of positive covenants is in evolution, and is capable of adapting to new factual and contextual situations. I adopt the reasons of MacPherson, J.A. in Amberwood as reflecting the current status of law in Ontario, taking into account recent clarification and confirmation of the benefit and burden exemption in England. I conclude therefore that both the conditional grant and the benefit and burden exceptions reflect the current law in Ontario.”33

Justice J. Wilson’s decision provided guidance to future courts and suggested that courts

should engage in a two-step analysis when examining the applicability of the exemptions, as

suggested in Tito to see if either exemption would apply:

“When being asked to enforce a positive obligation, the courts will first look at the transaction to see if the conditional grant exemption applies. Was a benefit that was clearly made on the conditional acceptance of a positive obligation? If such an intention can be made out on the face of the transaction, the conditional grants exemption is engaged….

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…If a conditional connection between the obligation and the benefit is not clear, the courts will then consider whether the benefit and burden exception applies.”34

Justice J. Wilson determined that the conditional grant exemption applied in the case at

bar, but if not accepted by a higher court, then the benefit and burden exemption would apply

for it is, “an implicit, yet necessary connection in the nature of the benefit and burden. To find

otherwise would run counter to the history and common understanding of the community, and

it would render the unique nature of Wychwood Park untenable.”35

The Court, in rending its decision, acknowledged that:

“There is a paucity of cases applying the benefit and burden principle or the conditional grants exemption. This rare application of the exceptions makes sense, considering there are so few communities sharing facilities like the holiday park in Wilkinson or Toronto’s Wychwood Park.”36

Conclusion

My research as of the date of this writing has not disclosed any appeal to the Second

Proceeding, nor did it reveal any negative treatment to the decision. Accordingly, in my view, the

pendulum on the rule in general rule in Austerberry that positive covenants do not run with the

land has shifted. Now, Ontario recognizes two more exceptions, in addition to the chain of events

exception to the general rule, the conditional grant and the benefit and burden exceptions which

are to apply in certain circumstances.

I think it remains to be seen as to whether or not these exceptions will be widely accepted,

but I agree with Justice J. Wilson’s characterization regarding the exceptions’ applicability in

future cases. It is a rare occasion where the benefit and burden exemption and the conditional

grant exemption would come into play, but when they do, they ought to be engaged when

needed to achieve fairness.

7 - 10

11

1 A gracious thank you to Daniel Wulffhart, Student-at-law for his assistance with this paper. 2 2016 ONSC 40 (CanLII) 3 Amberwood Investments Ltd. v. Durham Condominium Corp. No. 123 (2002), 2000 CanLII 22699 (ON SC), 211 D.L.R. (4th) 1, 157 O.A.C. 135, 58 (O.R.) 3d) 481, 50 R.P.R. (3d) 1 (Ont. C.A.) 4 Wentworth Condominium Corp. No. 12 v. Wentworth Condominium Corp. No. 59 (2007), 2007 CanLII 38944 (ON SC), 2007 Carswell Ont 4391, 57 R.P.R. (4th) 128 (Ont. S.C.J.) 5 Tito v. Waddell (1977), [1977] Ch. 106, [1977] 3 All E.R. 129 (Eng. Ch. Div.) 6 Wilkinson & Ors. v. Kerdene Ltd. (2013), [2013] EWCA Civ 44 (Eng. & Wales C.A. (Civil)) 7 Austerbery v. Oldham (1885), 29 Ch. D. 750 (Eng. C.A.) 8 Owen v. Black, 2012 ONSC 400 (CanLII) 9 Ibid. 10 Ibid. 11 Ibid. 12 Ibid. 13 Ibid. 14 Ibid. at paragraph 20 15 (1848), 2 Ph. 744 16 Ziff, Bruce, Principles of Property Law, Sixth Edition, Carswell 2014, Servitudes over Property – The Running of Burdens and Benefits in Equity, pages 412-413 17 Supra note 2 at paragraph 80 18 Supra note 3 19 Supra note 7 20 Supra note 2 at paragraphs 42 and 43 21 Supra note 3 22 Supra note 5 23 Supra note 6 24 Supra note 4 25 Supra note 2 at paragraph 74 26 Supra note 3 at paragraph 35 27 Supra note 2 at paragraph 74 28 Supra note 2 at paragraph 79 and 80 29 Supra note 4 30 Supra note 2 at paragraph 32 31 Supra note 2 at paragraph 89 32 Supra note 2 at paragraph 92 33 Supra note 2 at paragraph 99 34 Supra note 2 at paragraphs 103 and 105 35 Supra note 2 at paragraph 106 36 Supra note 2 at paragraph 95

7 - 11

TAB 8

A Primer on Clean-Up of Contaminated Lands

Rosalind Cooper, C.S. Fasken Martineau DuMoulin LLP

April 3, 2017

14TH ANNUAL

Real Estate Law Summit

A PRIMER ON CLEAN-UP OF CONTAMINATED LANDS

Rosalind H. Cooper

Fasken Martineau DuMoulin LLP

Introduction

Brownfield properties are vacant or underutilized places where previous industrial

or commercial activities may have resulted in contamination and include f acilities such as gas

stations, plants and factories.

However, whether you call a contaminated property a “brownfield” or otherwise,

the requirements and approach on clean-up are the same. The purpose of this paper is to provide

a p rimer o n cl ean-up of l ands unde r O ntario R egulation 153/ 04, not ing t hat i t i s no t a lways

required t hat you follow t he R egulation a nd, i n many circumstances, a n independent c lean-up

can pr oceed w ithout f ollowing t he R egulation a nd w ithout i nvolving t he M inistry of the

Environment and Climate Change (“MOECC”).

When is Clean-up Legally Required?

If a c ontaminated pr operty i s be ing r edeveloped or r epurposed f or a ne w us e,

property o wners a nd r edevelopers m ust c onsider w hether t he ne w us e i s a m ore s ensitive us e

under Ontario Regulation 153/04 and whether it is necessary to file a Record of Site Condition.

An e xample i s w here t he pr operty w as us ed f or c ommercial or i ndustrial pur poses a nd i s not

being used for residential. It is important to note that the zoning is irrelevant. It is the actual use

to which the property is being put and the previous use that matters.

The filing of a Record of Site Condition is mandatory where there is a change in

property use from an industrial use property changing to residential, institutional, and parkland

or a gricultural. It is a lso ma ndatory f or commercial u se p roperty c hanging to r esidential,

institutional, parkland or agricultural provided the commercial business is a garage; bulk liquid

8 - 1

dispensing facility including gas station; dry cleaning operation with dry cleaning equipment on

site or has done so in the last ten years.

Record of Site Condition

A record of site condition summarizes the environmental condition of a property,

based on t he c ompletion of e nvironmental s ite a ssessments. E ach r ecord of s ite c ondition:is

based on t he r esults of one or m ore e nvironmental s ite a ssessments a nd i s c onducted b y a

“qualified pe rson”, a s d efined unde r O ntario R egulation 153/ 04. A R ecord of S ite C ondition

may i nvolve t he c ompletion of a risk a ssessment a nd t he de velopment of pr operty s pecific

standards, how ever, a q ualified pe rson m ust c ertify t hat t he pr operty m eets t he a pplicable s ite

condition standard or a s tandard specified in a risk assessment for the intended use. O nce this

has been done, the Record of Site Condition is filed in the Environmental Site Registry.

Qualified Persons

To c onduct a nd s upervise e nvironmental s ite a ssessments unde r Ontario

Regulation 153/ 04, one must hol d a l icence, l imited l icence, or t emporary l icence unde r t he

Professional E ngineers Act o r a c ertificate o f r egistration u nder th e P rofessional G eoscientists

Act, 2000 and be a practising member, temporary member or limited member of the Association

of Professional Geoscientists of Ontario.

As a qua lified pe rson, there c annot be a ny di rect or i ndirect i nterest in a ny

property being assessed, reported on or being certified and professional insurance is required.

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Environmental Site Assessments

To pr epare a R ecord of S ite C ondition, t he f ollowing a ssessments ne ed t o be

undertaken. A phase one environmental s ite assessment must be completed for all Records of

Site Condition and require the qualified person to identify any potentially contaminating activity

in t he s tudy area, i ncluding t he pha se on e pr operty; i dentify areas o f p otential e nvironmental

concern on the phase one property and determine if a phase two environmental site assessment is

required because, for some types of property uses and circumstances, a phase two environmental

site assessment is mandatory.

A phase one environmental s ite assessment consists of ( i) a records review; s ite

reconnaissance; i nterviews; evaluation of i nformation collected; pr eparation of written r eports;

and submission of the reports to the property owner. In addition, the phase one environmental

site assessment includes the identification of recognized environmental conditions by a qualified

person, a nd t he pr eparation of a pr eliminary c onceptual s ite m odel. T he qua lified pe rson i s

responsible f or de termining r ecognized e nvironmental c onditions t hrough t he i dentification o f

past or present us es and any pot entially contaminating a ctivities, both within t he property and

within a m inimum de fined s tudy a rea of 250 metres s urrounding t he property t hat m ay b e

contributing to recognized environmental conditions on the property.

The pha se one environmental s ite a ssessment w ould r esult i n one of t wo

conclusions, na mely, t hat a pha se t wo e nvironmental s ite a ssessment i s not r equired a nd a

Record of Site Condition may be submitted to the MOECC for filing on the Environmental Site

Registry; or that a phase two environmental site assessment is required.

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Phase t wo e nvironmental s ite a ssessments r equire t he qua lified pe rson t o

determine the location and concentration of one or more contaminants and take action to reduce

the concentrations if a standard has been exceeded and/or complete a risk assessment to develop

property specific s tandards that a re safe for the i ntended use of the property and then confirm

that t he pr operty m eets t he a pplicable s ite c ondition s tandard or a s tandard s pecified i n a r isk

assessment.

A phase two environmental site assessment consists of:

(i) planning the site investigation,

(ii) conducting the site investigation;

(ii) interpretation and evaluation of the information gathered;

(iv) preparation of a written report; and

(v) submission of the report to the property owner.

A pha se two e nvironmental s ite a ssessment i s m andatory unde r t he following

circumstances:

(i) If the property is used or has ever been used, in whole or in part, for an industrial use or

any of the following commercial uses: a garage, bulk liquid dispensing facility including

a gasoline outlet; or the operation of dry cleaning equipment; and

(ii) if a potentially contaminating activity is identified on, in or under the property during the

phase one environmental site assessment.

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Details regarding actions taken to reduce the concentration of contaminants on the

property, i ncluding c onfirmation s ampling, i s r equired i n t he ph ase two e nvironmental site

assessment report. A refined conceptual site model is also required and would be developed by

updating the preliminary conceptual site model with information obtained during the phase two

environmental s ite as sessment. T he r efined conceptual s ite m ode i s presented in t he r eport i n

tabular and narrative form, supplemented by cross-sections and maps and includes:

(i) a site plan of the property;

(ii) a description of the physical setting of the property;

(iii) a de scription of c ontaminants pr esent a t concentrations g reater t han t he applicable s ite condition standards;

(iv) information pertaining to the sources, distribution, transport pathways and receptors.

Site Condition Standards

When a p hase two environmental s ite assessment i s required, a qualified person

must c ertify i n t he record of s ite condition, a mong ot her t hings, t hat t he c oncentration o f

contaminants a t t he pr operty m eet t he a pplicable s ite c onditions s tandards or t he s tandards

specified in a risk assessment. There are two different approaches that can apply to the clean-up

of l and: r emediation t o generic s tandards ( applicable s ite c ondition s tandards) o r t o pr operty-

specific standards (derived through a risk assessment).

The level of risk is a measurement of the likelihood that the contamination on the

property will cause harm to people, animals and plants. F or each contaminant, a concentration

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level is e stablished b y lo oking a t th e d ifferent w ays th ey c an c ome in to c ontact w ith a

contaminant.

Generic standards

The MOECC has established standards to use when assessing contaminated lands.

These standards are set based on intended use (e.g., residential, commercial) and certain physical

characteristics of the property (proxomity to a water body). A Record of Site Condition based on

these g eneric s tandards w ill c onfirm t hat t he s tandards f or t he i ntended us e a re m et. B ut i f

contaminants are present at concentrations higher than the generic standards, the qualified person

can e ither c hoose t o un dertake remedial a ction at t he pr operty t o reduce t he co ncentration o f

contaminants t o m eet t he a pplicable s ite c ondition s tandard or de cide t hat a r isk a ssessment

approach is appropriate.

Risk Assessment Standards

A pr operty ow ner c an c onsider de veloping property-specific s tandards b y

preparing a risk a ssessment. T he pr operty-specific a pproach us es i nformation a bout t he

conditions and characteristics of a property when calculating risk. The risk assessment examines

the risk posed to human health, plants, wildlife and the natural environment from exposure to a

contaminant a t t he pr operty and t hen pr oposes pr operty-specific s tandards t hat o ffer eq ual

protection for human health and the environment as the MOECC’s generic s tandards and may

propose engineering or land-use controls to manage risk on the property. A risk assessment must

be prepared by a qualified person.

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Before c ompleting th e written r isk a ssessment r eport, th e p roperty o wner mu st

complete the Risk Assessment Pre-Submission Form and submit this form to the MOECC.

Modified Generic Risk Assessment

For less complex projects that meet certain criteria, a q ualified person may use a

streamlined p rocess as an al ternative t o m eeting generic s tandards a nd t he t raditional r isk

assessment process. T he modified generic r isk assessment can be prepared using an approved

model and a standardized report template. T his approach allows for convenient and controlled

modification of the generic site condition standards for use in a Record of Site Condition and can

be adjusted to site specific conditions. The modified generic risk assessment approach provides

a s et o f p re-defined risk m anagement m easures t hat can b e s elected f or t he p roperty an d i s

streamlined.

The Certificate of Property Use

Where t he c ertification relies o n a risk as sessment, t he M OECC m ay i ssue a

Certificate of P roperty Use ( “CPU”) t o t he pr operty owner. A C PU m ay require t hat t he

property ow ner t ake c ertain s pecified actions, s uch a s m onitoring and r eporting, t hat f inancial

assurance be provided, or that the property owner refrain from using the property for certain uses

or for certain construction activities. If the latter restriction is imposed in a CPU, the property

owner m ust g ive a c opy of t he r equirement t o e very oc cupant of t he pr operty and e nsure

compliance with t he r equirement. T he MOECC a lso has t he ability t o require t he CPU to be

provided to future purchasers, and that a certificate setting out this requirement be registered on

title to the property.

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Environmental Site Registry

You must be a qualified person for environmental s ite assessment to c reate and

submit Records of Site Condition for filing in the Environmental Site Registry. Once a record is

submitted and complete, the Director issues a no tice and has 30 bus iness days from the not ice

date to check the record for administrative and technical errors, and to notify the property owner

of the outcome of the review. T here are three possible outcomes, one being that the Record of

Site Condition has been filed; another that the Record of Site Condition has not been completed

in accordance with the Regulations; or that the Director intends to conduct a review before the

Record of Site Condition can be filed.

Searching the Environmental Site Registry

You c an s earch f or R ecords of S ite C ondition f iled i n t he E nvironmental S ite

Registry s ince October 1, 2 004. H owever, t here i s a d isclaimer t hat m akes i t cl ear t hat t he

information pr ovided i s not i ntended t o pr ovide s pecific a dvice or r ecommendations i n a ny

circumstances and that there is no liability to the MOECC.

Protection from Filing of Record Site Condition

Once the Record of Site Condition is filed in the Registry, the MOECC issues an

acknowledgement of ha ving r eceived t he R ecord of S ite C ondition. F rom t hat t ime f orward,

subject t o c ertain e xceptions, t he pr operty ow ner filing t he R ecord o f S ite C ondition a nd a ny

subsequent owners, current and subsequent occupants, and persons who have or in the future will

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have charge, management or control over the property obtain protection from MOECC orders in

respect of contaminants discharged before the filing of the Record of Site Condition.

There a re a lso pr ovisions t o pr ovide pr otection t o pa rties pr eviously c onnected

with the property. It should be noted that the protection does not extend to all MOECC orders

that ma y b e is sued, nor doe s i t i nclude pr otection f rom c ivil l iability or pr otection f or

contamination that may have migrated off the property.

Re-Openers

The protection f rom MOECC orders can be lost in cer tain ci rcumstances. S uch

situations ha ve be en r eferred t o a s “ re-openers”, an d i nclude w here f alse o r m isleading

representations ha ve b een m ade on a n R ecord of S ite C ondition, w here t here i s of f-site

movement of contamination after the date of the filing of the Record of Site Condition, where the

actual us e of t he pr operty i s m ore s ensitive t han t he u se s pecified i n t he R ecord o f S ite

Condition, and where a term or condition of any CPU has been violated.

There a re a lso pr ovisions t hat a llow a n or der t o be i ssued i n e mergency

circumstances where the Ministry believes that the presence of contamination, which pre-dates

the filing of an Record of Site Condition, creates a danger to the health and safety of any person.

The scope of such an order is limited to dealing with the emergency situation.

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TAB 9

“Your First Look at Second Units”

Leo Longo, C.S. Patrick Harrington

Aird & Berlis LLP

April 3, 2017

14TH ANNUAL

Real Estate Law Summit

1

“YOUR FIRST LOOK AT SECOND UNITS” Leo F. Longo

Patrick J. Harrington Aird & Berlis LLP

SPEAKING NOTES

Topics:

• What is a “second unit”? • Mandatory requirement to permit “second units” • No appeal rights • Ministry regulation powers • Selected municipal examples • Licensing • Property Standards • Ontario Building Code / Fire Code

What is a “second unit”?

• Second units — also known as accessory or basement apartments, secondary suites and in-law flats — are self-contained residential units with kitchen and bathroom facilities within dwellings or within structures accessory to dwellings (such as above laneway garages).

• See Ontario’s website: http://www.mah.gov.on.ca/Page9575.aspx which states: “The Strong Communities through Affordable Housing Act, 2011 requires municipalities to authorize second units in detached, semi–detached and row houses, as well as in ancillary structures. However, there is a need for municipalities to assess several considerations in developing new official plan policies and zoning provisions, or in reviewing their existing policies and provisions, if they already allow second units:

Second units should be permitted in both existing residential communities and in newly developing areas. Newly developing areas offer the opportunity to plan proactively for second units. This includes the design of the actual houses and in the lot fabric or neighbourhood layout where ancillary structures like laneway garages could be integrally incorporated into the design. Municipalities and development proponents should specifically consider second units in the planning of new neighbourhoods.

While the Act requires municipalities to permit second units, the government recognizes there may be inherent constraints within portions of a municipality or community which would make those areas inappropriate for second units (such as flood-prone areas or those with inadequate servicing). Municipalities should consider any such constraints in developing or reviewing second unit policies.

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While the Act requires municipalities to permit second units in detached, semi-detached and row housing, and in ancillary structures, the provisions permit one additional unit (i.e., a second unit) either in a house (e.g., basement) or in an ancillary structure (e.g., above laneway garage) on the same lot. Municipalities should assess where second units may be appropriate in the primary dwelling versus the ancillary structure. In some instances, municipalities may conclude it is appropriate to allow a second unit in both. However, in these situations, the sheltering of appeals does not extend to the third unit. Any party would be able to appeal the authorization of the third unit to the Ontario Municipal Board.”

Mandatory Requirement to Permit Second Units

• Every municipal official plan must have policies authorizing the use of a second residential unit by allowing the use of two residential units in a detached house, semi-detached house or rowhouse. [s.16(3)]

• One cannot apply to amend an official plan to either revoke or amend the policies authorizing the use of a second residential unit. [s. 22(7.2)(c)]

• Every municipal zoning by-law must give effect to the “second unit” official plan policies. [s. 35.1]

No Appeal Rights

• Only the Minister can appeal a municipality’s “second unit” official plan policies…no landowner or member of the public has that right. [ss. 17(24.1) & (36.1)]

• Only the Minister can appeal a municipality’s “second unit” zoning by-law provisions…no

landowner or member of the public has that right. [ss. 34(19.1)]

Ministry Regulation Powers

• The MMAH Minister has broad regulatory powers to establish requirements and standards with respect to residential “second units”. [s. 35.1(2)-(6)]

• Any such regulation will prevail over a zoning by-law.

• Up to March 7, no regulation had been filed by the MMAH. As such, municipalities are responsible for determining what standards or zoning provisions should apply to second units in relation to matters such as minimum unit size or parking requirements. Standards should support the creation of second units.

• November 1, 2016 Minister’s Letter – See Attachment “A”.

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• UPDATE: On March 7 details of a proposed regulation were filed on the EBR Registry as Number: 012-9694; see http://www.ebr.gov.on.ca/ERS-WEB-External/displaynoticecontent.do?noticeId=MTMxNjMz&statusId=MTk5NjYz&language=en

• The public comment period expires on June 5, 2017.

• The proposed regulation will contain the following provisions:

“A maximum of one parking space would be required for a second residential unit, where second residential units are permitted, which includes “tandem parking”, which would be defined as a parking space that is only accessed by passing through another parking space from a street, lane or driveway;

A second residential unit, where permitted in the zoning by-law, may be occupied by any

person in accordance with s. 35(2) of the Planning Act, and, for greater clarity, regardless of whether the primary unit is occupied by the owner of the property; and

A second residential unit, where permitted in the zoning by-law, would be permitted without regard to the date of construction of the primary building.”

Selected Municipal Examples

• Links to selected municipal websites are provided so that you might review the staff reports and by-laws that apply in a variety of municipalities; see Attachment “C”.

Licensing

• Check to ensure whether there are municipal licensing or registration requirements for establishing and/or operating a “second unit” in your community.

• Some municipalities have different fees based on whether the home is owner-occupied.

Property Standards

• Check to determine if there are specific requirements in the municipality’s Property Standards By-Law applying to “second units”.

Ontario Building Code / Fire Code

• There have not yet been any amendments made to either Code that specifically deal with “second units”.

• A public consultation respecting proposed Building Code revisions was undertaken last Fall.

• The proposed in-effect date for these revisions is July, 2017.

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• For specific details, see: http://www.mah.gov.on.ca/Page14998.aspx

CMHC Website – Second Units: https://www.cmhc-schl.gc.ca/en/inpr/afhoce/afhoce/afhostcast/afhoid/pore/pesesu/pesesu_001.cfm

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ATTACHMENT “A” – MINISTER’S NOV. 1/16 LETTER

Ministry of Housing

Minister Responsible for the Poverty Reduction Strategy

Office of the Minister

777 Bay Street, 17th Floor Toronto ON M5G 2E5 Tel.: 416 585-6500 Fax: 416 585-4035

Let me thank you and your council for the work you do every day on behalf of the citizens of Ontario. It can't be said enough that a strong partnership between your government and my Ministry is critical to addressing the affordable housing challenges we collectively face.

As you'll know, the province recently released an update to the Long-Term Affordable Housing Strategy (LTAHS) 2016 (the "Update"). The Update continues the transformation of Ontario's housing system which we began with the 2010 LTAHS. On September 14, 2016, we re-introduced the Promoting Affordable Housing Act, 2016 (Bill 7). If passed, Bill 7 would help ensure that the people of Ontario have better access to affordable and adequate housing. This includes an even stronger emphasis on the role that private sector housing can play in providing a mix and range of affordable housing choices for Ontarians.

More specifically, second units are an important tool in contributing to the supply of private sector affordable housing choices. They are widely recognized as one of the most affordable forms of rental housing. Second units help optimize the use of the existing housing stock and infrastructure, all the while providing an income stream for homeowners, particularly younger and older homeowners, who may respectively have a greater need for income to help finance and/or remain in their homes.

In support of second units, I am pleased to announce that Bill 7 proposes to amend the Development Charges Act, 1997 which, if passed, give authority to amend the regulations and exempt second units in new homes from development charges. This should help spur the design of houses to accommodate second units at the outset, which is a more effective approach compared to retrofitting. In this way, we can plan ahead for houses to be used in a flexible way over time, depending on the life cycle stage of homeowners and whether they seek or need the income a second unit can provide.

Concurrently, we are proposing to publicly consult on potential changes to the Building Code (by way of an amendment to Regulation 332-12) to improve the affordability of second units in newly constructed houses while still meeting safety standards of both the Building Code and Fire Code. The proposed new requirements for construction of newly built houses with second units would allow for greater flexibility and decrease the construction costs.

You may recall that we began a renewed emphasis on second units as part of the 2010 LTAHS which saw us make amendments to the Planning Act to require municipalities to amend their official plans and zoning by-laws to authorize second units in single-detached, semi-detached and

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row dwellings, as well as in accessory structures (e.g. laneway garages). These provisions came into effect on January 1, 2012. The Act was also amended to give the Minister regulation making authority - to both directly permit second units and/or to prescribe standards for them (e.g. parking).

I am aware that an increasing number of municipalities have taken, or are engaged in taking, steps to amend their official plans and zoning by-laws to reflect these provisions. I appreciate those efforts. However, in some instances, analysis reveals that certain official plan policies and/or zoning provisions do not reflect the permissive spirit and intent of these legislative changes. It is noted that Bill 7 proposes to provide the minister with appeal rights related to municipal adoption of second unit official plan policies and zoning by-laws.

However, the majority of municipalities have not updated their official plans and zoning by-laws to reflect the second unit requirements of the Planning Act - even though we are well into the fourth year since this requirement came into effect. As such, and based on all of the above, I have instructed staff to engage in a five part plan as follows:

1. Engage in outreach to apprise municipalities of the proposed changes to the Building Code and Development Charges Act as a means of supporting the planning and establishment of second units.

2. Our Municipal Services Offices will approach those municipalities that have adopted official plans and/or zoning by-laws post 2012 to:

a. Discuss policies, by-laws, or standards that appear to be overly restrictive and not in keeping with the permissive spirit and intent of the legislation; and

b. Request these municipalities to review the policies or standards considered restrictive at the next opportunity (i.e., during an official plan review or zoning by-law update) to reflect the purpose and intent of the Planning Act provisions on second units.

3. Our Municipal Services Offices will also approach all of those municipalities that have yet to adopt changes to their official plans and/or zoning by-laws to reflect the Planning Act requirements, to seek an understanding of when the changes will be made and to provide guidance as needed. I have instructed them to seek commitments to complete this work by March 31, 2017.

4. Propose a regulation under the Planning Act setting out standards and/or limitations on official plan policies and/or zoning standards which would take precedence over existing policies/standards which are deemed to be not in keeping with the permissive spirit and intent of the legislation as follows:

o Only a maximum of up to one parking spot per second unit could be required and tandem parking would be permitted;

o Second units could not be subject to any provision which requires the primary or second unit be occupied by any person (e.g. a by-law could not require the primary unit to be inhabited by the owner in order for a second unit to be permitted); and

o Second units would be permitted in primary dwellings and accessory buildings regardless of date of construction of the primary or the second unit.

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5. Publish an information backgrounder setting out best practices on second units, along with promoting guidance material and web content developed by the Landlord Self Help Centre.

While some of the above steps may seem strong, these province-wide legislative requirements for second units have been in place for some time. Since their enactment, the need for affordable housing choices for all Ontarians has increased.

The benefits of second units are widely recognized and they form a substantial and increasing part of the province's affordable housing supply. Since becoming Minister in June, I have crossed the province listening to municipal leaders, housing experts and advocates. In the formal and informal discussions, the need for secondary suites to be part of a healthy municipal housing "mix" became more obvious. I have instructed ministry staff to provide as much information and advice as possible to assist municipalities in moving forward with this important work.

I look forward to all municipalities in Ontario embracing a permissive second unit policy and zoning framework to help house their residents.

Thank you in advance for your help as we work together in partnership to achieve our shared goal of creating more affordable housing in our communities.

[Emphasis Added]

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ATTACHMENT “B” – PLANNING ACT PROVISIONS

Planning Act, R.S.O. 1990, c. P.13, as amended

Official Plan - Second Unit Policies

16. (3) Without limiting what an official plan is required to or may contain under subsection (1) or (2), an official plan shall contain policies that authorize the use of a second residential unit by authorizing,

(a) the use of two residential units in a detached house, semi-detached house or rowhouse if no building or structure ancillary to the detached house, semi-detached house or rowhouse contains a residential unit; and

(b) the use of a residential unit in a building or structure ancillary to a detached house, semi-detached house or rowhouse if the detached house, semi-detached house or rowhouse contains a single residential unit. 2011, c. 6, Sched. 2, s. 2.

Note: On a day to be named by proclamation of the Lieutenant Governor, subsection 16 (3) of the Act is amended by striking out “Without limiting what an official plan is required to or may contain under subsection (1) or (2)” at the beginning of the portion before clause (a). (See: 2016, c. 25, Sched. 4, s. 1 (1))

No appeal re second unit policies 17. (24.1) Despite subsection (24), there is no appeal in respect of the policies described in subsection 16 (3), including, for greater certainty, any requirements or standards that are part of such policies. 2011, c. 6, Sched. 2, s. 3 (1).

Exception re Minister (24.1.1) Subsection (24.1) does not apply to an appeal by the Minister. 2016, c. 25, Sched. 4, s. 2 (1).

No appeal re second unit policies 17. (36.1) Despite subsection (36), there is no appeal in respect of the policies described in subsection 16 (3), including, for greater certainty, any requirements or standards that are part of such policies. 2011, c. 6, Sched. 2, s. 3 (2).

Exception re Minister (36.1.1) Subsection (36.1) does not apply to an appeal by the Minister. 2016, c. 25, Sched. 4, s. 2 (3).

Official Plan – Private Amendment Applications - Second Unit Policies

Appeals restricted re certain amendments 22. (7.1) Despite subsection (7) and subsections 17 (36) and (40), there is no appeal in respect of,

(a) a refusal or failure to adopt an amendment described in subsection (7.2); or

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(b) a refusal or failure to approve an amendment described in subsection (7.2). 2006, c. 23, s. 11 (6).

Application of subs. (7.1) (7.2) Subsection (7.1) applies in respect of amendments requested under subsection (1) or (2) that propose to,

(a) alter all or any part of the boundary of an area of settlement in a municipality;

(b) establish a new area of settlement in a municipality; or

(c) amend or revoke the policies described in subsection 16 (3), including, for greater certainty, any requirements or standards that are part of such policies. 2006, c. 23, s. 11 (6); 2011, c. 6, Sched. 2, s. 4.

Zoning By-Laws - Second Unit Policies

No appeal re second unit policies 34. (19.1) Despite subsection (19), there is no appeal in respect of the parts of a by-law that give effect to policies described in subsection 16 (3), including, for greater certainty, no appeal in respect of any requirement or standard relating to such policies. 2016, c. 25, Sched. 4, s. 3 (3).

Exception re Minister (19.2) Subsection (19.1) does not apply to an appeal by the Minister. 2016, c. 25, Sched. 4, s. 3 (3).

By-laws to give effect to second unit policies 35.1 (1) The council of each local municipality shall ensure that the by-laws passed under section 34 give effect to the policies described in subsection 16 (3). 2011, c. 6, Sched. 2, s. 6.

Regulations (2) The Minister may make regulations,

(a) authorizing the use of residential units referred to in subsection 16 (3);

(b) establishing requirements and standards with respect to residential units referred to in subsection 16 (3). 2011, c. 6, Sched. 2, s. 6.

Regulation applies as zoning by-law (3) A regulation under subsection (2) applies as though it is a by-law passed under section 34. 2011, c. 6, Sched. 2, s. 6.

Regulation prevails (4) A regulation under subsection (2) prevails over a by-law passed under section 34 to the extent of any inconsistency, unless the regulation provides otherwise. 2011, c. 6, Sched. 2, s. 6.

Exception (5) A regulation under subsection (2) may provide that a by-law passed under section 34 prevails over the regulation. 2011, c. 6, Sched. 2, s. 6.

Regulation may be general or particular (6) A regulation under subsection (2) may be general or particular in its application and may be restricted to those municipalities or parts of municipalities set out in the regulation. 2011, c. 6, Sched. 2, s. 6.

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ATTACHMENT “C” – SELECTED MUNICIPAL EXAMPLES

City of Vaughan

Staff Report: https://www.vaughan.ca/council/minutes_agendas/AgendaItems/CW0207_17_4.pdf

Second Units Website:

https://www.vaughan.ca/projects/policy_planning_projects/secondary_suites_policy_study/Pages/default.aspx

City of Toronto

Zoning By-Law 569-2013 Extract: http://www.toronto.ca/zoning/bylaw_amendments/ZBL_NewProvision_Chapter150_10.htm

City of Mississauga

Second Units Website: http://www.mississauga.ca/portal/residents/housingchoicessecondunits & http://mississaugalandlords.ca/2014/01/01/mississauga-landlords-licensing-and-secondary-suites/

City of Brampton

Staff Report: http://www.brampton.ca/EN/City-Hall/meetings-agendas/PDD%20Committee%202010/20170213pdc_Agenda.pdf#page=6 ; see Item 4.1

Second Units Website: http://www.brampton.ca/EN/Business/planning-development/projects-studies/Pages/SecondaryUnits.aspx

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TAB 10

Land Claims in Ontario

Kathleen Lickers Barrister and Solicitor

April 3, 2017

14TH ANNUAL

Real Estate Law Summit

Real Estate Summit: Land Claims in Ontario

Toronto, Ontario

April 3, 2017

Kathleen Lickers, Speaking Notes

Terminology:

Aboriginal: applied in the Constitution Act, 1982 to mean persons of First Nations, Metis and Inuit origin

Band: applied in the federal Indian Act to mean a body of Indians (a) for whose use and benefit in common, lands, the legal title to which is vested in Her Majesty, have been set apart before, on or after the 4th day of September 1951 (b) for whose use and benefit in common, moneys are held by Her Majesty, or (c) declared by the Governor in Council to be a band for the purposes of this Act (section 2(1) of the Indian Act)

First Nation: commonly means the same as Band

Indian: defined in the Indian Act to mean a person who is registered as an Indian or is entitled to be registered as an Indian

Indigenous: also known as first peoples descended from and identify with the original inhabitants of a region (applied in the United Nations Declaration of the Rights of Indigenous Peoples)

Reserve: defined in the Indian Act to mean (a) a tract of land, the legal title of which is vested in Her Majesty, that has been set apart by Her Majesty for the use and benefit of a band, and (b) except in subsection 18(2), section 20 to 25, 28, 36 to 38, 42, 44, 46, 48 to 51, 58, 60 and 124 of the Act.

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Insert map: There are 46 treaties covering Ontario1

What are First Nations’ land claims in Ontario?

The Supreme Court of Canada has recognized a spectrum of First Nations’ interests in land outside of reserves. These rights may arise because of:

• Treaties entered into between the Crown and a particular First Nation(s)

o Treaty obligations have not been honoured – treaty land entitlement and specific claims

o Access to off reserve lands pursuant to Treaty – treaty rights to hunt, fish, trap, harvest

• Use and occupation of land prior to contact where no treaty has been signed – Aboriginal title

A treaty is a legal agreement that sets out the rights, obligations and relationships of First Nations people and the Crown (federal and/or provincial).

The Supreme Court of Canada has similarly developed a number of treaty interpretation principles.2

Processes for resolution:

Canada has developed a policy framework and process to resolve outstanding land

claims: specific3 (treaty) and comprehensive (title).

1 www.ontario.ca /page/treaties. Ontario and Canada both provide maps to illustrate the treaty boundaries throughout the province of Ontario.

2 Justice McLachlin summarized the body of treaty interpretation principles developed by the Supreme Court of Canada in R. v. Marshall (No. 1), [1999] 3 SCC 456.

3 Justice At Last, 2007

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Ontario has similarly developed its own policy and process framework to resolve

outstanding land claims. This policy and process was most recently under examination

during the Ipperwash Inquiry.4

Of course, recourse to the courts is also an option.

There are currently 51 Ontario based specific claims filed with the INAC and 53 Ontario

claims litigation5.

How do I know if a land claim is underway?

There is no single claims registry or notation on title such that anyone can readily be

made aware that a claim has been asserted. This knowledge will only be gained by

directed research and knowing where to look.

The Department of Indigenous Affairs Canada maintains a public database wherein you

can research what claims are currently filed against the federal crown. Where the claim

has not been resolved through the federal claims processes, the database will identify

those claims in litigation.

Of the 51 specific claims filed against the federal Crown, many involve unlawful

flooding, expropriation, mismanagement of funds, outstanding treaty land entitlement

and unlawful surrenders.

Similarly, the Government of Ontario provides a public listing of those land claims that

have been accepted for negotiation. An examination of these claims reveals that many

negotiations involve fulfilling the outstanding treaty obligation to provide land. Others

involve negotiating compensation for unlawful flooding; unauthorized uses of reserve

land (eg. highway right of way).6

4 Final Report of the Ipperwash Inquiry, 2007, The Honourable Sidney B. Linden, Commissioner

5 www.aadnc-aandc.gc.ca/eng/1100100030294/1100100030295 of specific claims in Canada.

6 www.ontario.ca/page/current-land-claims land claims.

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Neither process identifies (potential) claims that have not yet been filed. Counsel would

be wise to proactively search these public listings to at least be aware of the claims

being advanced by First Nations within their area.

Title Insurance in Ontario:

Standard title insurance policies (while not a requirement in Ontario) contain an

exemption from claims that arise by reason of First Nations land claims. Practitioners

should be aware of this to advise their clients accordingly.7

Land may be included in settlement but neither Ontario nor Canada expropriate land to settle land claims

Both Ontario and Canada do not expropriate lands in settling a land claim. Land may be

included in the settlement agreement but on a willing seller, willing buyer basis:

Mohawks of the Bay of Quinte v. Canada (Indian Affairs and Northern Development)8

Courts will not displace third parties: Chippewas of Sarnia v. Canada (AG)9

Justice Linden explained (non-expropriation) stating,

“[I]t is not difficult to understand the political rationale for this part of the land

claims process. It would be difficult to find majority acceptance for the claims

policy without assurances that non-Aboriginal communities and interests have

nothing to fear from the settlement of land claims. However, it is important to

recognize that, from the perspective of First Nations, according this privilege to

non-Aboriginal property and economic interests is difficult to accept. This is

especially so when the private property or commercial interest protected by the

7 Financial Services Commission of Ontario: www.fsco.gov.on.ca

8 2013 FC 669 (CanLII)

9 195 D.L.R. (4th) 135. Leave to the Supreme Court of Canada was denied.

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policy is on land proven to have been taken from or denied to a First Nation

illegally.”10

Justice Linden recommended that the province make this part of Ontario’s claims policy

and the rationale for it much more widely known. Saying “[N]on-Aboriginal people tend

to see the result of land claims in terms of Aboriginal people gaining land at their

expense. Acknowledging that the lands claims policy aims to protect non-Aboriginal

property and interests even when it means that Aboriginal people will be unable to

recover lands that are rightfully theirs, might serve to correct this false perception. At

the same time, Ontario should continue to emphasize in its public consultations the

ways in which land claim settlements can generate benefits locally and contribute to the

general economic progress of the province. This approach will help to foster

understanding that treaty relationships contribute to the wellbeing of everyone in

Ontario.”11

What can we learn from previous experience in Ontario?

In his 2007 Final Report into the Ipperwash Inquiry, Justice Linden, Commissioner said:

“The objective of resolving treaty and land claims must be much more than

simply to settle legal dispute. The aim must be to re-establish relationships that

embody the commitment to mutual respect and mutual benefit that was the

original foundation for the Indian nations and the Crown when they made treaties

with each other.

I suspect that man people in Ontario see the settlement of land claims as a

financial issue: ”How much do we have to pay to settle the Indian problem?”

Approached from that attitude, the claims process in Ontario will continue to

generate frustration and anger rather than forming the basis of a constructive and

mutually beneficial relationship. Instead of viewing claims settlements as once-

and-for-all payoffs that end the treaty relationship, we should see them as new

10 Ibid., p. 94

11 Ibid., p. 94

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beginnings to ongoing relationships of peace and friendship. The negotiating

process itself can contribute to such a relationship, but not if it is conducted in a

combative, adversarial style, pitting “our historians against your historians” or

“our lawyers against yours lawyers.…

… where land and access to resources are at issue, the substance of claims

settlements should be forward – looking. Government negotiators should be

concerned not with minimizing what First Nations will recover, but with restoring a

stronger economic base to their communities. The Ontario government

submission recognized the economic development objective of claims

settlements, which I find encouraging. Developments in fostering co-

management and sharing of resources, a major part of the new approach to

Aboriginal Affairs released by the Government of Ontario, should link to and

nourish the economic aspect of claim settlements.”12

Consideration for Non-Aboriginal Interests

Justice Linden further described the consideration of non-Aboriginal interests in claims

negotiations when he said:

“One aspect of the existing Ontario process that is working well is the attention to

ensuring that non-Aboriginal communities and interests which may be affected by the

settlement of a land claim are kept informed of the claim and that their concerns are

considered during the negotiation. A variety of third-party interests may have concerns

about a given claim. More often than not, the Ontario process deals with land claims

that go beyond monetary compensation to call for some adjustment of reserve

boundaries or that raise other land issues. Municipalities will be concerned about the

implications of additions to reserve where municipal services, infrastructure and the

municipal tax base are involved. Businesses involved in extracting natural resources in

the area of the claim will be concerned about the possible impact on their investments

and revenues. Land developers will be concerned about the security of their

investments and property rights. Recreational users of lands and waters in the area will

12 Report of the Ipperwash Inquiry, Volume 2, Policy Analysis, pp. 85-86.

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be concerned about possible restrictions on their activities. Non-aboriginal residents in

the area will want reassurance that their properties will not be expropriated and that

their convenient access to their properties will not be impaired. These are reasonable

and settled expectations that the provincial clams process properly acknowledges.

When land claims are asserted in the urban areas of Southern Ontario, these concerns

are likely to be especially acute. Caledonia is the most recent example.”13

The provincial government keeps these third parties informed and provides

opportunities to voice concerns through public consultation processes; each negotiation

process is different but the opportunity for third parties will be created.

Before I highlight recent examples in Ontario let me preface my remarks by once again

citing Justice Linden, when addressing the question of whether Aboriginal occupations

and protests achieve their objectives, he said:

“…most Aboriginal occupations and protests have not resulted in the transfer of

lands to the protesting community. However, it is too simplistic to evaluate the

success or failure of an Aboriginal occupation on the sole basis of whether land

was transferred. In many cases, if not most, the protesters were also seeking to

prevent something from happening to the land, including resource development

generally or development that excludes Aboriginal peoples specifically.”14

Other Resources:

Justice at Last, Specific Claims Policy, Federal

Comprehensive Claims Policy, Federal

Additions to Reserve Policy, Federal

Federation of Canadian Municipalities (tool kit) 13 Ibid., pp. 92-93

14 Ibid., p. 25

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Report of the Ipperwash Inquiry, 2007

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TAB 11

Top 10 Things Real Estate Practitioners Need to Know About the

Forfeited Corporate Property Act, 2015

Brenda Linington, Senior Counsel Marta Zoladek, Legal Counsel

Ministry of the Attorney General, Civil Law Division, Ministries of Energy / Economic Development and Growth /Research, Innovation & Science Infrastructure / Accessibility

April 3, 2017

14TH ANNUAL

Real Estate Law Summit

1

Top 10 things Real Estate Practitioners Need to Know about the Forfeited Corporate Property Act, 2015

LSUC Real Estate Summit April 3, 2017

Presented by Brenda Linington, Senior Counsel and Marta Zoladek, Counsel Ministry of the Attorney General, Civil Law Division,

Ministries of Energy / Economic Development and Growth / Research, Innovation and Science / Infrastructure / Accessibility/ Small Business

New Legislation: policy objectives and timeline

• The Forfeited Corporate Property Act, 2015 (FCPA) was part of Bill 144, Budget Measures Act, 2015 (Schedules 4 and 7) introduced on November 18, 2015 Applies to property that forfeits or escheats to the Crown when a company dissolves Escheats Act, 2015 also introduced

• Received Royal Assent on December 10, 2015 and came into force on December 10, 2016 Except several changes to the companies statutes that will come into force on proclamation

• The policy objectives of the legislative framework included: Reducing the number of properties that forfeit to the Crown Returning forfeited corporate properties to productive use Increasing corporate accountability for costs associated with forfeited corporate properties;

and Providing greater transparency and certainty in the management and disposing of forfeited

corporate properties

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2

1. Application of FCPA / change in jurisdiction within government for forfeited corporate property

• Minister of Infrastructure (MOI) administers FCPA and deals with forfeited corporate real property FCPA does not apply to

o mining lands/certain mining rights o provincial parks, conservation reserves, or other public lands (unpatented crown

lands)

• Public Guardian and Trustee (PGT) deals with forfeited corporate personal property • Notice provisions updated to reflect change in jurisdiction within government

Corporate statutes require notice to MOI and PGT when commencing a proceeding against a corporation after its dissolution but only to MOI if relates to certain matters affecting forfeited corporate real property

Municipalities must provide notice to MOI in the tax sale of forfeited corporate real property and MOI and the PGT regarding payments of proceeds into court

• Residue of mortgage proceeds from sale of forfeited corporate property should be paid to Crown

and not to the dissolved corporation that previously owned the land

2. Will title to forfeited corporate property reflect forfeiture

• Crown becomes owner of forfeited corporate property upon the dissolution of a corporation as an operation of law but title does not change Only way to know is to check the status of the corporation

• Crown may make application to the Land Registrar to be shown on title as the owner This is not required as Crown is already the owner due to forfeiture or escheat This does not affect status of lands as forfeited corporate property

• Under FCPA Minster can register notice on title to forfeited corporation property indicating Crown intends to use it for Crown purposes Part of government portfolio and no longer forfeited corporate property

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3

3. New limits on availability of property after dissolution

• Administratively dissolved corporations now have three years after dissolution/coming into force of FCPA to revive if they want to have their property automatically returned to them

• New limits after which property is no longer available to satisfy a judgment or order or be sold

in a power of sale If encumbrances have been cancelled by order of Minister of Infrastructure If Crown has transferred the property If MOI has registered notice of Crown use of property

4. Keeping track of real property

• Corporations are required to keep track of their registered ownership interests in land

Applies to ownership interests in real property - fee simple or co-ownership interests only

Requirement phased in Will assist corporations in ensuring land is disposed of before voluntarily dissolving

5. Mortgage discharges / statements for registration / corporate searches

• Requests for mortgage discharges, where the mortgage is statute barred or paid in full, should be made under s. 102 of the Land Titles Act to the Land Registrar

• MOI and the Ministry of Consumer and Government Services are working on electronic

statements confirming that corporate searches have been undertaken Will be required for registration of documents on title

• Corporate searches should be done every time One of the parties to a transaction is a corporation The registered owner of land affected by a transaction is a corporation

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6. Remedies: relief from forfeiture / vesting orders

• Those with a legal or moral claim to forfeited corporate property may apply to the Minister of Infrastructure for relief from forfeiture under the FCPA

• MOI may take the position that vesting orders are not available against forfeited corporate

property as remedies against Crown property are limited by the Proceedings Against the Crown Act

7. Minister’s powers: cancellation of encumbrances

• Minister of Infrastructure may order cancellation of encumbrances against forfeited corporate property that were valid and enforceable before it forfeited Must provide notice to those who may have an interest There is an opportunity to bring a claim or act on an interest Encumbrances will be removed from title Generally a municipality may not commence tax sale once encumbrances cancelled

• Minister of Infrastructure may cancel interests created after property forfeits, without notice Interests will be removed from title

8. Minister’s powers: disposition and transfers by order

• Minister of Infrastructure can dispose of forfeited corporate property At any price and subject to any terms and conditions In any manner Forfeited charitable corporate property must be returned to a similar charity Other co-owners registered on title may apply to purchase a forfeited co-ownership

interest

• Minister of Infrastructure can transfer forfeited corporate property by order to a municipality, condominium corporation, conservation authority, or abutting property owner Registration of order on title completes transfer

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9. Special Lien

• Minister of Infrastructure can determine Crown costs/expenses for forfeited corporate property

• Costs constitute a special lien against the property which is enforceable if someone other than

the Crown sells the property or if the corporation revives Does not have to be registered on title to be enforceable

• Lien has priority, except for trusts created pursuant to federal legislation

10. Collection of information

• Minister of Infrastructure may collect information, including personal information, relating to forfeited corporate property, from any person or entity

• Failure to comply is an offence under the FCPA • Exception for information subject to solicitor-client privilege, litigation privilege or settlement

privilege

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6

Appendix

Background and Summary of Legislative Changes

Forfeiture: context

• The property of a corporation forfeits to the Provincial Crown when the owner dissolves owning property under one of these Acts: The Business Corporations Act (BCA), ss. 244(1) The Corporations Act (CA), ss. 322(1) The Co-operative Corporations Act (CCA), s. 170 The Credit Unions and Caisses Populaires Act, 1994, s. 303

• The unproclaimed Not-for-Profit Corporations Act, 2010 (NFPCA) includes a forfeiture provision in ss. 173(1)

• Some statutes have no forfeiture provision:

The Condominium Act, 1998 which has provisions dealing with the assets of a condominium if it ceases to be governed by the Act

• Property may vest in the Federal Crown when a corporation dissolves under these Acts:

The Canada Business Corporations Act The Canada Not-for-profit Corporations Act, 2009 The Canada Cooperatives Act

Highlights of the FCPA

• Provides new powers and authorities to Minister of Infrastructure: Cancel by order interests in forfeited corporate property (mortgages or liens) created after

forfeiture (s.11) Appoint a receiver manager to manage forfeited corporate property (s.13) Access forfeited corporate property and require occupiers to vacate (s.15 to 17) Cancel encumbrances on forfeited corporate property created prior to forfeiture with

notice to encumbrance holders (s.18 to 23) Provide notice on title of the Crown’s intention to use forfeited corporate real property

(s.24) Transfer forfeited corporate property by order or dispose of it including by transferring

charitable property to another charity and transferring an interest in property to another co-owner (s.25 to 29)

Collect, use and disclose information related to forfeited corporate property (s.35 to 38)

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7

More Highlights of the FCPA

• Provides for the recovery of government costs for the management of forfeited corporate property as determined by the Minister of Infrastructure: Collection from proceeds of sale where forfeited corporate property sold by Minister of

Infrastructure (s.30) Creation of a lien against the forfeited corporate property that Crown may enforce (s.32) Application to court by Crown for an order against former officers and directors for costs

(s.31) Collection of fees set out in a regulation that may be made by the LGIC (s. 30 to 34)

• Exempts the Minister of Infrastructure from any obligations related to forfeited corporate

property until the Crown registers a notice that it intends to use forfeited corporate real property or begins to use personal property for Crown purposes but does not affect the issuing of regulatory orders against the Minister of Infrastructure (s. 4)

• Limits liability related to Crown ownership and management of forfeited corporate property by

providing that no claims can be made against: The Crown, the Minister of Infrastructure or servants or agents related to acts of third

parties related to forfeited corporate property; and The Minister of Infrastructure or servants or agents for actions taken or not taken related to

forfeited corporate property

Amendments to Companies Statutes Related to FCPA

• Amendments to corporate statutes: CA, NFPCA and BCA certain provisions related to cooperative corporations are in FCPA as CCA was not

amended (FCPA s. 39)

• Require corporations to keep records of their land ownership in Ontario A corporation in existence on December 10, 2016 must comply by December 10, 2018 with

respect to land owned on or after December 10, 2016 Any corporation incorporated after December 10, 2016 must comply by December 10,

2017 or within one year of incorporation, whichever is later with respect to land owned since incorporation

Record keeping requirements are in CA ss. 300, 300.1, 301, 303, 304, 305; NFPCA ss. 92, 92.1, 93, 95; BCA ss. 139, 140, 140.1,144

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More Amendments to Companies Statutes

• Return forfeited corporate property to administratively dissolved corporations only if revived within 3 years of dissolution or the coming into force of the FCPA, 2015, whichever is later (CA ss. 317(15) and (16), NFPCA ss. 170 (3.1), and BCA ss. 241(10) and (11))

• Forfeited corporate property is not available to satisfy a judgment or order or to be sold in a

power of sale proceeding after the earlier of:

The day the Crown disposes of the property The effective date of an order of the Minister of Infrastructure cancelling any

encumbrances (e.g. mortgages, liens) from title to the property, or A notice is registered indicating that the government intends to use the land for a

government purpose or in the case of forfeited corporate personal property the Crown begins to use the property for government purposes

More Amendments to Companies Statutes

• Change certain procedures related to corporate dissolution and revival:

Minister responsible for the CA (rather than the LGIC) can cancel the letters patent of a corporation where it is in default with Corporations Information Act requirements (CA s. 317(1))

Authority for the Minister of Infrastructure, the PGT or the Minister of Northern Development and Mines to request the revival of a corporation where in the public interest (CA ss. 317(10); NFPCA ss. 170(2.1 but does not include MNDM); BCA ss. 241(5))

• Additional notice requirements when a proceeding is commenced against a dissolved corporation

include:

Serve MOI and the PGT with a notice setting out required details and document that commences proceeding

Notice is not required to be delivered to the PGT where o the proceeding is a power of sale or foreclosure o an application under the Land Titles Act, or o a proceeding claiming solely an interest in land that is forfeited corporate property

CA ss. 318(4) and (6); NFPCA s. 171(3) and (4); BCA s. 242 (3), (4) and (5)

• A corporation seeking to voluntarily dissolve must confirm that it is no longer a registered owner of land in Ontario (BCA ss. 238(1)(d.1); CA ss. 319 (1) (c.1); NFPCA ss.167(1)(d.1))

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TAB 12

Abandonment of Easements and Other Termination Concepts

Craig Carter, C.S., LSM Fasken Martineau DuMoulin LLP

April 3, 2017

14TH ANNUAL Real Estate Law Summit

900030.00173/95561222.1

ABANDONMENT OF EASEMENTS AND OTHER TERMINATION CONCEPTS

Craig Carter LSM Fasken Martineau LLP

April 3, 2017

A. Introduction

In order to understand the law relating to abandonment, termination, extinguishment and substitution of easements, it is necessary to distinguish the various ways that easements can arise and consider the law in relation t o each of these d ifferent kinds o f eas ements. Different r ules ap ply to different kinds of easements. For the purposes of this paper, we will consider express easements, prescriptive easements, implied easements and equitable easements.

Abandonment is when a party by their behaviour exhibits the intent to give up the easement. This applies to all four kinds of easements. Termination is when there is a specific contractual right to terminate the easement or by its express terms the easement comes to an end. This could also arise where based on contract interpretation the purpose or reason the easement was granted ends. Termination applies only to express easements and implied easements. In this context, it does not apply to prescriptive or equitable easements. Extinguishment is when by operation of law an easement comes to an end. This applies to all four kinds of easements. Substitution is the right to substitute one easement for another or the right to the move the easement to a different location resulting in the original easement coming to an end. This applies only to express or implied easements although in theory it could also apply to equitable easements.

Before embarking on a review of each kind of easement in the context of abandonment, termination, extinguishment and substitution, we will summarize the laws of each concept and the rules affecting them. At the end of this paper we will discuss a recent trial court decision on abandonment which is under appeal and if not overturned or at least clarified will impact on the law of abandonment and substitution.Effectively, the trial judge allowed a new easement to be substituted for an old easement, in the absence of a contractual term and in fact contrary to the conduct of the parties on the baisi that the old easement was abandoned and therefore the court had to impose a new easement to assist the parties fulfil their intention, against the wishes of the dominant tenement.

One final comment. Easement law has a strong historical basis. Rooted in Victorian England and the new industrial age, easement law developed at a time when drafters of easement rights used rudimentary language. As such the law stepped in and created rules where the parties had failed to do so. Because the courts were imposing their concepts of fairness in the absence of contractual terms, the courts were not surprisingly reluctant to provide expansive rights. The minimum required to create a workable real estate system of shared uses was imposed. Old law is invariable restricted law. Over the last hundred years, the courts have often softened the strict rules governing easements in order to create a more practical approach where the parties have failed to clearly define their rights. The recent case of Weidelich v. De Koning1 is a good example. In Weidelich the Court of Appeal effectively reduced the boundaries of an

1 Weidelich v. De Koning 2014 ONCA 736

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900030.00173/95561222.1

easement where the dominant owners could not prove that their rights to access were substantially interferered with. As well, in the MacIssac v. Salo2 case, the Court of Appeal again rectified easement boundaries. However, this liberalizing trend was rejected in Toronto-Dominion Bank v. Wise3 where the Ontario Court of Appeal returned to strict necessity in an easement of necessity throwing the softening law back to its Victorian roots.

B. Abandonment

An e xpress, i mplied, pr escriptive or e quitable e asement c an b e ended b y e xpress or i mplied release, t erminated by mutual c onsent, extinguished by ope ration of l aw a nd b y unilateral abandonment. As well, an easement can be abandoned by acquiescence or estoppel. The servient owner has no pow er to unilaterally terminate an easement.4 An easement which is suspended, revives o nce t he cau se o f t he s uspension ceas es.5 A n e asement w hich i s e xtinguished, abandoned or terminated cannot be revived.6

An easement being an interest in land cannot be destroyed as a matter of law. If the means to use the easement i s destroyed by an Act o f God such as a f lood, forest fire, earthquake or violent storm which washes out or destroys all or part of the servient lands so that the easement can no longer be used, this does not result in the easement being extinguished or destroyed unless the destruction i s pe rmanent. If t he s ervient l ands are r estored, t he e asement i s r estored a nd t he dominant owner has the right to go on the servient lands to restore the servient lands in order to restore the easement. There is no abandonment by Act of God.

In Crossley and Sons vs. Lightowler7 the defendant owned dye works on the River Hebble and for 20 years prior to 1839 discharged polluted water into the river. In 1840 the dye works were shut down and the building removed. The prescriptive right to pollute was abandoned.

Non us e o f a n e asement i s not c onclusive o f a bandonment but ha s to be a ccompanied b y evidence of an intention to abandon.8 T he onus is on t he party alleging abandonment to show abandonment on a balance of probability.9

In Cook v. Mayor and Corporation of Bath10 the plaintiff owned a house which backed onto a public and private lane. The house had a back door giving access to the lane. In 1828 the back

2 MacIssac v. Salo 2013 ONCA 98 3 Toronto-Dominion Bank v. Wise 2016 ONCA 629 4 The Canadian Law Time October 1900 “The Extinguishment of Easements” Frank Anglin page 825. 5 Thomas vs. Thomas (1835) 2 C.M. & R. 34 see also Canadian Law Times October 1900 “The Extinguishment of

Easements” Frank Anglin. 6 Walley vs. Thompson I B. & P. 371; Aynsley vs. Glover supra. 7 Crossley and Sons vs. Lightowler supra. 8 Arduini vs. Gasparin 88 B .C.L.R. ( 2d) 27; C loss vs. Ferguson supra; Stevens vs. Levy (1978) 4 R .P.R. 28 2

(N.S.S.C.) Re Kileel vs. Kingswood Realty Ltd (1979) 108 D.L.R. (3d) 562 (N.B.C.A.), Liscombe v. Maughan (1928) 62 O .L.R. 328 ( Ont. C.A.). S ee a lso Bustrode vs. Lambert supra where the ea sement was never used because of a r estrictive gate but once the gate was removed could be used. But see Re Stone (1982) 38 N.B.R. (2d) 492 (N.B.Q.B.) where non-use itself was sufficient to abandon.

9 Laker vs. Jackson (2001) 44 R.P.R. (3d) 155 (Ont. S.C.). See also Jakmar Developments Ltd. vs. Smith (1973) 1 O.R. (2d), 87 (Ont. H.C.) and Liscombe vs. Maughan supra.

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900030.00173/95561222.1

door was bricked up. In 1862 the door was opened again. The defendant started to build a house which w ould h ave bl ocked t he easement but t he c ourt e njoined t he c onstruction be cause t he easement had not been abandoned by the dominant owner by non-use. In one case, non-use for over a hundred years was not sufficient to show abandonment. However, non-use is a necessary requirement f or a bandonment. If t here i s s ome us e, i t w ill be di ffuicult t o s how a bandonment unless such use can be properly categorized as a trespass or mistake or is pursuant to some other relationship s uch as a lease, l icense o r pr ofit or s ome ki nd of s ervient ow ner pe rmission including a growing legal concept good neighborliness.

It i s di fficult to show abandonment of an express easement.11 In order to show abandonment, there must be circumstances from which a court can presume an impled release of the easement by the dominant owner.12 Non-use is insufficient to presume a release.13 An intention not to use a right of way is different from an intention to abandon a right of way.14

In Kileel vs. Kingswood Realty Ltd15 absent adverse possession, renunciation or some other way recognized by law, discontinued use is insufficient to prove abandonment. T he spring that the applicant had a right to withdraw water from had not been used in 18 years, was polluted, had low w ater f low a nd w ould r equire t he i nstallation of e xpensive pi ping t o r each t he dom inant lands, and would require approval of the Province to lay pipes under the road lying between the servient a nd t he dom inant l ands. I n a ddition, t he dom inant l ands w ere s erviced b y m unicipal water. Abandonment was not made out because there was no evidence of release.

Where the dominant and servient owner had a mutual right of way and the dominant owner built a garage over the right of way, fenced the right of way into his property and stopped using the right of way as a driveway, the court held abandoned.16

In James vs. Stevenson17, the court rejected a cl aim by the servient owner that an easement was abandoned based on non -use for at least 36 years because the dominant owner did not need or want to use the easement during such period.18 Use by the servient owner must be inconsistent with t he eas ement t o a rgue ab andonment b y a cquiescence. A s ignificant f actor r egarding

10 Cook vs. Mayor and Corporation of Bath (1868) L.R. 6 Eq. 177. 11 See also Closs vs. Ferguson supra and James vs. Stevenson [1893] A.C. 162; Nantais v. Panzer supra; Pharand

vs. Jean-Louis [1952] O.R. 665 (Ont. C.A.); Baker vs. Harris (1929) 64 O.L.R. 513 (Ont. C.A.). 12 Liscombe vs. Maughan supra; Arduini vs. Gasparin 88 B.C.L.R. (2d) 27. 13 Baker vs. Harris supra; 455645 Ontario Ltd. vs. Rousseau supra. 14 James v. Stevenson [1893] A.C. 162 the court stated:

“abandonment was a qu estion of i ntention ba sed on a ll t he f acts. A n i ntention not t o u se a r ight of way is different from an intention to abandon a right of way and see Hayden v. Warden (1984) 33 R.P.R. 246 where the court concluded that the dominant owner asserted its right to use the right of way in a notorious and open way and there never was an overt act to abandon the right of way.”

15 Kileel vs. Kingswood Realty Ltd. 108 D.L.R. (3d) 562 16 Re Stone (1982) 38 N.B.R. (2d) 492 (N.B.Q.B.) 17 James vs. Stevenson supra. 18 The court stated that abandonment was a question of intention based on all the facts. An intention not to use a

right of way is different from an intention to abandon a right of way.

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abandonment is whether the dominant owner actually uses or asserts a desire to use the right of way.

Where the dominant owner has a prescriptive right to receive water into a pond on his lands, and constructs a ne w pond t o r eceive t he w ater a nd no l onger us es t he ol d pond w hich be comes unusable and overgrown, he does not abandon his right to receive water into the old pond despite its non use and being overgrown.19

Where the dominant owner has an easement to reach a railway crossing on her neighbor’s lands, and c onstucts a crossing on h er ow n l ands a nd bl ocks t he e asements with boul ders, i mplied release can be presumed.20

Adverse possession of a right of way by the servient owner by constructing a shed which blocks use of a right of way and deprives the dominant owner of his legal right to use the easement is not sufficient to terminate the easement a result of abandonment.21

Where t he dominant owner s ubdivided his parcel a nd c onveyed t he s ervient l ands r eserving a right o f w ay and t he s ervient a nd dom inant l ands w ere t hereafter conveyed s everal t imes, but when the dominant l ands were converted t he e asement r eference i n t he P IN w as “s ubject t o” instead o f “t ogether w ith” and w hen t he s ervient l ands w ere al so co nverted t he P IN m ade no reference to an easement, the court held no abandonment even where following conversion the servient l ands were thereafter conveyed without any reference to the easement. There was no use made by the dominant owner of the easement. The servient owner argued the easement had been abandoned because of non-use, because a board fence had been constructed blocking the easement lands f rom t he dom inant l ands, be casue t he dom inant ow ner ha d t ried t o bu y t he easement strip to add to his side yard and because the servient owner had applied for a severance to create a building lot and notice had gone to the dominant owner who did not object or raise his easement. The court rejected each of these indices of abandonment. The court citing 2108133 Ontario Inc. vs . Kabcan Foods Ltd. [2009] O.J. No. 951, s et out the test for determining if an express eas ement i s ab andoned.22 T he ba sic r ule i s t hat non -user i s i nsufficient, you ha ve t o

19 In Hale vs. Oldroyd supra the non use was explained because it was not necessary to use the old pond while the

new ponds were being used, but when the new ponds could not be used, the dominant owner could take up his old easement. T he court uses language that the new ponds were substituted for the old use and therfore the old use was not abandoned but this seems wrong. See also Darling vs. Clue (1864) 4 F. & F. 329.

20 Phinny v. Macaulay [2008] O.J. No. 3629, 170 A.C.W.S. (3d) 661, 75 R.P.R. (4th) 66 21 Mykel vs. Doyle (1880) 45 U .C.Q.B. 65; 455645 Ontario Ltd vs. Rousseau supra and Ihde vs. Starr (1909) 19

O.L.R. 471 a ffirmed (1910) 21 O.L.R. 40 7 (Ont. C.A.) although the decision in Mykel has been cr itized. See also Nantais vs. Pazner supra.

22 McCormack vs. Ciampanelli (2012) ONSC 1702 where the court stated: [29] An easement may be extinguished in one of three ways: by express release, implied release, or operation of law. An implied release may occur through abandonment or prescription. [30] There was no suggestion that there had been an express release by the dominant land owners. Further there was no a rgument made t hat t he r ight o f way ha d b een e xtinguished b y ope ration of l aw. R ather, t he Respondent’s position focused on an implied release based on abandonment by the dominant land owners. [31] The law of abandonment of an express right of way has been summarized by Aitken J. in 2108133 Ontario Inc. v. Kabcan Foods Ltd., [2009] O.J. No. 951 (S.C.), as follows:

8 The law regarding abandonment of an express right-of-way is well settled. The following principles apply:

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show a n i ntention t o a bandon. H ere, t he f ailure of t he t itle t o r eflect t he e asement w as not evidence of abandonment but was an intervening error by Land Titles. There was no indication that t he dom inant ow ner w as a ware he ha d a n e asement a nd m ade a n i nformed de cision t o abandon it when he constructed the fence, tried to buy the servient lands and did not object to the neighbor’s severance. Because of the title error, the dominant owner did not knowingly, with full appreciation of his rights, intend to abandon his easement. The onus to prove abandonment is on the servient owner.

In TDL Group Ltd. vs. Harvey23 an easement granted to access a g arage was abandoned when the garage was torn down and replaced with an apartment building and when the easement had not been used for thirty years.

▪ Abandonment is a question of fact. (455645 Ontario Ltd. v Rousseau (1981), 19 R .P.R. 1 ( Ont. H.C.) a t para. 25). ▪ The onus of establishing the loss or extinction of an express right-of-way by abandonment or non-user rests upon t he pa rty a sserting i t. (Liscombc v . M aughan ( 1929), 62 O .L.R. 328 ( S.C. App. D iv.) a t pa ra. 28; 455645 Ontario Ltd. v. Rousseau, supra, at para. 31; Peters v. Palmer (2000), 34 R.P.R. (3d) 143 (Ont. S.C.J.) at para. 21). ▪ The only way in which a right of way can be extinguished by the act of the parties interested is by release, actual or presumed. (Liscombe v. Maughan, supra, at para. 28). ▪ In t he ab sence o f a n act ual r elease, n on-user i s es sential t o ab andonment. (455645 O ntario L td. v . Rousseau, supra, at para. 27; Peters v. Palmer, supra para. 22). ▪ Non-user and nothing more, however, is not sufficient to permit a conclusion of abandonment. (455645 Ontario Ltd. v. Rousseau, supra, at para. 27). ▪ When a right-of-way has its origin in an express grant, it is not lost by mere non-user; there must be some intention to abandon this property right. (Closs v Ferguson (1923) 24 O.W.N. 199 (Div Ct); Peters v. Palmer, supra, at p ara. 2 1). The i ntention to ab andon means t hat t he p erson en titled t o t he r ight-of-way ha s, knowingly and with full appreciation of his rights, determined to abandon it. (Liscombe v. Maughan, supra; Peters v. Palmer, supra). ▪ In s ome ci rcumstances, e vidence o f non-user may l ead t o a finding o f acq uiescence o n t he p art o f t he holder of title to the right of way. (455645 Ontario Ltd. v. Rousseau, supra, at para. 29). Non-user will not have t he ef fect o f e stablishing ab andonment unless a r elease can b e i mplied f rom s uch n on-user a nd t he surrounding circumstances. (Liscombe v. Maughan, supra, at para. 28). ▪ All o f t he e vidence b earing up on the i ssues o f non-user, acq uiescence a nd ab andonment must b e considered. ▪ Including t he e xpress r ight of way i n a r egistered co nveyance i s e vidence t hat ab andonment was n ot intended by t he owner of the d ominant tenement o r not p resumed by the o wner o f the servient tenement. (Liscombe v. Maughan, supra, at par. 32).”

[37] There was no evidence provided by the Applicants as to the historical use of the right of way. They rely on the fact that there has never been a release of the right of way and that an express grant of a right of way cannot be extinguished simply by non-use. I agree. [38] In order to abandon an express grant of a r ight of way, the person entitled to the benefit of the easement must have been aware of that entitlement and must have made an informed decision to abandon it. Given the Land Registrar’s error in incorrectly describing the property as being subject to a right of way instead of having the benefit of the right of way, the dominant land owners did not knowingly, with full appreciation of its rights, intend to abandon the right of way. [39] Further and w hile at f irst g lance, t he a ctions o f t he P arsons i n i nquiring a bout p urchasing t he Royton property might appear to support an abandonment of the right of way, it is important to note that a right of way is an easement only and must be distinguished from the fee simple in the land over which the right is exercised.”

23 TDL Group Ltd. vs. Harvey (2002) 48 R.P.R. (3d) 223 (Ont. C.A.).

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Pulling down a bui lding enjoying ancient l ights is not abandonment i f t here i s an i ntention to rebuild a nd ha ve w indows i n t he s ame l ocation r eceiving t he ancient l ights.24 T he dom inant owner’s right t o l ight w as m erely s uspended. H owever, i f no n ew w indow coincides substantially with an old window then abandonment can be presumed.25 In Garritt vs. Sharp26 the mode of use of an easement for light was altered and the easement was lost.

In Liscombe vs. Maughan27 although the easement was not used and was fenced for a l engthy time period, t he f act t hat each d eed expressly s aid “t ogether with” t he e asement ev idenced an intention not to release the easement.

The acquisition of the dominant tenement by the servient owner or the acquisition of the servient tenement b y t he dom inant ow ner c onstitutes a m erger a t l aw w hich would e xtinguish t he easement b y law. E xtinguishment b y s tatutory e nactment i ncludes an e xpropriation of t he dominant or s ervient l ands, or t he passing of a s tatute which precludes o r prohibits use of t he easement or use of the dominant lands for the purposes for which the easement was granted.

Where the defendant had a prescriptive easement across the plaintiff’s backyard for access from a public lane for deliveries and customer parking at the rear of the defendant’s property and for a period of t ime t he de fendant a lso ha d a ccess a cross a nother ne ighbor’s yard f or a ccess t o a different street which was the main access route, this was not abandonment because there was no evidence by using a different route the defendant intended to abandon the lesser used route. The fact that an alternate route is available is not evidence of abandonment.28

In Jennings v. Redmond29 the dominant owner drained his property through an open ditch. The original ditch was filled in and a new drain was installed but the new drain did not follow exactly the path of the old ditch. The court held that the prescriptive easement to use the original ditch for dr ainage w as abandoned w hen t he di tch w as f illed i n a nd r eplaced by a completely ne w drainage s ystem. T he ol d s ystem w as a bandoned a nd no pr escriptive e asement f or the n ew system was acquired.

Even l engthy non-use w ill not cr eate abandonment where t here are ci rcumstances negating an intention t o a bandon.30 C onstruction of a lternate a ccess doe s not i n a nd of i tself c onstitute abandonment of the original right of way.31

24 Ecclesiastical Commissioners for England v. Kino [1880] L.R. 14 Ch. D. 213 (CA); Newson vs. Pender (1884)

27 Ch. D. 43. 25 Hutchinson vs. Copestake (1861) 9 C.B. (N.S.) 863. 26 Garritt vs. Sharp (1835) 3 A. & E. 325. 27 Liscombe vs. Maughan supra. 28 Trafford vs. Dowling [1988] O.J. No. 1121 (H.C.J.) 29 Jennings v. Redmond supra. 30 Arduini vs. Gasparin 88 B.C.L.R. (2d) 27; James vs. Stephenson supra; Zabolotniuk vs. Owners Strata Plan NW

1527 [1991] B.C.W.L.D. 072; 455645 Ontario Ltd. vs. Rousseau supra; Seaman vs. Vawdrey (1810) 16 Ves. 390. Cook vs. Mayor and Corporation of Bath supra; Baker vs. Harris supra.

31 Fyfe vs. James supra. No inference can be drawn from construction of the alternate access but see McCauley vs. Phinnay supra.

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Construction of a ga rage on a r ight o f way and non-objection for s ix years i s not evidence o f abandonment where the garage was not built by the servient owner for the purpose of blocking the right of way.32 C onstruction of a fence across a right of way by the servient owner which continues for 21 years does not amount to abandonment by the dominant owner because there is no evidence of intention by the dominant owner to abandon the right of way.33 However, it may be t hat t he non -use for a l engthy pe riod of t ime must be explained b y t he dominant owner i n order to avoid an argument of acquiescence.34

Statutory declarations of non us e for a lengthy period given by prior owners is not satisfactory evidence of abandonment.35 S tatutory declarations of use negative abandonment.36 References in deeds and leases being subject to the right of way was evidence that it was not abandoned 37

The court must infer from the facts, on a balance of probability that the dominant owner intended to a bandon. H owever, i f t here i s l engthy non -use, i n ci rcumstances w here i t i s r easonable t o infer abandonment, the onus shifts to the dominant owner to prove non-abandonment.

References in deeds and leases being subject to the r ight of way was ev idence that i t was not abandoned. 38 It would s eem in consistent f or a le ase o r o ther in terest in la nd r elating to th e servient l ands ev idencing t hat t he l ands ar e s ubject t o an eas ement t o b e ev idence t hat t he easement ha sn’t b een a bandoned b y t he dom inant ow ner. O ne w ould have t hought t hat t he evidence of non-abandonment must come f rom the dominant owner not the servient owner. In other words, the fact thaqt one my weakily infer that the servient owner believed the easement continued to exist should not be evidence of whether the dominant owner intended to abandon the easement or not.

Matters that can be taken into account are:

a) fences which block the easement either without protest or constructed by the dominant owner;

b) fences with gates giving access likely not evience of abandonment;

c) easement overgrown with trees;

d) placing of boulders blocking easement;

e) alternate replacement access or other use together with non-use of easement;

f) constructing permanent buildings on easement;

g) declarations by dominant that there is no easement; 32 Nantais vs. Pazner supra. 33 Pharand vs. Jean-Louis supra. 34 Pharland vs. Jean-Louis supra. 35 Jakmar Developments Ltd. v. Smith (1973), 1 O.R. (2d) 87 (Ont. H.C.). 36 Laker vs. Jackson (2001) 44 R.P.R. (3d) 155 (Ont. S.C.) 37 Closs vs. Ferguson supra; Baker vs. Harris supra. 38 Closs vs. Ferguson supra; Baker vs. Harris supra.

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h) making title together with the easement or subject to the easement;

i) non-use can be explained; and

j) acquiescence in servient owner usurping the easement.

Each circumstance is evidence but not conclusive evidence of abandonment.

If the servient owner changes its position in reliance on non -user in circumstances where it can be inferred that the dominant owner has abandoned the easement, then the servient owner can assert an estoppel against the dominant owner.39 As a g eneral rule, t ime of non-use is not the determining factor, the nature of the non-use is.40 W here by his non us e, the dominant owner encourages the servient owner to lay out money on the basis of non use, then the dominant owner will not be able to resume his former right.41

Where the dominant and servient titles continued to show the easement in all transfers, the court can infer that the servient owner would not have referenced the easement if the servient owners thought it had been abandoned. This is a rebuttable assumption and of course given the nature of electronic r egistration w here th e P IN is p repopulated w ith th e le gal d escrition in cluding easements, it is hardly conclusive that not removing an easement refence of the servient lands is conclusive evidence that the easement is not abandoned nor the inclusion of an easement in the dominant PIN conclusive evidence of an intention not to abandon. This si especially true where the evidence is not available as to what the servient or dominant owner was told by her lawyer about the title.42

Failure to show the easement in a listing agreement or marketing brochure of the dominant lands is some evidence of abandonment.

References i n deeds and l eases being subject t o t he r ight o f way was ev idence t hat i t was not abandoned 43

Acts o f t he s ervient owner consistent with abandonment b y the dominant owner a re not a lone sufficient t o e vidence a bandonment b y t he dom inant ow ner.44 T he dom inant ow ner m ust d o something e videncing a n i ntention t o a bandon. T he s ervient ow ner’s a cts c onsistent w ith abandonment will then add weight to the dominant owner’s intention to abandon.

In Shklar vs. Kwiecien45, the plaintiff had an express right of way over a lane at the rear of the property. The adjoining owner had constructed a garage over the right of way obstructing part of 39 Lovell vs. Smith (1857) 3 C.B.(N.S.) 127; Cook vs. Mayor and Corporation of. Bath supra; R. vs. Chorley

(1848) 12 Q.B. 55; Crossley vs. Lightowler supra; Liggins v Inge (1831) 7 Bing 682. 40 Regina vs. Chorley supra. 41 Bell vs. Golding (1896) 23 O.A.R. 485 (Ont. C.A.); Crossley vs. Lightowler supra; Stokoe vs. Singers (1857) 8 E.

& B. 31. 42 Peters vs. Palmer (2000) 34 R.P.R. (3d) 143 (Ont. S.C.) 43 Closs vs. Ferguson supra; Baker vs. Harris supra. 44 Stokoe vs. Singers supra. 45 Shklar vs. Kwiecien (1972) 3 O.R. 245 (H.C.)

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it. The plaintiff had also fenced part of her boundary where it accessed the easement. The court held that even though the obstruction had been in place longer than ten years, this did not give adverse pos session of t he r ight of w ay and t here w as no i ntention of t he dom inant ow ner t o abandon the easement. The defendant was ordered to remove the garage, fences and cars which blocked the right of way.

Acquiescence by the dominant owner in acts by the servient owner blocking the easement, or use inconsistent with t he easement evidences an i ntention to abandon. T he dominant owner must object t o t he s ervient ow ners a cts bl ocking us e of t he e asement, or r isk be ing f ound t o ha ve acquiesced in the easement’s abandonment.46

Alteration of t he us e o f t he easement in a ma terial w ay, ma y b e s ufficient to r esult in abandonment but it is more likely that such excess use will be restrained and use within the terms of the original easement will not be lost. H owever, i f the easement i s p rescriptive, excess use may result in a new prescriptive period for the excess use but should not result in loss of the old easement until the new one is established.47

Excess user does not terminate an easement. It is suspended until the excess use stops.48

A r ight of w ay or iginally us ed f or access t o a f armhouse a nd farm fields w as extinguished because the house burnt down and the farm fields were developed into residential subdivisions.49

Where the dominant owner is entitled to a right of way by necessity that implied easement is not lost by non-use over a lengthy time period starting from the time of the original grant.50

In Pharand vs. Jean-Louis51, the dominant owner had a f ifty foot easement to access a spring. The e asement was granted i n 1925. In 1930 t he s ervient put a f ence a cross t he eas ement preventing access to the spring. The dominant owner requested a gate which was refused. Both the servient owner and the dominant owner sought advice from the same lawyer who wrongfully concluded the express easement did not give access to the spring. The dominant owner took no further steps until 1950 when he determined that in fact the easement gave access to the spring. The court held there was no intention to abandon notwithstanding that there was continuous non-user for over twenty years, there was continuous obstruction for over twenty years and no claim to assert his r ight was brought for twenty years. T here was never an intention to abandon the easement b ecause t he d ominant o wner w as u nder a m istaken b elief a s t o t he extent o f t he easement and this mistake caused him to take no steps to assert his rights. There could not be an implied release of the easement where the dominant owner was under a mistaken belief.

46 Canadian Law Times October 1900 “Extinguishment of Easements” Frank Anglin page 287-288. 47 But see Scott v. Pape (1886) L.R. 31 Ch. D. 554 (CA); Ecclesiastical Commissioners vs. Kino supra. 48 Graham vs. Philcox [1984] Q.B. 747 (CA). 49 Bost Property Inc. v. Highland West Developments Inc. supra. 50 B.O.J. Properties Ltd. vs. Allen’s Mobile Home Park Ltd. 51 Pharand vs. Jean-Louis [1952] O.R. 665 (Ont. C.A.)

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Where a right of way that was never used, was blocked by cedar trees and rocks and the cedar trees had been in place for at least 30 years and the dominant owner allowed the servient owner to park cars on the right of way for six months, the right of way was not abandonment.52

The installation of a fence and gate blocking a right of way used by students of a university did not create an abandonment since the students continued to use the easement notwithstanding the fence and gate.53

There i s no a bandonment w here an nual r epairs ar e m ade b y t he d ominant o wner o r s now i s removed or work done on the easement even if the dominant owner doesn’t use the easement.54

In Cook v. Mayor and Corporation of Bath55, the plaintiff owned a house which backed onto a public and private lane. The house had a back door giving access to the lane. From 1793 unt il 1828 the back door was used but in 1828 it was bricked up. In 1862 the door was opened again. The de fendant s tarted t o bui ld a hous e w hich w ould ha ve bl ocked t he easement but t he court enjoined the construction because the easement had not been abandoned by the dominant owner by non-use. T he court said that if the boarding up and non-use by the plaintiff had misled the defendants t o s pend m oney i n reliance on t he non -use, t hen t he pl aintiff w ould not ha ve succeeded. But h ere, t he act o f reopening t he d oor w as ev idence t hat t he eas ement w as n ot abandoned.

In 455645 Ontario Ltd v Rousseau,56 the servient owner fenced in the 10 foot right of way and built a shed on i t which encroachment existed for 50 years without complaint by the dominant owner. T he court looked at all the facts and found that non-user together with acquiescence in this case amounted to abandonment.

Where the dominant owner used a right of way to a field for 16 years and then for 30 years a less convenient route to access the field was used because in part the field was leased to the servient owner’s tenants. The right was abandoned by non-use.57

Where a road to access a mill was not used and was by trial barely a discernable path, and the mill had been abandoned, there was no abandonment because the dominant owner used the path to walk on.58

Abandonment occurs when the dominant owner does something, or acquiesces in the doing of something on the s ervient l ands of a pe rmanent na ture which renders t he use of t he easement impossible. The non-user must be of a quality so as to create a presumption that the dominant owner intended to abandon the easement. The non-user must interrupt the right itself not merely the possession of the easement.

52 Bison Realty Ltd vs Athersynch (1998) 19 R.P.R. (3d) 45 (Ont. Gen. Div.). 53 Lafontaine vs. University of British Columbia (2102) BCSC 805 54 Abell v The Corporation of the County of York (1917) 39 O.L.R. 382 followed (1920) 61 S.C.R. 345 (S.C.C.) 55 Cook v. Mayor and Corporation of Bath (1868) L.R. 6 Esq. 177 56 455645 Ontario Ltd v Rousseau (1981) 19 R.P.R. 1 57 Darling vs. Clue (1864) 4 F. & F. 329 58 Aspotogan Ltd vs. Lawrence (1972) N.S.R. (2d) 313 (N.S.C.A.)

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Where the dom inant o wner ha d a pr escriptive e asement to w alk f rom h is c ottage across th e neighbouring farm to get to town, but made an agreement with the tenant of the farm to deviate from part of the easement to a new path which he used for many years, the court held that he did not establish use of the new path for the statutory prescription period because the owner of the farm was a minor, but the court found that the dominant owner had a right to use the old way because he never abandoned i t in favour of the new diverted easement. This i s the case even though he used the new way and substituted the new way for the old.59

The court determined that a road had not been abandoned although it had not been used at all for 30 years, had been washed out and was overgrown.60

59 Lovell vs. Smith 3 C.B.(N.S.) 120 where the court stated:

“In Payne v. Shedden, 1 M . & Rob. 382, a plea of twenty years’ user of a right of way, under the 2 & 3 W . 4, c.71, was held not to be defeated by proof of an agreed alteration of the line of way, nor by a temporary non-user under an agreement of the parties. Patteson, J., there says: ‘If there be ten years enjoyment of a right of way, and then a cessation, under a temporary agreement, for another ten years, yet this may be a sufficient enjoyment of the old right for twenty years, to make it indefeasible under the s tatute; for, the agreement to suspend the enjoyment o f the r ight does not extinguish, nor i s i t inconsistent with, the right. So, if, instead of the direct path from A. to B., another track over the plaintiff’s land, from A. to C. and thence to B., had been substituted by a parol agreement of the parties for an indefinite time, yet the user of this substituted line may be considered as substantially an exercise of the old right, and evidence of the continued enjoyment of it.’ The case thus put is precisely this case. Again, in Hale v. Oldroyd, 14 M. & W. 789, in case for the diversion of water. At the trial, it appeared in evidence that the plaintiff had enjoyed an immemorial right to the flow of this water into an ancient pond in one of his closes, but that, above thirty years ago, he made a new pond in each of the t hree c loses, a nd turned t he water so a s to supply t hem, a nd thenceforth d isused the old pond, which was gradually filled with rubbish, and overgrown with grass. The plaintiff’s right in [124] respect of the three ponds having been defeated by proof of an outstanding life-estate, under the 2 & 3 W. 4, c.71, s.7, - it was held that he was entitled, under this declaration, to recover in respect of his right to the flow of water to the old pond. Parke, B., there says: ‘The use of the old pond was discontinued only because the plaintiff obtained the same or a g reater advantage from the use of the three new ones. He did not thereby abandon his right; he only exercised it in a different spot; and a substitution of that nature is not abandonment. He has a right, therefore, under this declaration, to recover in respect of the old pond.’ It is quite obvious that that was done without any intention on the part of the p laintiff to abandon his original right: and the jury were not at liberty to infer an abandonment or ex-[127] –tinguishment, without some evidence of i ntention. I do n ot t hink that this c ourt means t o l ay i t d own t hat t here c an b e a n a bandonment o f a prescriptive easement like this without a deed, or evidence from which the jury can presume a release of it. It is notorious that the owners of land and buildings are interested in their boundaries, and, in my judgment, the facts p roved at the trial o f t his case l ead irresistibly to the co nclusion t hat the s uccessive owners of the dye-works, assuming them to have been reasonable persons, diligent in the protection of their interests, either must have known or must be taken to have had reasonable opportunity o f becoming aware o f the fact that the dye-works were supporting the north-east part of the plaintiffs’ yard and of the outbuilding standing thereon.”

60 Mason vs. Partridge (2005) 261 D.L.R. (4th) 315 (NSCA) where the court stated: 46. The respondents submit that if a right-of-way had been established, it had been abandoned or extinguished. With respect, I am unable to agree. 47. When M r. M ason acq uired t itle t o t he M ason p roperty between 1991 t o 1993, t he hom estead on t hat property had not been occupied since approximately 1960. The trial judge was satisfied that the roadway access to the Mason property had not been used as a logging road since as far back as 1963 when Elgin Allen purchased it. According to M r. Allen, the r oadway was washed o ut b y 1 974. W ayne P artridge te stified t hat it was

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Where a deed of 1891 granted a right of way, it was abandoned despite clear law that non-use alone doesnot c onstitute abandonment. T he c ourt c oncluded t hat t here w as a n i ntention t o abandon given the encroachments, the non-use and the giving of a consensual alternate access. Inclusion of t he r ight of w ay i n de eds di d not p reserve i t f irst be cause t he r ight of w ay was already abandoned and second because the court found an intention to abandon.61

overgrown with alders. Not until 1997 did Mr. Mason inquire about using the roadway. Thus the period of non-use was over 30 years, a duration longer than the period of user in this case. 48. A lengthy period of non-use does not equate to abandonment. According to Gale on Easements, supra, at p. 456, more than the fact of non-use is required:

... mere non-user without more, however long, cannot amount to abandonment. Such non-user is evidence of which abandonment may be inferred but must be regarded in the context of the circumstances as a whole.

The non-user may be explained by the fact that the dominant owner had no need to use the easement, in which case it will not be enough to establish abandonment. A presumption of abandonment will arise where there are circumstances adverse to the user and sufficient to explain the non-user, combined with a substantial length of time during which the dominant owner has acquiesced in that state of affairs or where the dominant owner does some act clearly indicating the firm intention that neither he nor any successor in t itle of h is should thereafter make use of the easement. It has been said that abandonment is not to be lightly inferred; owners of property do not normally wish to d ivest themselves o f i t unless i t i s to their advantage to do so, no twithstanding that they may have no present use of it. 49. Here t here was no e vidence of a ny intention o n t he p art of Mr . M ason o r his p redecessors i n t itle t o permanently abandon the right of user. Nor was there any evidence of any act relinquishing that right. Nor were there any obstructions or other circumstances adverse to the user, such as walls or buildings encroaching on the roadway as in Swan v. Sinclair, [1925] A.C. 227 (H.L.) which was referred to in Finley v. Sutherland (1969), 4 D.L.R. (3d) 586 (N.S.C.A.). The trees and brush which had grown up over the years could be cleared. Nor was there any evidence of any reliance, to their detriment or at all, by the servient owners upon abandonment.

61 Finley vs. Sutherland [1969] 4 D.L.R. (3rd) 586 (N.S.C.A.) where the court stated: 51 In the first place there was here much more than mere non-user. The green strip area was obstructed by two stone walls which have been in place for at least 40 years. In addition there are other obstructions, namely, the shed a nd ga rage o f t he plaintiff, t o t he e xtent I ha ve mentioned, and t hese have existed o ver m any years. In addition predecessors in title of the defendant sought and obtained permission from predecessors in title of the plaintiff to obtain access to the property now owned by the defendant over the plaintiff’s property by another route. A ll t hese matters in dicate to me an i ntention t o a bandon a ny right of way o ver the gr een s trip area. I therefore conclude that if there was an outright grant of a right of way by the 1891 Deed, the right of way has been abandoned. As was said by Lord Chelmsford, L.C., in Crossley & Sons, Ltd v. Lightowler (1867), 2 C h. App. 478 at p. 482:

The question of abandonment of a r ight is one of intention, to be decided upon the facts of each particular case. Previous decisions are only so far useful as they furnish principles applicable to all cases of the kind.

52 I refer also to what was said by Warrington, L.J., in the Swan case on the question of abandonment quoted above -- see also Bell v. Golding (1896), 23 O.A.R. 485, and Gale on Easements, 13th ed., pp. 341-2. 53 It was argued by counsel for the appellant that because the alleged right of way over the green strip area had been referred to in documents of title subsequent to the 1891 Deed, as I have already mentioned, entitlement to the right of way had thereby been kept alive. As pointed out by Sargant, L.J., in the Swan case, supra, at p. 275 of the Court of Appeal report -- "according to the ordinary practice of conveyancing, the conveying party in each case would, of course, avoid any risk they might incur under any implied covenants for title by assuming that the easement in question had been abandoned and affecting to convey without any mention of it." Sargant, L.J., went on to say that --

even if a mention of the right of way in any such conveyance might operate to keep an existing right alive, it could not, in my view, revive an abandoned right; and in my judgment, in the circumstances of this case, abandonment had taken place by the end of last century at latest.

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In Day vs. Adili,62 Day and Adili were neighbors. They were part of a four parcel subdivision with a single entrance. They all shared a common driveway by way of mutual easements. Part 6 was over the day property and used by Adili to get to her driveway. Adili constructed an addition which r eoriented t he garage s o t hat A dili ne ed not us e pa rt 6 f or a ccess. D ay argued t he renovations effectively constituted abandonment of the easement. The court refused to find the easement was abandoned in l ight of the Adili’s evidence that i t was s till needed for pedestrian access t o t heir s ide doo r of t he garage an d b ecause u sing t he alternate acc ess m ade t urning vehicles tight. In all the circumstances the easement still had utility to the Adilis. The concept of implied a bandonment w as not r ejected. In t his t heory t he c hanges t o t he dom inant t enement makes the easement unnecessary and i t i s thereby abandoned. The s econd argument m ade b y Day was that i f there was excessive user of the easement i t was voided. The court felt that the evidence of excessive user was insufficient here for such a result. The blocking of the driveway by trades renovating the Adili house was temporary.

and see Viscount Cave, L.C., at p. 238 of the House of Lords report. In this case if it c ould be said that the right of way had not been abandoned by 1913 when Amos Slaughenwhite conveyed to R. Evatt Mathers, it had i n my view c ertainly be en a bandoned b y 1944 when M athers c onveyed t o D orothy M artin a nd a ny reference to it in the deed to Dorothy Martin and in the solemn declaration to which I have referred would not have the effect of reviving it.

56 However, I think that the case of Baker v. Harris is clearly distinguishable on its facts from the present case. A major portion of the right of way had been used for many years and the question at issue was merely whether the plaintiff had lost her right to use the remainder of the right of way -- see Kelly, J., at p. 358. In the present case no portion of the right of way over the green strip area had ever been used nor in fact could it be used because of the nature of the terrain. In any event, as pointed out by Lord Chelmsford in the Crossley case, supra, the question of abandonment is one of intention. The Court in the Baker case found no such intention but in the present case I think that for the reasons I have given, intention to abandon has been clearly established.

62 Day vs. Adili 2011 ONSC 1835 (Ont. S.C.) where the court stated: 15. Ms. Day’s legal basis for requesting the expungement o f the easement (or part o f i t relating to vehicular traffic) is found in the concept that if there is an alteration of the dominant tenement which makes the enjoyment of the easement unnecessary, there is an implied abandonment and therefore a release of the easement. Since it is ar gued t hat M s. Adili no l onger needs t he eas ement o ver P art 6 f or v ehicular acces s t o h er l ot ( given t he substantial addition and reconfiguration of her premises) therefore she has effectively abandoned the easement. Ms. Adili denies any such intention. The caselaw relied on by the Applicant is not persuasive. In Giecewicz v. Alexander, [1989] O.J. No. 511 (Ont. H.C.), the language of the easement was specifically designed to provide use of a lane and driveway access until road access was otherwise provided. As such, it was capable of extinguishment when the substitution occurred. There is no such limitation in the easement language in this case. The subsequent case of Bost Properties Inc. v. Highland West Developments Inc., [2002] O.J. No. 477 (Ont. S.C.J.) relied on Giecewicz (supra). I n that case, however, the dominant tenement has conveyed away a portion the easement so that the retained portion no longer provided the road access that was originally contemplated. I n that case, the Court held that the easement was extinguished especially given that direct access to lands was available by another route. 19. In my view, the better analysis is found in Fife v. James, 2006 CarswellOnt 496 (Ont. S.C.J.). In that case, the Court held that even though a new access road had been established, there was nothing in the easement to indicate that it was limited, given its creation by express grant. A review of surrounding circumstances is only required when the wording i tself i s unc lear. There is no indication in this case that the purpose for which the easement was created has come to an end. There should be a h igh onus on the Applicant to establish that an easement, which has value as an adjunct to the dominant tenement, should be extinguished without consideration where there is no express release.

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In Overs vs. ten Kortennar,63 t he a pplicant s ought c onfirmation t hat a n express r ight of w ay could be used to service the applicant’s assembled lands for waste removal. The applicant had other means of access but this was more convenient. The extent of the existing assembled lands was greater than the original dominant tenement. The respondent argued abandonment. The right of way was for access but there was a number of mature trees, and a water pipe making access for ve hicles di fficult. T he c ourt concluded t hat t he or iginal e asement was granted t o pe rmit access t o t he w ater pi pe t o m aintain gardens and f or p edestrian a ccess but not ve hicular. T he court f ound t hat t he e asement ha d not be en used f or 50 years, a f ence had be en c onstructed across i t b y t he dominant owner with no gate and the applicant h ad maintained the f ence and non-use f or ove r 15 years. A s w ell, t he a pplicant ha d pl anted t rees m aking t he r ight of w ay unusable. The court held the easement was abandoned.

In MacNeil vs. Anban Holdings Ltd.64, the defendant had the benefit of an express easement by reservation in a 1942 deed creating the lot conveyed to the defendant’s predecessor. Over time a fence was placed on the boundary blocking the access although there was a gate in the fence. A 63 Overs vs. ten Kortennar (2006) 46 R.P.R. (4th) 118 (Ont. S.C.) where the court stated:

9 I t d oes n ot ap pear t o m e t hat t he Land T itles Act ab rogates t he co mmon l aw d octrine o f ab rogation. S ee Dominion Stores Ltd. v. United Trust Co. (1976), [1977] 2 S.C.R. 915 ( S.C.C.), at 952 to 953. As was said in Campbell v. Graat, [1988] O.J. No. 1918 (Ont. Dist. Ct.), at 4 to 5, abandonment is a question of fact and it can occur by conduct of the dominant tenement owner. The release can be implied, including from acquiescence in acts: s ee B ell v . Golding ( 1896), 2 3 O .A.R. 485 ( Ont. C.A.), a t 494. S ee 455645 O ntario L td. v . Rousseau (1981), 19 R .P.R. 1 (Ont. H .C.), a t 13 t o 1 4, w here O sborne J . he lpfully s et o ut his c onclusions c oncerning abandonment: My consideration of the cases counsel have referred to causes me to reach the following conclusions: (1) Abandonment is a question of fact; (2) Non-user i s es sential to abandonment, at least i n these c ircumstances. Non-user, a nd no thing more, i s not sufficient to permit a conclusion of abandonment; (3) Adverse possession for a period in excess of that provided for in The Limitations Act, R.S.O. 1970, c. 246 [now R.S.O. 1980, c. 240] is not sufficient to bar a right to an easement. As well, such possession if found, does not change the onus on the issue of abandonment; (4) In some circumstances evidence of non-user may lead to a finding of acquiescence on the part of the holder of title to a right of way or easement; (5) All of the evidence bearing upon the issues of non-user acquiescence and abandonment must be considered. It is an error in principle to fail to consider all the evidence by expedient resort to reference in earlier decisions, the effect of which is non-user, is in itself not sufficient to permit a conclusion that an easement right has been abandoned by the possessor of that right; (6) The onus of establishing abandonment is on the defendant in this case. In more general terms, the onus is cast upon the party asserting abandonment. In this case, where there is no dispute as to the evidence, the matter of onus assumes very much less practical significance than is the case where there is a co nflict in the evidence, and he nce the f acts ar e o pen t o d ispute o n t hat acco unt. O n t he issue o f ab andonment, i f e vidence o f abandonment, when considered and compared with that opposed to it, has a more convincing force, and a greater probability of truth, then the onus has been discharged. On the other hand, if the trier of fact is unable to say that the evidence on ei ther s ide o f the i ssue o f abandonment p reponderates, then the f inding on that i ssue must be against the defendant; (7) I f there i s evidence of non-user and evidence, albeit circumstantial, o f acquiescence, the tr ial o f fact may infer abandonment. It would seem to me that based on the foregoing facts as to Ø's activity, acquiescence and non-use taken together K has met the onus.

64 MacNeil vs. Anban Holdings Ltd. (2005) 725 A.P.R. 392 (N.S.S.C.)

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shed was built on t he right of way by the servient owner. An 18 inch diameter tree grew on the right of way. Deeds on t he servient lands did not refer to the easement after 1994 a nd from the dominant between 1986 and 2003. A party who didn’t own the dominate tenement purported to release i t. T here w as no r elease i n w riting f rom t he dom inant ow ner. T he c ourt he ld t hat t he easement had not been abandoned. There was no evidence of an intention to abandon. Access to the ba ckyard of t he d ominant r equired t he easement. N on-use was insufficient t o be a n abandonment. The outbuildings did not completely obstruct the right of way and the gate in the fence was evidence that the benefit of the easement to access the backyard was still needed and never released. The judge was not satisfied that the dominant owner intended to relinquish the right.

Deficiencies i n t he l egal d escriptions d o not c onstitute a bandonment. Constructing f ences an d piling building materials on a right of way is not an obstruction since the right of way could be used so long as gates were provided and therefore not abandoned.65

65 Beman vs. Harris (2002) 48 R.P.R. (3rd) 238 (Ont. S.C.) where the court stated:

23 This court is satisfied that the Bemans have used the right-of-way regularly since building their home in 1957. They have traveled along Part 3, particularly the cleared driveway, and along or across Part 4 to access the various entrances to the wood lot which is on the southern portion of their property behind their home. They have used the right-of-way t o access their property in o rder to co llect firewood, for recreational pu rposes, to access trails which lead to Little Lake at the south of their property, to walk their dogs, and to access and use the southern portion of their property as a retreat and for peace and quiet. 25 T his court is satisfied that Mr. Beman did use the Part 3 and Part 4 properties on a regular basis to gain entry to the southern part of his property, until September 21, 1997 when he suffered a broken hip in a fall while he was working on hi s roof. He was hospitalized and underwent therapy for approximately 1 1/ 2 years during which time he was unable to use the right-of-way to gain access to the back portion of his property. Mr. Beman was in a wheelchair when he was released from the hospital, but graduated to a walker and subsequently a cane. He was able to begin to use the right-of-way again in the Spring of 2000 when his recuperation was complete. This court is satisfied that at no time did he intend to abandon his use of the right-of-way as a result of this period of non-use. 36 None of the parties to this action has abandoned the original intent of the right-of-way. Each is attempting to p rotect h is in terests in the e vent of future d evelopment. Although a r oadway was n ot constructed over the years, the intent to have the land preserved for that is still very much alive among the parties. In as much as all parties are cognizant of the potential for the use of this strip of land as a road way, and in as much as Mr. Beman has used i t t o g ain access t o h is p roperty b y tractor a nd on foot, i t c an hardly be s aid t hat his use i s not i n conformity with t he o riginal intention o r t hat hi s use o f t he r ight-of-way t o acces s his p roperty d oes n ot f all squarely within the usual purposes for such a right-of-way. 37 It is of little significance to this issue that the Bemans conveyed and reconveyed the lands to one another in different capacities, or that an error was made in the original deed from Beman to Parker conveying Part 4, or that Mr. Parker has quit c laimed hi s r ight-of-way over Part 3 to the Harrises, or that in the last deed from the Bemans conveying the same property back to themselves in different capacities makes no mention to the rights-of-way over Part 3 or Part 4. It is clear that the intent to use the right-of-way and the actual use of the right-of-way were never abandoned by Mr. Beman. 41 There has been no expressed release of the entitlement of the right-of-way, nor has there been any action on the part of the Bemans upon which this court would rely as evidence of either their intention to abandon or of actual abandonment of their right-of-way. On the contrary Mr. Beman testified that it was never his intention to abandon hi s r ight-of-way. His ev idence o f t he u se t o which h e p ut t he r ight-of-way, t he p eriod of t ime ov er which it has been used, taking into account as well the reasons for its non use, are relied upon by this court to establish the intention to maintain a right-of-way.

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In Costa vs. Janikas,66 the p arties s hared a m utual eas ement o ver a ccess o ver a d riveway. In 1937 the southerly 16 f eet was enclosed into the backyards of each party by fencing. The court held th at th is w as a s ubstantial a lteration in th e r ight o f way ma king the e njoyment o f th e easement impossible or unnecessary and evidencing an intention to abandon. It was the active incorporation of each party of the easement lands into their respective backyards that constituted abandonment. The abandonment occurred before the t ransfer to the plaintiffs and therefore the inclusion of the right of way in the description is not relevant to intention.

Giving up a car is not abandonment of an access right of way for vehicles.67

In Currie v. Chatterton,68 in a dispute between neighbors over a fenced and unsused right of way the court found no anadonment.

In Bialkowski v. Cowling,69 the parties were n eighbors. The respondent h ad an 8 f oot r ight of way over the plaintiff’s property but it had not been used in a hundred years. The servient lands 66 Costa vs. Janikas 2001 CarswellOnt 1691 (Ont. S.C.) 67 Sugrue vs. Graham 1994 CarswellOnt 2615 (Ont. C.J. (Gen. Div.)) 68 Currie v. Chatterton 2014 CarswellOnt 10784, 2014 ONSC 4571, 243 A.C.W.S. (3d) 497, 47 R.P.R. (5th) 108

where the court stated: 14 I n all, assessing all of the evidence before me on the standard set out in Rousseau, supra, I would not find as a fact that the applicants or their predecessors abandoned their right-of-way over the laneway. The few fairly small trees and the fences are equivocal. They support a finding of non-use at least by a wide vehicle. But people are a llowed to h old th eir d eeded r ights-of-way a nd no t use them until they want to d o so. Absent something more, under the case law I would not find abandonment from mere non-use based on a couple of grainy aerial photos. As I noted above, the continued r eference to t he r ight-of way in the deeds o f t he applicants and their predecessors is s ome in dication th at t hey c ontinued to r ely o n th eir r ight-of-way. Ms M oss's p redecessor recognized the applicants' rights i.e. they did not assert that the applicants had abandoned. The precise timing of when Ms Mo ss l earned t he d etails o f h er r ight-of-way is n ot r elevant a s it is n ot p robative o f whether th e applicants or their predecessors intended to abandon their right-of-way. The fact that she parks on the laneway after acknowledging to her counsel her understanding that it was not a parking spot is once again colour that may go to the equities rather than to the merits of the issue of abandonment. 15 I t f ollows th at i f I c ould get to t he merits, I would n ot f ind t hat t he a pplicants or t heir pr edecessors abandoned their right-of-way based on the very l imited evidence before me. But I do not think that I have the necessary parties before me to make that determination. A determination that t here i s no abandonment means that the true owner remains subject to the right-of-way. That is, it affects the owner's interests. I can only surmise that neither the applicants nor the respondents served the owners because they have made common cause that neither wants the true owners asserting an interest in the laneway (and asking for money) now or because of some issue in the other litigation that I am told exists. As noted above, Ms Moss seeks to advance an argument as if she is the true owner. I am not satisfied that Ms Moss has standing to raise the issue of abandonment to answer the applicants' assertion of their deeded rights. I note only in the alternative that if I am found to be wrong on standing, I do not think that Ms Moss has proven the fact of abandonment by the applicants or their predecessors. Based on the title documents, I am prepared to enforce the applicants' deeded right-of-way as against Mr. Healey and M s M oss i n personam a nd en join t hem f rom b locking the ap plicants' u se o f the l aneway t o acces s their premises. Nothing herein is intended to bind the true owner(s) of the laneway and my order is expressly without prejudice to any and all rights of the true owner(s) to assert abandonment or any other causes of action or defense that he, she, it, or they may have against the applicants, Ms Moss or Mr. Healey.

69 Bialkowski v. Cowling 2015 CarswellOnt 3850, 2015 ONSC 1744 (Ont. S.C.)

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made no reference to the right of way after the deed in 1939. The court held the right of way was abandoned. It relied upon a declaration form the owner from 1939 to 1994 that the neighbor had not used it. The title to the dominant lands did say together with an easement. The court held that the dominant owner had a duty to check the servient lands to see if the right of way were noted on it and failure to do so was evidence of abandonment when combined with non-use.

In Madigan Plaza Inc. v. Calgary Golf & Country Club,70 the court considered lengthy non-use in t he context of a f ence blocking a r ight of way, pl anting of t rees and other obs tructions and

70 Madigan Plaza Inc. v. Calgary Golf & Country Club 2015 C arswellAlta 726, 2015 A BQB 272, [ 2015] 8

W.W.R. 134, [2015] A.W.L.D. 2170, 14 Alta. L.R. (6th) 233, 253 A.C.W.S. (3d) 231, 53 R.P.R. (5th) 51, 615 A.R. 252 where the court stated: 9 C GCC concedes that it does not make frequent use of the Easement. The main entrance to the Dominant Tenement is off of 50 Avenue SW. While CGCC makes frequent use of the East Strip, it can be accessed in two ways without having to t ravel across the greens and fairways o f the golf course. O ne possible entrance to the East Strip is from the south over the Easement. The other entrance is from the north, via a public alleyway that exits on to 50 Avenue SW. 10 I n the past, CGCC has used the main entrance and the northern alleyway entrance on to the East Strip to bring equipment on to the Dominant Tenement. 11 S ince a bout 199 2, C GCC has maintained a ch ain-link gate at t he north e ntrance o f t he E asement t o prohibit public access to the Dominant Tenement (the "Gate"). At least one key for the Gate is stored in CGCC's equipment manager's office located on the Dominant Tenement. 12 Mr. and Ms. Sherbut occupy the residence located on the Servient Tenement. Mr. Sherbut has deposed that CGCC has made no use of the Easement during the 14 years that he and Ms. Sherbut have occupied the Servient Tenament. A s w ell, he deposes that during t he p revious 1 5 y ears t hat t he p revious o wner, T homas Amaola, owned and occupied the Servient Tenement, CGCC has made no use of the Easement. 16 Presently, there are some caragana shrubs planted on the Dominant Tenement side of the Gate. CGCC planted these shrubs for aesthetic purposes after ENMAX accessed the Dominant Tenement across the Easement in 2007. Before that, there were some other vines and shrubs in front of the Gate that CGCC removed in 2007 to facilitate E NMAX's acces s a cross t he E asement. As was the cas e i n 2 007, C GCC can r emove the car agana shrubs if necessary to provide access to the Dominant Tenement through the Easement. 17 C GCC argues that while it has not used the Easement frequently, future potential uses include access for the following purposes:

(a) emergency officials, including police, fire, ambulance and city vehicles or officials, (b) emergency purposes if the primary access to the Dominant Tenement is blocked, (c) maintenance a nd c onstruction pe rsonnel or v ehicles pe rforming work o n the D ominant T enement a nd facilities, (d) vehicular traffic (excluding member ingress and egress) if the City of Calgary undertakes one of its long range plans to extend 50th Avenue SW across the Elbow River, and (e) other unforeseen uses or requirement to access the Dominant Tenement.

21 W hen M s. S herbut p urchased t he Servient T enement from M r. Amaolo o n S eptember 1 0, 2 001, t he Sherbuts were able to negotiate a lower purchase price for the Servient Tenement because of the existence of the Easement. 24 N o one from CGCC has ever expressed to Madigan, orally or in writing, that CGCC has abandoned the Easement, nor has any other conversation taken place between Madigan and any person connected with CGCC that would lead to such a conclusion. 29 Thus, t he only way i n which the Easement has been extinguished i s b y a n i mplied r elease. In Genstar Development Co. v . P lains Midstream Canada U LC, 2 012 A BQB 4 57 ( Alta. M aster) [ Genstar] at p ara 1 2,

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quoting H alsbury's Laws o f England, V ol 1 4, 4 th ed ( London, U K: B utterworths, 1980) a t pa ra 2 1, M aster Prowse said the following:

The e xtinguishment of an e asement b y implied r elease must b e b ased up on t he i ntention o f t he d ominant owner. To establish abandonment the conduct of the dominant owner must have been such as to make it clear that he had had, at the relevant time, a fixed intention to never at any time thereafter assert the right to himself or attempt to transmit it to anyone else. It is a question of fact whether an act amounts to an abandonment or was intended as such.

30 The onus of proving the dominant tenement owner's intention is on the party that seeks to establish that intention on a balance of probabilities: Liscombe v. Maughan (1927), 62 O.L.R. 328 (Ont. C.A.) [Liscombe] at 335; 455645 Ontario Ltd. v. Rousseau (1981), 19 R.P.R. 1 (Ont. H.C.) [Rousseau] at 7 and 14; 2108133 Ontario Inc. v. Kabcan Foods Ltd. (2009), 80 R.P.R. (4th) 194 (Ont. S.C.J.) at para 8. In Overs v. ten Kortenaar (2006), 46 R.P.R. (4th) 118 (Ont. S.C.J.) [Overs] at para 9, Farley J said the following, citing Rousseau at 13-14:

On the issue of abandonment, if evidence of abandonment, when considered and compared with that opposed to it, has a more convincing force, and a greater probability of truth, then the onus has been discharged. On the other hand, if the trier of fact is unable to say that the evidence on either side of the issue of abandonment preponderates, then the finding on that issue must be against the [owner of the servient tenement].

31 What are the facts that will allow the court to find that the owner of the dominant tenement abandoned or intended to abandon i ts r ights in the servient tenement? In AW La Forest, Anger and Honsberger Law of Real Property, 3r d e d ( Toronto: C anada L aw B ook, 2006 ) (l oose-leaf r evision r el 12, S ept 2014) a t §17: 20.60(c) [Anger & Honsberger, citations excluded], the author says the following:

Extinguishment of an easement will occur when the holder of the easement acts in such a way as to indicate an intention to abandon the easement or so as to create an estoppel. However, if the easement was acquired by a grant or if the title to it was perfected, it is immaterial whether there has or has not been enjoyment of the easement for long periods of time. Easements so acquired can rarely be extinguished in any manner-other than b y e xpress r elease o r b y c ircumstances so co gent a s t o p reclude a q uasi-releasor f rom d enying t he release. Discontinuance of use of an easement is not in itself abandonment but only evidence from which abandonment may be inferred. Other circumstances may indicate that there was no intention to abandon and, unless such intention exists, there is no abandonment. Whether there was an intention to abandon the use of an easement is always a question of fact. If there has been non-use of an easement for a very long time, that in itself may be prima facie evidence of an intention to abandon it. Furthermore, if the duration of non-use has been eq uivalent t o t he period o f use, a co urt will p resume t hat an ex press r elease o f t he eas ement which cannot now be proved was made before the period of non-use commenced. If the owner of the dominant tenement permanently alters the dominant tenement so that the enjoyment of the easement is impossible or unnecessary, or so as to substantially increase the burden of the easement, this is seen a s e vidence o f a n i ntention t o ab andon the ea sement. A r elease will b e i mplied i f t he o wner o f t he dominant t enement p ermits t he owner of the s ervient t enement to do an act of a p ermanent nature on t he servient tenement which necessarily prevents the future enjoyment of the easement. Failure to keep a right-of-way in sufficient repair does not amount to an implied release.

33 The owner of the dominant tenement's non-use is essential to its a bandonment, but its mere non-use, without more, i s i nsufficient to extinguish t he easement: Kingswood Realty Ltd. v. K ileel (1979), 108 D.L.R. (3d) 562 (N.B. Q.B.) [Kingswood] at 565; Rousseau at 6 and 14. Even a lengthy period of non-use may not, without more, c onstitute a bandonment. I n M ason v. P artridge, 2005 N SCA 144, 261 D.L.R. ( 4th) 315 ( N.S. C.A.) [Mason] at para 48, Oland JA, for the court, said the following:

A lengthy period of non-use does not equate to abandonment. According to Gale on Easements, supra at p . 456, more than the fact of non-use is required: ...mere non-user without more, however long, cannot amount to abandonment. Such non-user is evidence of which abandonment may be inferred but must be regarded in the context of the circumstances as a whole. The no n-user may be ex plained by the fact t hat the dominant owner had no need to u se the easement, i n which case it will not be enough to establish abandonment. A presumption of abandonment will arise where there are circumstances adverse to the user and sufficient to explain the non-user, combined with a substantial length of time during which the dominant owner has acquiesced in that state of affairs or where the dominant

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owner d oes s ome act cl early i ndicating t he firm i ntention t hat ne ither he no r a ny s uccessor in t itle of his should thereafter make use of the easement. I t has been said that abandonment is not to be lightly inferred; owners of property do not normally wish to d ivest themselves of it unless it is to their advantage to do s o, notwithstanding that they may have no present use of it.

34 E xamples o f " circumstances ad verse t o t he user" will b e d iscussed later i n t hese r easons. F or now, however, it is important to note that a lengthy period of non-use is a factor that the court must take into account. 35 M adigan also ar gues t hat use o f an ea sement a fter ab andonment will not r evive t he eas ement, ci ting Arychuk v. Calgary Power Ltd. (1978), 8 Alta. L.R. (2d) 354 (Alta. C.A.), at 360. W hile this Court does not disagree with that proposition, it must first find there to be an abandonment. 37 This C ourt d oes not n eed t o r ely o n whether E NMAX acces sed t he D ominant T enement using t he Easement. That is not the test. The test is whether CGCC has abandoned its use of the Easement, and has a fixed intention never to assert its right to use the same. 38 F urthermore, M adigan ha s not p rovided t his Court with a ny e vidence t hat C GCC has no t used t he Easement over the past eighty-six years. It says that CGCC has not made any effective use of the Easement over the past twenty-nine years, except for one entry by an employee. Besides, the authorities to which this Court has referred ear lier s ay t hat i nfrequent o r n on-use o f t he E asement d oes n ot, i n i tself, p rove t hat t he o wner o f a dominant tenement has abandoned its easement rights. B. An Act of a Permanent Nature 39 Although Anger & Honsberger refers to the dominant tenement's owner permitting the servient tenement's owner t o d o an act o f a p ermanent nature o n t he s ervient te nement which necessarily p revents the d ominant tenement o wner's future e njoyment o f t he e asement, t his p rinciple c uts b oth ways. T hus, i f t he d ominant tenement's owner does an act of a permanent nature that prevents it from its enjoyment of the easement, that too would s how a n i ntention t o abandon i ts r ights. T his i s so e ven i f t he d ominant tenement's o wner c ould s till exercise its rights under the easement, but it has indicated, by actions or otherwise, an intention to abandon that right: 0730729 B.C. Ltd. v. Shoker, 2007 BCSC 540 (B.C. S.C.) at para 67. There is no doubt that the caragana bushes that CGCC planted in 2007 might interfere with its use of the Easement. However, in Mason, Oland JA said that "[t]he trees and brush which had grown up over the years could be cleared": Mason at para 49. CGCC confirms that the same holds true in this case. 40 I n Rousseau, the owner of the dominant tenement had a r ight-of-way that passed over the owner of the servient tenement's lands. A shed located on the servient tenement blocked the right of way. From at least 1923, the part of the right-of-way on the servient tenement was within an area enclosed by fences, and was never used. In 1939, further fencing was erected, which co mpletely b locked the r ight o f way. T he owner o f t he dominant tenement moved for an injunction requiring the owner of the servient tenement to remove the obstructions. The owner of the servient tenement argued that the owner of the dominant tenement had abandoned the right of way. 41 The court dismissed the application noting that while an easement created by express grant cannot be lost by mere non-use in itself, non-use is material in considering whether an intention to abandon has been proved. The long period of non-use, coupled with acquiescence to obvious obstructions to the right-of-way, warranted a conclusion that the owner of the dominant tenement had abandoned the r ight-of-way. See also Bell v. Golding (1896), 23 O .A.R. 485 ( Ont. C .A.) [ Bell]. A fortiori i f t he c ourt f inds that no n-use o f t he e asement for t he purposes for which it was first intended, it could find that the owner of the dominant tenement had abandoned its rights c ontained i n t he e asement: B ungay, R e ( 1983), 58 N .S.R. ( 2d) 327 ( N.S. T.D.), F inley v. S utherland (1969), 4 D.L.R. (3d) 586 (N.S. C.A.) [Finley] at 597-99. 42 T he na ture o f the o bstruction is a r elevant consideration, b ut is no t t he sine q ua no n t o a finding of abandonment. In Stella Psarakis Medicine Professional Corp. v. Gonnsen, 2015 O NSC 25 (Ont. S.C.J.) [Stella] at para 27-28, Whitten J said the following:

This possibility of interference, by the servient tenement, as in the construction of a fence, may be to preclude use of the right of way. The continued presence of such an obstruction may well play into acquiescence on the part of the dominant tenement, such that abandonment could be presumed ...

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Again, a f inding o f p resumed acquiescence o r ab andonment would b e fact d riven in that it would depend upon the degree of obstruction upon the enjoyment of the right of way and its duration.

43 T hese same principles apply to anything that the owner of the dominant tenement does that prevents its enjoyment of the easement. In Overs, the predecessor of the owner of the dominant tenement had a right-of-way over the servient tenement, but had not used the right-of-way for access. The predecessor had planted trees, and constructed a water pipe and fence near the right-of-way. The owner of the dominant tenement rebuilt that fence after acquiring the dominant tenement, and had planted some cedar trees. The court found that the owner of the dominant tenement had abandoned any right to use the right-of-way by his actions and inactions. He knew of the fence, water pipe and trees when he purchased the dominant tenement, and that knowledge should have been sufficient to put him on inquiry as to whether the right-of-way was something other than paper title and perhaps had b een ab andoned b y h is predecessor i n t itle. I n t hat c ase, F arley J f ound t hat t he owner of t he d ominant tenement had abandoned his easement right through his inaction (acquiescence in determining whether the right-of-way was still in functional existence), and action (planting the "mass of cedars). 44 I n this case, besides the caragana bushes that CGCC planted in 2007, Madigan argues that the Amaola Fence, and the Code-Operated Gate are obstructions that interfere with CGCC's use of the Easement, and CGCC never complained about either to the owner of the Servient Tenement. CGCC was aware of both. 45 T he C ode-Operated Gate was i nstalled b ecause o f vandalism t hat was co mmitted o n t he D ominant Tenement, and CGCC was supportive of the installation, as it would protect its property. Mr. Sherbut concedes that had CGCC asked him for the code to access the Easement, he would have provided it to CGCC. The Code-Operated Gate does not prevent CGCC's use of the Easement, l ike a p ermanent obstruction constructed on the Easement. It simply has to be opened to allow access to it. 46 The Amaolo Fence was a temporary obstruction of the Easement that Mr. Amaolo constructed for aesthetic purposes. H e r emoved i n 2 001, t o f acilitate h is sale o f t he S ervient T enement. I t i s n o l onger an o bstacle t o CGCC's use of the Easement. The fact that CGCC did not use the Easement during the period that the Amaolo Fence ex isted may i ndicate a bandonment, b ut i t i s cer tainly n ot t he s ine q ua n on. I n M ason O land J A s aid specifically that, "[t]he non-user may be explained by the fact that the dominant owner had no need to use the easement, in which case it will not be enough to establish abandonment." Similarly in Liscombe at 335 (citations excluded), the court said, "Non-user may be explained by shewing that the owner of an easement had for the time no occasion to use it, he having other and more convenient means of employing his land than when the easement was in use." See also Kingswood at 566. 47 What is important is "the degree of obstruction upon the enjoyment of the right of way and its duration": Stella at para 28. In this case, neither the Amaolo Fence, nor the Code-Operated Gate had the permanence of a shed and fences (Rousseau), cedar t rees, an above-ground water-pipe and fences (Overs), a s eries of buildings (Bell), trees, boulders, stone walls, a shed and garage (Finley), or a power corridor (Bungay). The Amaolo Fence was removed and the Code-Operated Gate does not prohibit CGCC's use of the Easement. 48 This Court finds that neither the owner of the Dominant Tenement (CGCC) nor the owner of the Servient Tenement ( Madigan) has d one a nything which ne cessarily p revents the D ominant T enement o wner's future enjoyment of the Easement. C. The Grant 49 The authors of Anger & Honsberger said that if an easement is acquired by a grant, it "can rarely be extinguished in any manner-other than by express release or by circumstances so cogent as to preclude a q uasi-releasor from denying the release." See also Jakmar Developments Ltd. v. Smith (1973), 1 O .R. (2d) 87 (Ont. H.C.), at 97. 50 The wording of the grant has some importance to this Court's analysis of whether CGCC has abandoned its use of the Easement and whether it had an intention to abandon that use. CGCC argues that the grant's language is not relevant to this Court's consideration, as the issue is not whether CGCC has any particular right under the Easement. This Court does not agree with that analysis. For example, had the grant stated that the portion of the Servient Tenement that formed the Easement would be used to house the horses that worked on the Dominant Tenement, t he E asement's useful p urpose would ha ve b een e xhausted when CGCC s tarted us ing i nternal

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combustion engines or electric vehicles to do what the horses did at the turn of the twentieth century. Thus, the Easement, by its terms, would no longer be necessary. 51 I n Giecewicz v. Alexander (1989), 3 R.P.R. (2d) 324 (Ont. H.C.), at 334-35, aff'd 1990 CarswellOnt 2388 (Ont. C.A.), leave to appeal refused (1991), 48 O.A.C. 416 (note) (S.C.C.), Gray J said the following:

So far as the law is concerned, there would appear to be three main principles applicable to the interpretation of easements in connection with this action. The first of these principles is that the extent of an easement created b y a n ex press grant d epends o n t he wording o f t he i nstrument. T he e xtent of t he e asement i s ascertainable b y t he ci rcumstances e xisting at t he t ime o f t he g rant a nd k nown t o t he p arties o r with t he reasonable contemplation of the parties at the time of the grant. ... The second of these principles is that subsequent changes in circumstances may alter the justifications for the use of the easement. A grant may be made for a l imited purpose and when that purpose is accomplished, the right of way shall cease ... ... [T]he third of these principles . .. [ is] that in interpreting the grant, the Judge should p lace himself in the situation of the grantor at the time of the grant.

52 Madigan argues that this examination is undertaken to determine the intention of the parties with respect to the nature and extent of the rights granted and that the court should have regard for the conveyance as a whole, including the plan that forms part of it, to establish the parties' intention as to the use to which the land is to be put: Fyfe v. James (2006), 42 R.P.R. (4th) 221 (Ont. S.C.J.) at paras 14-16. 53 The interpretation of the grant differs depending on the emphasis that one places on one phrase or another. Of course, t he parties a sk t his Court t o d ecide which phrase is the predominant phrase, which will help it to determine intention. 54 Madigan asks this Court to focus on the words "said highway," arguing that the intention of the parties was to grant a right of way to access the Dominant Tenement to and from the "said highway." It goes on to argue that the Easement made sense at the time it was granted. It used to be part of a r oad right-of-way running north to south in the community of Elboya in the 1910s and early 1920s. In 1927, the City decided to angle this north-south r oad r ight-of-way in an eas tward d irection t o co nnect with what was k nown at t he t ime as Crescent Boulevard, which became Elbow Drive. Anticipating these changes to the roadway, CGCC obtained the strip of property referred to as "the East Strip", which is a separately-titled property abutting the Dominant Tenement and stands in CGCC's name. The East Strip is not part of the Easement. 55 There is no dispute that CGCC has made frequent use of its own property, the East Strip, in recent decades. This does not, however, equate with evidence of use of the Easement, for the purposes for which it was intended or otherwise. 56 C GCC asks this Court to focus its a ttention on o ther wording contained in the grant. I t argues that the Easement gr anted C GCC " full a nd free r ight a nd l iberty" t o "pass an d r epass" o ver t he S ervient P roperty, i n connection with CGCC's "use and enjoyment of the [Dominant Tenement]...to whatever uses the said land may be from time to time lawfully put..." Furthermore, the Easement has been consistently registered on ti tle to the Servient Tenement since 1929. 57 CGCC goes on to argue that it only intends to use the Easement for the broad purposes contemplated in grant, in particular, using the Easement as a service entrance to the Dominant Tenement, and for other purposes that it articulated, but which are not relevant to this Court's consideration. 58 This Court holds that the grant must be given the broad interpretation that CGCC suggests, in the sense that the grant intended that CGCC be able to access the Dominant Tenement by passing over the Easement. Even today, one access route to the Easement is from a driveway off the "said highway," viz, Elbow Drive. D. Potential Future Use of the Easement by CGCC 59 This Co urt a ssumes that C GCC h as p rovided th is C ourt with a lis t o f it s p otential future u se o f t he Easement to meet what Master Prowse said in Genstar that its conduct must have been such as to make it clear

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finds no abandonment. The court takes into account that the right of way might be useful to the dominant owner in the event of a future development and considers that poosible future intention to conclude that no present intention to abandon can be inferred.

The following guidelines were enumerated in Liscombe vs. Maughan:71

1. abandonment is a question of fact;

2. non use is essential but not conclusive;

3. adverse possession by the servient owner is not conclusive;

4. non use must indicate acquiescence to equal abandonment;

5. all evidence must be considered; and

6. the onus is on the servient owner to establish abandonment.

In Remicorp Industries Inc. v. Metrolinx72 is a difficult case to understand. The court requires Metrolinx to move an access that it has the benefit of on the basis that the easement has been abandoned. The court confirms that an exclusive easement does not give the dominant owner use of the servient lands to the exclusion of the servient owner. Exclusive does not mean exclusive of the servient owner and therefore must be exclusive of other easement holders. The law has always been that the dominant owner cannot be

that it had, a t the relevant time, "a f ixed in tention to never a t any time thereafter assert the r ight to himself or attempt to transmit it to anyone else." [Emphasis added]. 60 Madigan argues as follows:

The possible future uses put forward by the Country Club, while creative, lack an evidentiary foundation; and with the greatest of respect are over-reaching, highly speculative, unrealistic and simply do not accord with common sense. More importantly, no evidence has been put forward of prior uses of the Easement consistent with the possible future uses asserted by the Country Club.

61 That is not the test. The test is whether any evidence is presented by Madigan to show that CGCC has a fixed intention to never at any time in the future assert a right to use the Easement. The future uses that CGCC presented are not highly speculative or unrealistic on a balance of probabilities. Thus, the onus shifts to Madigan to show they are. IV. Conclusion 62 All this takes us back to the statement in Anger & Honsberger that, "if the easement was acquired by a grant ... it is immaterial whether there has or has not been enjoyment of the easement for long periods of time. Easements so acquired can rarely be extinguished in any manner-other than by express release or by circumstances s o co gent as to p reclude a q uasi-releasor fro m d enying t he r elease." A s well, i n M ason a nd Jakmar, the courts cautioned that abandonment should not be lightly i nferred and it is "extremely d ifficult" to prove. 63 H ere the obstructions are not of such a permanent nature to show that CGCC had an intention to abandon the E asement. As well, t he grant i s very b road. T here ar e n o o ther ci rcumstances t hat may indicate CGCC's intention to abandon. Madigan has failed to meet its "extremely difficult" burden. 64 Thus, this Court finds that there is no abandonment. Accordingly, it dismisses Madigan's application.

71 Liscombe vs. Maughan supra. 72 Remicorp Industries Inc. v. Metrolinx 2016 ONSC 10

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compelled to relocate an easement even if it is more convenient for the servient owner and has no impact on the dominant owner. In fact even where the new easement is beneficial to the dominant owner, the dominant owner cannot be compelled to accept the new easement. This concept seems to arise out of the legal theory that the servient owner cannot derogate from her grant, what is given cannot be taken away.

C. Substitution

An easement that by its terms contemplates a different right of way or easement being granted to replace the originally granted easement, will result in the original easement being extinguished.73 The p rovision o f alternative access will not r esult in the o riginal easement being extinguished unless th e a lternative e asement is c omparable. T he c ourts w ill n ormally reject a s ubstituted easement n o m atter h ow b eneficial u nless t he l anguage o f t he e asement can r easonably b e interpreted to permit substitution.

In Fyfe vs. James 74 the s ervient l ands w ere s ubject t o t wo eas ements g iving ac cess t o t he dominant lands. The dominant owner built a new road which the applicant argued made one of the rights of way obsolete. The Court refused to extinguish the right of way because:

(i) the e asement w as granted b y express g rant a nd extinguishment w ill not lightly be permitted of an express grant;

(ii) since t here w ere no words of l imitation i n t he grant, i t w as a p erpetual easement;

(iii) the p arties s hould h ave ex pected t he easement t o b e released, i f a substituted access were obtained; and

(iv) no intention can be inferred from the construction of alternate access.

The court can determine that another legal access has been provided to the dominant owner in substitution for the original right of way and the original right of way is therefore extinguished.75 However, t he s ervient ow ner c annot uni laterally s ubstitute a ne w r ight of w ay f or a n e xpress right of way even if more convenient. In Gromley vs. Hoyt76 a winding cottage road benefited several c ottages. T he s ervient ow ner w anted t o s traighten t he c ottage r oad f or t he be nefit of himself and the dominant owners, but one refused. T he Court confirmed that the right of way could not be unilaterally changed without the consent of all users.77

73 Giecewicz vs. Alexander supra. 74 Fyfe vs. James (2006) 42 R.P.R. (4th) 221 (Ont. S.C.). 75 Bost Property Inc. v. Highland West Developments Inc., supra. 76 Gormley vs. Hoyt (1982) 43 N.B.R. (2d) 75. 77 Canada Cement Co. v Fitzgerald (1916) 53 S.C.R. 263 (S.C.C.) where the Supreme Court of Canada stated “The

right accorded to the defendant by the judgment of assigning to the p laintiff some suitable way o ther than the formerly used and more convenient and less prejudicial to its mining operations is probably something to which it was not entitled”.

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To the extent that an alternate route does not exist a t the time of a conveyance, the court will allow the substitution of an alternate route for access when it is thereafter available.78

Where the applicant had the use of a right of way across a farm for 72 years, and the respondent purchased t he f arm and requested t he e asement be r elocated and the respondent t hen installed additional gates and otherwise made use of the right of way more difficult, the court held that the servient ow ner c ould not s ubstitute a n a lternative r ight of w ay. T here i s no obl igation on the dominant owner to use a substituted right of way to accommodate the servient owners farming activities.79

Once a p rescriptive e asement i s d etermined, t he l ocation can not b e ch anged b y t he s ervient owner unilaterally regardless of how convenient i t is. While the location cannot be changed, if the old way is obstructed, and a new way is proffered, the dominant owner cannot argue that his way h as be en s ubstantially i nterfered w ith be cause he c ontinues t o ha ve a ccess ove r t he ne w way. The servient owner has no ability to change a way given by necessity or prescription.80

Where the dom inant ow ner pur chased l and on a pr ivate c anal and the s ervient ow ner bui lt a bridge across the canal which obstructed the plaintiff’s easement, and the plaintiff deviated over an unobstructed part of the servient owner’s land to get around the bridge the court held that the test was “It is admitted that if A. grants a right of way to B. over his field, and then places across the way an obstruction not allowing of easy removal, the grantee may go round to connect the two parts of his way on each side of the obstacle over the grantor’s land without trespass.” 81

In Goodhart vs. Hyett82 the plaintiff established an easement by express grant to run a pipe from a well on the servient lands to the dominant lands, which easement had existed for 100 years. At some point t he ex isting p ipe was r eplaced with a l arger pipe and the l ocation of t he pipe was changed but the new location still supplied water from the well to the dominant lands. The new size a nd l ocation ha d e xisted f or 23 years. T he de fendant i ntended t o b uild a hous e ove r t he pipes. The court upheld the new location and size based on acquiescence.

Where t he dom inant ow ner a nd s ervient ow ner agree t o m ove a r ight of w ay 300 f eet f arther from Lake Erie because blowing sand from the beach blocks the right of way from time to time, the n ew right o f w ay is a substitution f or t he o ld r ight of w ay, a nd t he ol d r ight of way i s therefore extinguished.83

In Lane vs. George84 the plaintiff used a right of way which was different from the one granted to her. The court allowed her to give up the existing right and use the original right of way.

78 Goguen vs. Fougere (2005) 38 R.P.R. (4th) 219 (N.B.Q.B.) 79 Kozik vs. Partridge (2000) 36 R.P.R. (3rd) 254 (Ont. S.C.) 80 Deal vs. Palmeter [2004] 244 D.L.R. (4th) 196 (N.S.S.C.) 81 Selby v Nettleford (1873) L.R. 9 Ch 111(Ch. App) 82 Goodhart vs. Hyett supra. 83 Malden Farms Ltd. vs. Nicholson supra. 84 Lane vs. George (1904) 4 O.W.R. 359

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An easement can be created which is inconsistent with the natural rights imposed by law. In this case, the natural rights are not extinguished but are merely suspended while the easement exists. If the easement is terminated or abandoned, the natural rights thereafter apply.85

The s ervient o wner can not cr eate i nconsistent e asements. O nce t he f irst i n t ime eas ement i s granted, a second inconsistent easement is void because it would derogate from the first grant.

D. Extinguishment

In Moorhouse vs. Child,86 the applicant had p ermission f rom the local mu nicipality to build a pool and cabana over an easement in favour of his neighbours. He argued that the easement was either a bandoned or e xtinguished be cause t he dom inant ow ners ha d not obj ected t o t he applicant’s application to build a pool and because the original purpose of the easement for use as a sandy beach no longer applied there was no longer a beach on that part of the right of way. The co urt r ejected t he ap plication b ecause t here w as no c ogent e vidence t hat e very pa rty benefiting from the easement had agreed to abandon or extinguish it.

An easement is not extinguished by slight variations of the use of the servient lands so long as there is no increase in the burden on the servient lands.87

It is possible that if a covenant by the dominant owner in an easement is fundamental to the right granted that the easement would be terminated by a default. However, this would be an extreme situation because the easement is a property right and its cancellation increases the benefit to the servient l ands a nd di minishes t he dom inant l ands. Instead t he c ourt m ay us e o f t he l aw o f injunction to force the dominant owner to comply with the covenant or suspend its use until the default is cured.88 In the event that an easement is cancelled for fundamental breach, the Court can provide relief from forfeiture if the default could be cured.

Because the loss of an easement is the loss of a property right in favour of the dominant owner and a n i ncrease i n t he pr operty right of t he servient ow ner, e xtinguishment m ay require acquiescence by the servient owner.89

The better rule would be to permit extinguishment upon evidence of such by the dominant owner even without acquiescence or knowledge of the servient owner unless a reasonable person would not want the easement extinguished because of l iability thereby acquired or the servient owner moves within a reasonable time to reject the restoration of the servient lands.

85 Goddard page 32, Bealey vs. Shaw 6 supra; Wright vs. Howard (1823) 1 Sim. & St. 190; Sampson vs. Hoddinott

(1857) 1 C.B. (N.S.) 611. 86 Moorhouse vs. Child [1994] O.J. No. 516. 87 Harvey vs. Walter supra where the height of eves overhanging the servient lands was raised by a few feet. In this

case, for a period of time the eves must have been removed when the old house was demolished and a new one with higher eaves built.

88 Collinson vs. LaPlante (1992) 28 R.P.R. (2d) 297 (B.C.C.A.). See also Holmes vs. Goring (1824) 2 Bing. 76. 89 Collinson vs. LaPlante supra. In Sunoco Inc. vs. Vocisano (2001) O.J. No. 5878 it was suggested that an Ontario

Court may not ha ve t he a uthority t o e xtinguish a n e xpress e asement a s th is would a mount to e xpropriation without compensation.

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Unity of title will extinguish an easement but unity of possession will not.90

A statute authorizing the construction of a pier where the public had previously enjoyed access to a beach, extinguishes the public easement.91

A right to an easement given to a tenant over other lands of the landlord either by express grant or by implication, terminates when the lease terminates.92

The c ourt c an l ook a t t he c ircumstances s urrounding t he grant of t he easement a nd i f t hose circumstances h ave ch anged i n a s ignificant w ay, c an f ind t hat t he eas ement i s e xtinguished because its intended purpose is no longer applicable.93

In Sunoco Inc. vs. Vocisano94 a summary judgement motion was dismissed where the applicant asked the court to extinguish an express easement because a public road had been created which abutted the dominant l ands and provided s imilar access p rovided b y the or iginal r ight of way. The c ourt h eld t hat t o extinguish t he r ight of way w ould amount t o e xpropriation w ithout compensation.

An express easement can be extinguished by prescription.95

In National Guaranteed Manure Company vs. Donald96 a company was authorized by statute to build a can al and was given a r ight t o d ivert water. T he c anal w as ev entually converted t o a railway p ursuant t o a n ew s tatute. T he r ight t o t ake water en ded w hen the c anal ceased t o operate as a canal.

E. Abandonment, Termination, Extinguishment and Substituion of Particular Kinds of Easements

1. EXPRESS EASEMENTS

(a) Termination

Express eas ements ar e e asements g ranted p ursuant t o a co ntract b etween t he dominant o wner and t he servient owner. Express easements can be broadly drafted or narrowly drafted. Express easements can be permanent or temporary. It is a matter of contract interpretation whether an express easement terminates according to its terms. In this case, the easy case is where the express easement has a termination right built into i t. I f t he termination right is v ague, t he court c an f irst l ook a t the w hole of the e asement

90 Ivimey vs. Stokes supra. “The law i s clear, that i f the same person becomes absolute o wner o f t he land from

which a stream of water flows, and also of the land into which it flows, the easement which the latter might have claimed is extinguished, and it was sought to apply that principle to the case now before us”.

91 Yarmouth Corp. vs. Simmons (1878) 10 Ch. D. 518. 92 Beddington vs. Atlee supra. 93 Bost Property Inc. v. Highland West Developments Inc., supra. 94 Sunoco Inc. vs. Vocisano supra. 95 Moorhouse vs. Childs supra. 96 National Guaranteed Manure Co. vs. Donald (1859) 4 H. & N. 8).

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contract to determine the parties’ intention to create a termination right or not. If this is not sufficient to interpret t he t ermination right, t he court can look a t the c ircumstances surrounding t he g ranting of t he easement to interpret the termination right. The courts will, however, be reluctant to embark on a review of the surrounding ci rcumstances unless the parties’ i ntention cannot be reasonably determined f rom a review of the contract.

A vague easement is void. A broadly drafted easement is not.

Generally, the c ourts w ill ignore conduct subsequent t o t he g ranting o f the easement t o i nterpret t he easement.

The courts are sometimes asked to determine if an easement is perpetual or for so long as a particular set of circumstances exist. For instance, an easement given for access to repair a house may terminate if the house is torn down, or maybe not. The answer depends on whether the easement is ambiguous and if the courts feel it can look to surrounding circumstances to interpret the easement. There is no presumption of permanence and no p resumption of a temporary t erm. S ilence in the contract is not an indication of a perpetual right. I f anything, because an easement is a valuable right and interest in land, the courts will lean towards it being of perpetual benefit. Easement drafters are therefore asking for trouble if they don’t expressly provide that the easement is perpetual or temporary.

Often an easement is granted for a particular purpose. Over decades, the neighbourhood changes and the purpose changes but the easement is still of value to the dominant owner. The parties will ask the courts to determine if the intention of the parties was that the easement ends when the purpose ends. Even if the easement is perpetual, the easement can still end when the purpose ends. Here again, the courts will look first at the wording of the easement and then only if it is ambiguous, will the court look at surrounding circumstances at the time the easement was granted. So, a broadly drafted easement will continue even if the specific purpose it was originally given to deal with ends. The words of the grant will determine the intended purpose, not what the parties actually intended at the time of the grant. Even if the courts look at surrounding ci rcumstances an d see t hat i t w as g iven f or a sp ecific p urpose, that al one w ill not be sufficient to limit the easement to that purpose. The courts will not easily take away a property interest. Some clear intent to limit the easement will be necessary.

A court can read into an express easement terms that the parties intended should be part of the easement. These are implied terms. The legal interpretation concepts for creating implied terms in express easements are the same as for finding implied terms in other contracts.

Where t he dom inant ow ner de faults on hi s c ovenants i n an eas ement, t his d oes n ot g ive t he ser vient owner the right to terminate the easement unless there is an express provision to this effect or the court could imply such a term. The easement is a property right and cannot be terminated by reason of default. However, the right to use the easement can be suspended while the easement contract is in default. Even if there is an express termination right the court can provide relief from forfeiture.

(b) Abandonment

Express eas ements ar e d ifficult t o ab andon. U nless t here is an ac tual r elease g iven b y t he d ominant owner, the express easements w ill be de clared abandoned on ly w here there is c lear a nd un equivocal evidence of an intention on the part of the dominant owner to abandon the easement or the servient owner clearly obstructs t he e asement and the dominant owner a cquiesces in the obstruction usually by not complaining for a number of years. N on use in itself is insufficient to show an intention to abandon an express easement. Something more must be relied upon. For instance, if the dominant owner blocks the right of way with a fence or boulder or if the easement is to access a specific feature such as a lane or

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railway crossing and the dominant owner builds a more convenient access point or railway crossing and no longer uses the old access or railway crossing, this is evidence of abandonment.

Other examples of abandonment of a right of way include planting trees in a right of way so it can’t be used, fencing of f a r ight o f w ay s o it c an’t be us ed by t he dom inant ow ner and t he dom inant ow ner acquiescing i n t his, c reating an al ternative access, written evidence that the dominant owner no longer uses an easement, digging your own well where you have an easement to use your neighbour’s well, and tearing down the house having the benefit of a mutual driveway and then building a new home with a driveway o n an other p art of t he p roperty. Wh ile co urts are r eluctant t o d eclare an ex press ea sement abandoned, the determining factor will likely be, does the easement accord any continuing or real benefit to the dominant owner. Even if that benefit is a future benefit (example – it will facilitate the severing of the dominant t enement into two bui lding l ots) the court will not t ake away a property i nterest that has some continuing or future benefit absent cogent evidence of abandonment.

Once abandoned, the dominant owner cannot reverse his position and withdraw the abandonment although if the dominant owner starts to use the easement again with the consent of the servient owner, the courts can find: (i) there never was an abandonment; (ii) the abandonment was waived or (iii) there is permissive use in the nature of a licence.

(c) Substitution

Substitution is the right to replace the location of an easement with a m ore convenient easement for the dominant or servient owner. Generally, there is no right to substitution unless the language of the express easement can reasonably be interpreted to contemplate a substitution right. I t is not uncommon to heve the language of the easement contemplate the moving of an easement to a more convenient location.

(d) Extinguishment

An ex press easement can be ex tinguished i n l imited ci rcumstances. F or i nstance, if t he d ominant and servient l ands merge, t he easement may b e ex tinguished o r may b e su spended while there i s co mmon ownership. If the purpose of the easement becomes impossible of performance by reason of acts of God or statutory prohibitions, the easement may be extinguished or may be suspended while the impossibility of performance exists. The decision as to whether the easement is extinguished or suspended depends on whether t he e vent i s by i ts t erms a t emporary one or a pe rmanent on e, e ven i f i t c ould in t heory be reversed. For instance, if a bridge is washed out, the easement over it is suspended. If, however, the river is dammed and the bridge no longer exists because there is a l ake and not a r iver, then the easement is extinguished even if it is theoretically possible that the dam could be removed and the river created again. If a statute is passed expropriating the easement, the easement is extinguished.

Easements can also be void ab initio because there was no authority on the grantor to give it, no authority on the grantee to receive it, a statutory restraint on the granting of the easement or because the easement does not meet the usual four criteria for creating an easement.

Feeding t he es toppel is available t o regularize easements where the g rantor d id n ot h ave t he p ower t o convey but later acquired it. For instance, if a grantor has no title to the servient lands then he cannot give an easement, but when she acquires the servient lands, the easement will be valid.

A valid express easement which is not registered will be void as against a purchaser for value without notice.

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A valid easement where the servient lands are registered under the Registry Act will become void after forty (40) years, if a notice of claim is not registered. New legislation overturns the results in the Court of Appeal decision of Ramsay which protected easements if they were referenced in a deed within the forty (40) years. As such, practitioners must register notices of claims for easements to keep them alive after forty (40) years from the date of the original grant if the lands are in Registry. These rules do not apply to Land Titles.

(e) Other

Where the ea sement d oes not embody t he ag reed c ontract b etween t he p arties because for i nstance, a termination r ight was not included, the courts have the power to rectify t he easement. For the law on rectification see Sylvan Lake Golf & Tennis Club Ltd. vs. Performance Industries Ltd. 209 D .L.R. (4th) 318 (S.C.C.)

2. PRESCRIPTIVE EASEMENTS

(a) Termination

Prescriptive easements are hard to establish, but once established they “operate like an express easement”. One difference between prescriptive easements and express easements is that the prescriptive easement is limited to the original uses made of the servient lands. If the dominant owner no longer uses the servient lands for the original purpose, the law will treat the easement as ab andoned or extinguished or treat the changed use as an actual trespass.

Because prescriptive easements are created by operation of law and actual use, there are no contractual terms a nd no t ermination r ights. They ar e p erpetual. W here the p ossessory u se i s b y a t enant o r mortgagee, it is not correct that prescription right ends when the lease ends or the mortgage is repaid. The freehold owner gets the benefit of its tenant or lender’s use.

(b) Abandonment

Once a prescriptive easement is established, it can be abandoned in the same way as an express easement. Since the right was acquired by adverse use and represents an acquisition of a legal right without paying compensation for the right, it may be thought that a court will be more likely to find abandonment of a prescriptive e asement. I n t his c ase, non use might on i ts own constitute abandonment. I n a ddition, a change i n use could r esult i n e xtinguishment or a bandonment. W here t he pr escriptive r ight was for a farm use, the prescriptive easement will be limited to that use and where the dominant owner changes the use and makes the original use impossible (the farm is developed) the court will find that the prescriptive easement has been abandoned.

(c) Substitution

It i s n ot p ossible t o su bstitute an a lternate ea sement f or a p rescriptive easement b ecause there ar e n o contractual terms which would permit this. Where the dominant owner substitutes a new access route for an old prescriptive access, the prescriptive easement will cease if its use ceases.

(d) Extinguishment

A p rescriptive ea sement will b e ex tinguished in al l t he sam e w ays as an ex press easement. S ince a prescriptive easem ent is based o n ad verse use, a co urt w ill b e m ore w illing t o f ind it h as b een extinguished by operation of law.

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3. IMPLIED EASEMENTS

(a) Termination

There are three kinds of implied easements. F irst there are those where a court reads into a contract an easement b ecause the p arties i ntended t o g rant an easem ent; se cond t here ar e easem ents o f ap parent accommodation where the right was used by the joint owner of the dominant and servient lands before severance; and third, there are easements of necessity. To the extent that the court is prepared to imply contractual terms into easements, implied easements will be treated like express easements. Easements of necessity, however, terminate when the necessity terminates and arise again if the necessity returns.

(b) Abandonment

Once an i mplied easement i s d etermined t o exist, i t can b e abandoned i n t he same way as an ex press easement. In theory, an easement of necessity is not abandoned when the necessity ends, it is suspended or ex tinguished. I t i s p ossible f or an ea sement o f n ecessity t o b e ab andoned ev en i f t he n ecessity continues w here it i s a bsolutely c lear that t he d ominant ow ner accepts l andlocked pr operty. I f t he dominant o wner o btains al ternate acce ss, t he eas ement o f n ecessity i s n ot ab andoned, t he eas ement i s extinguished because the necessity ends.

(c) Substitution

It i s not possible to su bstitute an easement o f n ecessity. H owever, t he se rvient o wner can ch oose t he course of the easement of ne cessity. If t he s ervient ow ner do esn’t, the dom inant ow ner c an. O nce chosen, the easement of necessity cannot be changed. It is in theory possible for an implied easement to contain substitution r ights since i t is treated l ike a n express easement b ut the court w ould ha ve t o b e convinced that substitution language was intended by the parties. I t is not possible to have substitution rights for an ea sement o f ap parent accomodation b ecause t his easement i s b ased o n actual u se, n ot possible use.

(d) Extinguishment

Once an implied easement exists it is treated like an express easement for the purposes of extinguishment.

4. EQUITABLE EASEMENTS

An eq uitable ea sement a rises w here t he co urt b elieves t he servient o wner sh ould be e stopped f rom claiming the non existence of an easement. This usually arises where the dominant owner is encouraged to spend money on the reasonable belief that she will be getting an easement.

(a) Termination

Because these are equitable rights, it is open to a court to incorporate termination rights if it is equitable to do so.

(b) Abandonment

An equitable easement can be abandoned in the same way as an express easement.

(c) Substitution

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Once established there is no right of substitution. However, if equitable, a court can build in substitution language

(d) Extinguishment

Once established, an equitable easement is extinguished in the same way as an express easement.

F. STATUTORY TERMINATION

There is no statutory right to apply to the court to have an easement declared obsolete as there is in British Columbia. The closest we have in Ontario is Section 61 of the Conveyancing and Law of Property Act.

61.(1) Restrictive covenants, modification or discharge of. – Where there is annexed to land a condition or covenant that the land or a specified part of it is not to be built on or is to be or not to be used in a particular manner, or any other condition or covenant running with or capable of being legally annexed to land, any such condition or covenant may be modified or discharged by order of the Superior Court of Justice. R.S.O. 1980, c. 90, s. 61(1), revised; 2006, c. 19, Sch. C, s. 1(1)

61.(2) Appeal. – An appeal lies to the Divisional Court from a decision under this section. R.S.O. 1980, c. 90, s. 61(6); 1981, c. 66, Sch., revised.

61.(3) Exception. – Nothing in this section applies to building restrictions imposed by a by-law passed under the Municipal Act, 2001, the City of Toronto Act, 2006 or the Planning Act. R.S.O. 1980, c. 90, s. 61(7); 2002, c. 17, Sch. F, Table; 2006, c. 32, Sch. C, s. 10.

61.(4) Same. – Nothing in this section applies to covenants and easements

(a) established under the Agricultural Research Institute of Ontario Act; or

(b) entered into or granted under the Conservation Land Act, 1994, c. 27, s. 6; 2006, c. 23, s. 31.

While a “co ndition” o r “ covenant” d oes not refer t o easem ents b ut i s i ntended t o refer to restrictive covenants, the amendments in 2006 and embodied in Subsection 61(4) have opened the possibility that Section 6 1 ap plies t o eas ements o r el se t he r eference t o eas ements i n 6 1(4) w ould n ot h ave b een necessary. I suggest this is bad drafting only but the issue is now open for argument in the courts.

CASELAW

An easement that by its terms contemplates a different right of way or easement being granted to replace an originally granted easement, will result in the original easement being extinguished. The provision of alternative acc ess w ill not r esult in the original e asement be ing e xtinguished unl ess t he a lternative easement i s co mpatable w ith the o riginal ea sement. If a p arty m akes ap plication t o the courts for a substituted easement, the court will reject the request unless the language of the easement can reasonably be interpreted to permit substitution.

In Fyfe vs. James97 the servient lands were subject to two easements giving access to the dominant lands. The dominant owner built a new road (the substituted easement) which the applicant argued made one of the rights of way obsolete. The Court refused to extinguish the right of way. The following factors were relevant:

97 Fyfe vs. James (2006) 42 R.P.R. (4th) 221 (Ont. S.C.)

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(i) the easement was granted by express grant and extinguishment will not lightly be permitted of an express grant;

(ii) since there were no words of limitation in the grant, it was a perpetual easement;

(iii) if the parties expected the easement to be released, if a su bstituted access were obtained by the dominant owner, then the grant should have reserved this right;

(iv) the dominant owner had released another right of way but not this one.

(v) No intention to release can be inferred from the construction of alternate access.

In Collinson v. LaPlante,98 the B.C. Court of Appeal was asked to cancel an easement pursuant to Section 31 of the Law of Property Act because the easement was obsolete or had been terminated. The factual issue was that an alternate access to the dominant lands had been obtained over a public highway. T he dominant owner was r equired t o pay f or t he c ost of graveling t he or iginal e asement a nd keeping i t i n repair and hadn’t done so. The court held the original easement was not obsolete even though substituted access existed because it was actually being used by the dominant owner but in a different and reduced way. This was not a question of balancing the parties’ positions. T he dominant user had not kept the easement in r epair. The r ight t o us e was no t t erminated but the C ourt could suspend its use unt il the repair was corrected. Non repair did not terminate an easement. The Court said “Had there been in this case a complete refusal on the part of the appellants to maintain the driveway in a manner that conformed to the covenant which is binding upon them, coupled with an insistence on using and abusing the road and its surface, I might be inclined to the view that the right of way, in Gale’s words determined on default”.

In TDL Group Ltd. vs. Harvey,99 t he B ritish C olumbia C ourt of Appeal c oncluded t hat a n e asement granted to access a garage was obsolete and abandoned when the garage was torn down and replaced with an apartment building and where the easement had not been used for thirty years. The combination of substituted access, change of use and non user meant the easement was terminated or abandoned.

However, where an easement was originally granted for access to a garage on the dominant lands and the garage was torn down and an apartment building constructed on the dominant tenement, the easement was neither substituted or abandoned where the tenants of the apartment building used the easement to get to the apartment building. T he easement was not obsolete although the character of the use changed. The easement was not limited to the original use of access to a garage.

Excess user does not terminate an easement. It is suspended until the excess use stops.

In Henderson v Volk100 for a long time there was a sidewalk between two houses that covered part of the servient lands. The s ervient ow ner pa ved ov er pa rt of the s idewalk a nd b uilt a pa tio ov er pa rt of t he sidewalk and eventually fenced in the strip. The dominant owner accessed his property on the other side of the house. If there were a prescriptive easement over that part of the sidewalk on the servient lands, it had been abandoned.

In Bost Property Inc. v. Highland West Developments Inc.101 the dominant tenement was subdivided into residential lots. The local municipality obtained from the developer one-foot reserves to p revent l egal 98 Collinson vs. LaPlante (1992) 28 R.P.R. (2d) 297 (B.C.C.A.) 99 TDL Group Ltd. vs. Harvey (2002) 48 R.P.R. (3d) 223 (Ont. C.A.) 100 Henderson vs. Volk (1982) 35 O.R. (2d) 379 (Ont. C.A.) 101 Bost Properties Inc. v. Highland West Developments Inc., [2002] O.J. No. 477 (Ont. S.C.J.)

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access into and out of the subdivision over the public roads. The municipality gave a revocable license to the dominant owner/developer to enter and exit the subdivision over the one foot reserves. The Court held that there was alternate access from the dominant l ands to a public highway over t he s ubdivision roads and the one foot reserve license and therefore the express right of way (which until the subdivision was registered was the only access to the dominant lands) was unnecessary. T he revocable license over the o ne reserve w as legal a ccess for t he pu rpose o f de termining i f the r ight of w ay w as no l onger necessary.

The Court can look at the circumstances surrounding the grant of the easement and if those circumstances have changed in a significant way, can find that the easement is extinguished because its intended purpose is no longer applicable.

A change in the neighbourhood from rural to urban uses may be a sufficient change that an easement in no longer required and therefore is extinguished.

In Giecewicz vs. Alexander,102 the c ourt found that t he wording of an express grant of a right of way provided that the right of way would terminate when access to a public street or substituted right of way was provided to the dominant owner. The right of way contemplated a substitution if the servient lands were subdivided and the court considered access to a public street equivalent substitution to the provision in the grant for “a suitable alternative right of way.” The suitability test in the grant was interpreted to take into account the needs of both the dominant and servient owners and inconvenience to the dominant owner was not an impediment to extinguishing the original right of way.

The C ourt c an de termine t hat a nother l egal a ccess ha s b een p rovided to the dom inant ow ner in substitution for the original right of way and the original right of way is therefore extinguished. However, the servient owner cannot unilaterally substitute a new right of way for an express right of way even if more convenient. In Gromley vs. Hoyt a winding cottage road benefited several cottages. The servient owner wanted to straighten the cottage road for the benefit of himself and the dominant owners, but on e c ottage ow ner refused. The C ourt confirmed t hat the r ight of w ay c ould n ot b e un ilaterally changed without the consent of all users.

An easem ent that is not u sed m ay be extinguished w here t here is a si gnificant c hange i n the neighbourhood making the agreed purpose inapplicable and where in the case of a right of way there is alternative access.

Where the dominant owner and servient owner agree to move a right of way 300 feet farther from Lake Erie because blowing sand from the beach blocks the right of way from time to time, the new right of way is a substitution for the old right of way, and the old right of way is therefore extinguished.

In Canada Cement Co. v Fitzgerald,103 the vendor reserved a right “to pass over for cattle, horses and other domestic f arm animals for water going to and f rom Dry Lake” and the purchaser/servient owner excavated t he bank o f t he Dry L ake where t he ca ttle went t o d rink su ch that i t was n o l onger safe o r possible f or t he ca ttle to water at D ry L ake. T he court w as p repared t o allow t he s ervient o wner t o substitute a more convenient location for the easement, a lthough this seems to have been a co ncession that the dominant owner agreed to rather than a legal right to do so. A nglin J. in the Supreme Court of Canada stated “The right accorded to the defendant by the judgement of assigning to the plaintiff some suitable w ay other than t he f ormerly us ed a nd m ore convenient a nd l ess pr ejudicial t o its m ining operations is probably something to which it was not entitled”. 102 Giecewicz v. Alexander (1989), 3 R.P.R. (2d) 324 (Ont. H.C.) 103 Canada Cement Co. v Fitzgerald (1916) 53 S.C.R. 263 (S.C.C.)

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An easement can be created which is inconsistent with the natural rights imposed by law. In this case, the natural rights are not extinguished but are merely suspended while the easement exists. If the easement is terminated or abandoned, the natural rights thereafter apply.

The servient owner cannot create inconsistent easements. O nce the first in t ime easement is granted, a second inconsistent easement cannot be created because it would derogate from the first grant.

An e xpress, i mplied, pr escriptive or e quitable easement c an be e xtinguished by mutual c onsent and release, by ope ration of l aw a nd by a bandonment. T he servient ow ner ha s n o pow er t o uni laterally extinguish an easement.

An easement which is suspended for some reason, revives once the cause of the suspension ceases. A n easement which is extinguished cannot be revived.

An easement being an interest in land cannot be destroyed as a matter of law. I f the means to use the easement is destroyed by an Act of God such as a f lood, forest fire, earthquake or violent s torm which washes out or destroys all or part of the servient lands so that the easement can no longer be used, this does not result in the easement be ing extinguished or destroyed. I f the servient l ands are restored, the easement i s r estored a nd t he dom inant ow ner ha s t he r ight t o g o on t he s ervient l ands t o r estore t he servient lands in order to restore the easement. For instance, if a right of way crosses over a bridge and the bridge is washed out in a storm, the right of way is not thereby extinguished even if it is no longer useable. It is suspended until the bridge is rebuilt. The dominant owner can go on the servient lands and rebuild the bridge. However, if the bridge is not rebuilt and the right of way is not used for a period of time or if an alternate access is used, the court may infer an intention to abandon the easement, and if the bridge is subsequently rebuilt by the servient owner, the easement may not thereby be revived.

In Arduini vs. Gasparin,104 non use of an easement was not conclusive of abandonment but had to be accompanied by evidence of an intention to abandon.

In Laker vs Jackson,105 the onus is on the party alleging abandonment to show abandonment on a balance of probability.

In Jakmar Developments Ltd. vs Smith,106 it i s ex tremely d ifficult to show abandonment of an express easement.

In order to show abandonment, a release of the easement by the dominant owner is to be presumed in all the circumstances.

In Kingswood Realty vs Kileel,107 absent adverse possession, renunciation or some other way recognized by law, discontinued use is insufficient to prove abandonment.

Easements m ay b e ex tinguished b y l aw, b y act o f G od o r b y st atutory en actment. I n t he case o f extinguishment by law, the acquisition of the dominant tenement by the servient owner or the acquisition of the servient tenement by the dominant owner may constitute a merger at law which would extinguish the easement by law.

104 Arduini vs. Gasparin 88 B.C.L.R. (2d) 27 105 Laker vs. Jackson (2001) 44 R.P.R. (3d) 155 (Ont. S.C.) 106 Jakmar Developments Ltd. v. Smith (1973), 1 O.R. (2d) 87 (Ont. H.C.). 107 Kileel vs. Kingswood Realty Ltd. 108 D.L.R. (3d) 562

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Extinguishment by Act of God would occur where the means to use an easement is destroyed by flood, fire or other Act of God and the destruction is permanent.

Extinguishment by statutory enactment would include an expropriation of the dominant or servient lands, or the passing of a statute which precludes or prohibits use of the easement or use of the dominant lands for the purposes for which the easement was granted.

Abandonment occurs when the dominant owner does something, or acquiesces in the doing of something on the servient lands of a permanent nature which renders the use of the easement impossible . Non-use alone is insufficient to a bandon an easement. The non -user must be of a quality so as to create a presumption that the dominant owner intended to abandon the easement. The non-user must interrupt the right itself not merely the possession of the easement.

Even lengthy non-use will not create abandonment where there are circumstances negating an intention to abandon.

Construction of alternate access does not in and of itself constitute abandonment of the original right of way. H owever, it is evidence of an intention to abandon and when combined with non use indicates an intent to abandon.

The servient owner cannot insist that the dominant owner cannot abandon the easement.

This issue is primarily a factual issue. The court must infer from the facts, on a balance of probability that the dominant owner intended to abandon. However, if there is lengthy non-use, in circumstances where it is reasonable to infer abandonment, the onus shifts to the dominant owner to prove non-abandonment.

If the s ervient owner c hanges its pos ition in reliance on non-user in circumstances where it can be inferred that the dom inant ow ner ha s a bandoned the e asement, t hen t he s ervient ow ner can a ssert an estoppel against the dominant owner. As a general rule, time of non-use is not the determining factor, the nature of the non-use is.

If in the circumstances, a reasonable person would infer abandonment, the dominant owner’s actual, but undisclosed and u napparent i ntention n ot to abandon w ill no t w eigh i nto the c ourt’s d ecision a s t o abandonment. I f t he facts e stablish a bandonment, the dom inant ow ner intention not to abandon its easement is i rrelevant un less the i ntention not t o a bandon is di sclosed to the dominant ow ner or c an reasonably be inferred from the dominant owner’s activities.

Acts of the servient owner consistent with abandonment by the dominant owner are not alone sufficient to evidence abandonment by the dominant owner. The dominant owner must do something evidencing an intention to abandon. The servient owner acts consistent with abandonment will then add weight to the dominant owner’s intention to abandon.

Now, i t m ay be t hat a cquiescence by t he dom inant owner i n a cts by t he s ervient ow ner bl ocking t he easement, o r using t he se rvient l ands i nconsistent w ith t he easement, w ill b e sufficient to ev idence an intention to abandon. T he dominant owner must object to the servient owners acts blocking use of the easement by the dominant owner, or risk being found to have acquiesced in the easement’s abandonment.

If a tenant acquires a prescriptive easement, the right passes to the reversion when the lease terminates.

Abandonment can be inferred from the establishment or use of an inconsistent easement either by grant or prescription. If by prescription, the old easement will no t be abandoned until t he new easement is

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established. Use of an alternative new easement that is not inconsistent with the old may not be sufficient in and of itself to establish abandonment.

Alteration of the use of the easement in a material way may be sufficient to result in an abandonment but it is more likely that such excess use will be restrained and use within the terms of the original easement will not be lost. H owever, i f the easement is prescriptive, excess use may result in a n ew prescriptive period starting for the excess use but should not result in loss of the old easement unt il the new one is established.

A c hange i n t he us e by t he dominant owner w ill no t c onstitute an a bandonment e ven i f it amounts t o excess u sage. B ut w here the ef fect o f t he ch ange i n t he d ominant t enement i s t o make t he easement unusable in a material way, it may be abandoned. So if the easement is for light through certain windows, and the windows are blocked up a fter a renovation, the easement for light to those windows will be lost and will not be revived if the windows are later opened up again.

In Fullerton vs. Randall,108 the dominant owner used a foot path as a shortcut to get to the main road. The footpath r an from subdivision l ots c reated by t he servient owner over a proposed road and across fields owned by the servient owner. T he dominant owner prior to purchasing the two lots had used the footpath to access two other lots the dominant owner owned and argued for an implied grant. The court rejected the implied grant but intimated that if there had been an implied or express grant, the “long time during w hich t he p laintiffs di d not use the pa thway, a nd t he u nequivocal act o f joining w ith the defendants in the building of the fence, would be very serious difficulties for the plaintiff.”

In Bell vs Golding,109 a parcel of land was laid out in a plan of subdivision with a lane for access to two streets. The owner of Lot 4 and 5 also owned the lane which was at the rear of the properties. He built a stable on the lane blocking access to the lane from Lot 5. He also built a row of stores on the public street blocking the laneway access to the street. Lot 5 was sold and there was no express easement granted over the lane. Lot 5 had access directly to the public street at the front of the lot. Twenty years later the owner of Lot 5 moved to have the laneway obstructions removed and his right to use the land approved. T he Court o f A ppeal d enied t he a pplication. The c ourt found that t he s ervient owner ha d obs tructed t he easement and the dominant owner had abandoned the easement by n ot o bjecting to the o bstruction for twenty years.

Non us er, w hile no t c onclusive, w ill b e s ufficient t o s how a bandonment i s e vidence o f a bandonment, which must be determined on the whole of the circumstances of the case.

Where by his non use, the dominant owner encourages the servient owner to lay out money on the basis of non use, then the dominant owner will not be able to resume his former right.

1.2 EXTINGUISHMENT

In Laurie vs. Bowen,110 the Ontario Court of Appeal would have declared a right of way to a f arm lane extinguished where the farm was subdivided into hundreds of lots .

Where the dominant owner was in default of a repair obligation in an easement, the court did not cancel the easement under the Property Law Act of British Columbia but merely suspended use of the easement until the default was cured. 108 Fullerton vs. Randall (1918) 44 D.L.R. 356 109 Bell vs. Golding (1896) 23 O.A.R. 485 (Ont. C.A.) 110 Laurie v. Bowen (1952), [1953] 1 S.C.R. 49 (S.C.C.)

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It is possible that if a covenant by the dominant owner in an easement is fundamental to the right granted then t he e asement w ould be t erminated by t he de fault. H owever, t his w ould be a n e xtreme si tuation because the easement is a property right and its cancellation increases the benefit to the servient lands and diminishes the benefit to the dominant lands. A s such, the cancellation of the easement operates like a reconveyance. This will not lightly occur on a default. Instead the court may use of the law of injunction to force the dominant owner to comply with the covenant or suspend its use until the default is cured.

In the event that an easement was cancelled for fundamental breach, the Court would entertain relief from forfeiture if the default could be cured.

Because the loss of an easement is the loss of a p roperty right in favour of the dominant owner and an increase in the p roperty r ight of t he ow ner o f t he s ervient lands, abandonment m ay r equire s ome acquiescence by the servient owner. A lthough it seems that the circumstance where the servient owner would not want the easement abandoned and the servient lands restored would be rare. The requirement for acquiescence seems unnecessary.

The b etter t est w ould be t o pe rmit a bandonment up on e vidence o f s uch by t he dom inant ow ner e ven without acquiescence or knowledge of the servient owner unless a reasonable person would not want the easement ab andoned b ecause of l iability thereby acquired or the s ervient o wner m oves w ithin a reasonable t ime a fter the a bandonment be coming k nown t o r eject the r estoration of t he s ervient l ands because of the abandonment.

In Fyfe vs. James,111 the Court uses the covenant of quiet enjoyment in the original grant of easement to argue that a subsequent owner cannot argue that the easement is not perpetual because this would amount to a derogation from the original grant. This analysis is flawed and appears to be a cobbling together of unrelated legal concepts.

In TDL Group vs. Harvey,112 a r ight o f way was g ranted t o pe rmit t he owner of the dominant l ands access to a garage at the back of the property. The dominant lands had a house on it. Several years later, the house on the dominant lands and the adjoining house as well as the garage were demolished and a 51 unit apartment building constructed. The easement had not been used for 30 years. The servient owner built a Tim Horton’s outlet on t he s ervient l ands and wanted to t urn t he easement a rea i nto additional parking spaces. The dominant owner wanted to use the easement for access to his apartment building and create new parking spaces where the entrance to the apartment building had been for thirty years. The Court cancelled the easement because it was obsolete. The original purpose, access to the garage, was no longer applicable and the easement hadn’t been used for 30 years.

The d issent in TDL Group vs. Harvey concluded that t he operative words of the easement were b road enough t o c over any f uture u se n otwithstanding t hat a recital r estricted t he easement t o ac cess to the garage. The case distinguished Collinson vs. LaPlante.

Remicorp Industries Inc. v. Metrolinx

In Remicorp Industries Inc. v. Metrolinx113 the court required Metrolinx to move an access that it has the benefit o f o n t he b asis that the ea sement h as b een abandoned. The court confirms t hat an ex clusive easement does n ot g ive t he d ominant o wner u se o f t he s ervient lands to the ex clusion o f t he s ervient owner. Exclusive does not mean exclusive of the servient owner and therefore must be exclusive of other 111 Fyfe vs. James (2006) 42 R.P.R. (4th) 221 (Ont. S.C.) 112 TDL Group Ltd. vs. Harvey (2002) 48 R.P.R. (3d) 223 (Ont. C.A.) 113 Remicorp Industries Inc. v. Metrolinx 2016 ONSC 10

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easement holders. The law has always been that the dominant owner cannot be compelled to relocate an easement even if it is more convenient for the servient owner and has no impact on the dominant owner. In fact even where the new easement is beneficial to the dominant owner, the dominant owner cannot be compelled t o acc ept the n ew easem ent. This co ncept seem s t o ar ise o ut o f t he l egal t heory t hat t he servient owner cannot derogate from her grant, what is given cannot be taken away.

Facts

The facts in Remicorp are difficult to discern. As best as I can tell, Canadian national railway owned a parcel of land in Etobicoke known as the Mimico Railway Station. There was an access driveway in about the centre o f the lands g iving a ccess to the s tation which a djoined the r ailway c orridor. CNR sold the lands to Remicorp. CNR understood that Remicorp intended to construct a concrete factory on the lands. The access driveway was included in the lands conveyed to Remicorp but CNR retained an easement over the old driveway. This easement was called in the decision the access easement. As well, CNR appears to have r etained an easement over a strip of land r unning alongside the C NR r ail corridor in o rder to maintain its t racks. This e asement i s called t he m aintenance easement. T he maintenance ea sement i s accessed from the access easement but could of course be accessed from the rail corridor. It was always Remicorp’s [plan to build an alternate access and to close the Access easement as t his would make the lands m ore u seable. C NR was aw are o f this an d by ag reement r etained the r ight t o m ove t he A ccess easement to the new driveway location. CNR sold its tracks and the two easements to Metrolinx. Neither CNR nor Metrolinx used the access easement for over 13 years. Access to the maintenance easement was over the rail corridor. Maintenance of the rolling stock was consolidated in proximate lands making use of the Maintenance Easement and the Access Easement unnecessary.

Remicorp asked Metrolinx to move i ts access to the new driveway. T hey refused i n part because they constructed a signal bridge on the maintenance easement making access from the new easement difficult.

Remicorp br ought a p roceeding t o de clare the a ccess easem ent a bandoned an d t o r eplace i t w ith an easement at the new location.

The court held that Metrolinx had abandoned the Access Easement and if wanted any further access it should do s o ov er t he ne w dr iveway. T he c ourt w ent f urther a nd c oncluded t hat for so me r eason, Metrolinx was obligated to accept the new driveway in place of the abandoned Access Easement.

This result was surprising since the court properly examined the law on abandonment. Non- use i s not sufficient. An implied release must be found. It is unclear to me what evidence the court relied upon to find an implied release. The court made these findings:

15 Regarding an implied release, while the non-use by CNRC and Metrolinx supports the position of Remicorp, the legal documents do not. CNRC clearly maintained its right to access its land from Judson Street by r etaining a c orridor ov er t he R emicorp pr operty. T he dr afting of t he S eptember 19, 2003 agreement registered on title gives it, not Remicorp, the option to move the easement. It is also clear to me that thought was given to the access being moved or even required by a number of factors, the key ones for me being:

a) the existence and description of Part 1 in the plan of survey;

b) the subsequent non-use of the Access Easement while work was regularly done in the v icinity with access gained by other means;

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c) the evidence of Mr. Silva about Mr. Longo's acquiescence (on behalf of CNRC) to moving the Access Easement;

d) the drafting and registration on title of the September 19, 2003 agreement;

e) the December, 2014 Metrolinx photograph of 12 large concrete blocks, 3 wide and 4 high, completely blocking the south side of the alternate Access Easement plans, (Part 1 of the plan of survey) which had clearly been removed in a photograph taken May, 2015 by Remicorp (It should be noted the Metrolinx photograph also c ontained M etrolinx p allets a nd rails on t he immediate s outh side o f t he g ate a t t he western edge of the Maintenance Easement that would also block access if necessary).

16 As submitted by Metrolinx, with reliance on paragraph 30 of Justice Lauwers' (as he then was) decision i n L ywood, ea sements g enerally ar e p erpetual, have ac tual o r p otentially v aluable r ights and ought not to be lightly interfered with, particularly for no consideration. The December, 2014 photograph undermines the submission by Metrolinx of the importance and need for any easement. Neither party is suggesting or pr oposing t he e asement a nd t he r ights c onferred on i t be taken a way. R emicorp i s o nly proposing it be moved about 40 meters to the west and become a straight, paved lane, somewhat longer than the curved path currently on title in order to reflect the current configuration of the property.

17 In my view, the logic and circumstances are in favour of Remicorp. A finding of abandonment is a question of fact with the onus i n this matter on Remicorp. Metrolinx submits the i ntention t o abandon must be established which has not occurred. While Metrolinx or its predecessor has never used the easement over its 13-year existence, the existing easement has not been available for use for more than a decade. A gain, t he fact r emains R emicorp i s no t t rying t o e xtinguish the e asement, onl y move i t t o another location.

18 F rom t he a uthorities t o w hich I w as referred, t he s ituation w hich m ost cl osely ap plies is t hat addressed in Bost Properties Inc. v. Highland West Developments Inc., [2002] O.J. No. 477 (Ont. S.C.J.), where, urban development w as the change i n circumstances leading the parties to require a judicial determination o f easement r ights. In t hat case, t he al ternate means o f a ccess was p rovided b y an other party (as opposed to the same party as in the circumstances at hand).

19 As analyzed by Justice Gordon (at paragraph 35), I would agree there "is no basis to suggest the original right of way is a preferred access" subject to the submissions regarding the position of the signal bridge.

20 Counsel for Metrolinx submitted the original access lands was the best position to access the tracks and its land east of the signal bridge and that the signal bridge constitutes an obstacle to access from the Willowbrook yard. The difficulty with this submission includes:

1) M etrolinx, or pr ecisely i ts pr edecessor, C NRC, erected t he obs tacle a nd did s o e ncroaching on Remicorp land without notice, permission or consent. In submissions before me, Metrolinx suggested it had a right to do so on the basis of the "exclusive" nature of its easement which I reject as detailed below;

2) from my review of the photographs taken by Darryl Barnett, Director, Railway Corridor Infrastructure for Metrolinx and his evidence, he admitted in his cross-examination that while not involved in locating the signal bridge, the widening of the tracks to the west and the switches to the east resulted in the signal bridge being erected at i ts present location "plus or minus 100 f eet" or "maybe 150 f eet". Converted to metric, t his i s 30.48 - 45.72 m eters w hich m eans t he s ignal br idge c ould be a t t he e ast e dge of t he Maintenance Easement;

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3) the claim wider vehicles such as boom trucks, dump trucks, backhoes or cranes would not be able to access the M aintenance Easement eas t of the signal bridge ( about 40 meters) is u ndermined by the absence of any evidence or instance where this has been necessary but not available or possible;

4) the willingness of Remicorp to forgo any claim or request to have the north strut of the signal bridge removed from a property is part of its application.

21 In all of the circumstances, if necessary, I would conclude there is sufficient evidence of an implied release.

This at best muddled. The court seems to be suggesting that abandonment can be found when the result is relocating. Somehow by forcing the dominant owner to relocate abandonment becomes palatable. If you find that relocation is required, then it is reasonable to argument implied release since you no longer need the old easement. But that is the result of relocating where here the court finds abandonment because the relocation is offered i n exchange. A s a result there is n o co gent an alysis w hy t he easement sh ould b e relocated in the first place. The court makes some noises, that the development was always contemplated and relocation was always contemplated and that in some weak way was considered a good option for CNR. Contrary to this argument, CNR actually negotiated an option but not option to relocate. Here we find the court imposing relocation contrary to only written evidence of the parties.

Metrolinx r aised t wo r easons why t he r elocation w as ba d f or M etrolinx. F irst i t s aid i t would ha ve t o share u se o f t he n ew d riveway w ith R emicorp an d i ts cu stomers. The co urt n oted t hat R emicorp h ad agreed to give priority to Metrolinx’s use. Weak protection indeed.

Second, Metrolinx said its access over the new driveway was compromised because the signal bridge it built on the maintenance blocked access from the new easement and the old easement was necessary to maintain f ull a ccess. The court w as not m oved b y t his a rgument s ince M etrolinx ha d bu ilt t he signal bridge on Remicorp’s lands without permission and therefor caused its own access problems.

In order to defend i ts decision to block i ts own access, Metrolinx argued i t had an exclusive easement because t he easement i tself said so . I t ar gued t hat it use was exclusive o f Remicorp’s and t herefore i t could block access if it chose to so and couldn’t be judicially criticised for doing so. The court rejected this interpretation. The servient owner must have use of the servient lands subject to the right granted to the dominant owner. Exclusive does not affect priority of use between dominant and servient owner.

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TAB 13

Key Covered Risks Which You Should be Aware Of

Karen Decker, Senior Vice President, Underwriting and Legal,

Stewart Title Guaranty Company

Raymond Leclair, Vice-President, Public Affairs Lawyers' Professional Indemnity Company (LAWPRO®)

William McCarthy, Senior Legal Counsel and Chief Underwriter, FCT

April 3, 2017

14TH ANNUAL

Real Estate Law Summit

Key Covered Risks Which You Should be Aware Of

Karen Decker, Senior Vice President, Underwriting and Legal, Stewart Title Guaranty Company

Raymond Leclair, Vice-President, Public Affairs Lawyers' Professional Indemnity Company (LAWPRO®)

William McCarthy, Senior Legal Counsel and Chief Underwriter, FCT

Outline: Post Policy Date Coverage & Continuation of Coverage

– William McCarthy, Senior Legal Counsel and Chief UnderwriterFCT

Exclusions from a Title Insurance Policy & Duty to Defend

– Karen Decker, Senior Vice President, Underwriting and LegalStewart Title Guarantee Company

Tips for Lawyers about Title Insurance

– Searches / Reporting / Advising / Issuing Policy

– Raymond G Leclair, Vice President, Public AffairsLawyers’ Professional Insurance Company (LAWPRO)

Post-Policy Date Coverage

William McCarthy, Senior Legal Counsel and Chief Underwriter, FCT

• Although, as a general rule, coverage under a policy of title insurance is established as of theDate of Policy (usually the closing date of a purchase), there are certain defined situations inwhich an Insured owner is covered for matters occurring after this date. Some examplesare:

• Supplemental real estate taxes• Construction liens• Structures encroaching onto the Insured’s Land• Fraud

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• Damage to structures pursuant to the exercise of a right to use the surface of the Land for mineral extraction

• Limitations on the Insured’s rights of ownership and enjoyment of the Land

Continuation of Coverage • Coverage carries on in favour of an Insured owner for as long as he or she holds Title to the

Land. In addition, coverage will carry on in favour of the following parties: • The Insured when he or she takes back a mortgage from a purchaser to whom the Insured

sells the Land • An assignee of the Insured’s vendor take-back mortgage • Heirs of the Insured who inherit Title to the Land through the Insured’s estate • The Insured’s spouse, when he or she receives Title, either for nominal consideration or

pursuant to a division of assets under marital property law • Trustees or successor trustees under a trust settled by the Insured • Beneficiaries under such a trust to whom Title is transferred upon the Insured’s death

Exclusions from a Title Insurance Policy Karen Decker, Senior Vice President, Underwriting and Legal, Stewart Title Guaranty Company

• Two areas of matters not covered – exceptions on Schedule B and Exclusions in policy jacket • Governmental Power exclusion – including with respect to environmental protection laws • Expropriation not covered – unless a notice registered on title on the policy date or

expropriation occurred prior to the policy date and is binding on the insured (who had no knowledge of it)

Exclusions from a Title Insurance Policy • Exclusion for Risks:

– Created, allowed or agreed

– Actually known to the insured (but not the insurer) prior to the policy date

– That result in no loss

– First affect title after the policy date – except for the matters that expressly contain post policy date coverage in the covered risk

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• Lack of a right to land outside the land described in the legal description in schedule A • Lack of a right in streets, lanes or waterways that touch the insured land - this does not limit

the access coverage or the coverage for encroachments onto adjoining land

Duty to Defend • Additional benefit found within policies • Defend the Insured’s Title in a Court case based on a Covered Risk • Insurer pays legal fees cost and expenses incurred in the defence of title • Does not reduce the Amount of Insurance • Must relate to a Covered Risk • Not an absolute duty • Insurer may end duty by paying the claim Tips for Lawyers about Title Insurance Raymond Leclair, Vice-President, Public Affairs Lawyers' Professional Indemnity Company (LAWPRO®)

How to determine if you do a search?

– Search criteria

– Client intention

– Direction / Acknowledgement / Waiver

What if there is a problem after closing?

– Duty to report possible claim

– Rules of Professional Conduct, Section 7.8-2 • A lawyer shall give prompt notice of any circumstance that may give rise to a claim

to an insurer or other indemnitor so that the client's protection from that source will not be prejudiced.

– All insurers require to be advise of a claim ASAP and before any act to repair

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What do I tell the client?

– OBA / LSUC Working with a Lawyer booklet

– Discussion about limited searches and importance to clients

– Discussion about what client intends to do with the property

– Client sensitivities or special interests/features

Title Insurance Policy

– Confirmation of availability ASAP prior to closing

– Issuance ASAP after closing

– Ensure accuracy of schedule • Name(s) of insured • Property covered by policy

Resource Page • Working with a Lawyer when you buy brochure

– https://www.oba.org/For-the-Public/Working-with-a-Lawyer-When-You-Buy-a-Home

• TitlePLUS Quick Facts/Summary of Searches

– http://www.titleplus.ca/publications/quick_facts_summary_of_searches.html

• Stewart Title search requirements

– http://www.stewart.ca/LegalProfessionals186.html

• FCT Ontario search guidelines

– https://www.fct.ca

• Chicago Title Standard Search Guidelines – http://www.chicagotitle.ca/assets/uploads/Standard-Search-Guidelines-Res-Feb-

2015.pdf

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• Title insurance coverage is like a box of chocolates – no two policies are the same

– http://www.practicepro.ca/lawpromag/Title_Insurance_Different_Policies.pdf

• LAWPRO Real Estate Claims Malpractice Fact Sheet

– http://www.practicepro.ca/information/doc/RealEstate-FactSheet.pdf

• Six things LAWPRO hates to see in a real estate transaction

– http://avoidaclaim.com/2017/lawpro-tales-of-horror-six-things-lawpro-hates-to-see-in-a-real-estate-transaction/

• Title insurance is not an autopilot licence

– http://avoidaclaim.com/2016/title-insurance-is-not-an-autopilot-licence-2/

• What do title insurers expect from lawyers?

– http://avoidaclaim.com/2016/what-do-title-insurers-expect-from-lawyers/

• Failing to deliver title insurance opens up a number of risks

– http://avoidaclaim.com/2012/failing-to-deliver-title-insurance-opens-up-a-number-of-risks/

• Checklist – Using Title Insurance Safely: Issues to Consider

– http://www.practicepro.ca/practice/pdf/Using-Title-Insurance-Safely-Checklist.pdf

William McCarthy, Senior Legal Counsel and Chief Underwriter FCT (905) 287-3152 or 888 771-0065 x 763152 wmccarthy@fct.ca Karen Decker, Senior Vice President, Underwriting & Legal Stewart Title Guarantee Company (416) 309-4960 karen.decker@stewart.com Raymond G Leclair, LL.B. Vice President, Public Affairs LAWPRO (416) 598-5890 or 1-800-410-1013 ray.leclair@lawpro.ca

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chairs

Sidney TroisterC. Arb., C.S., LSMTorkin Manes LLP

Joel Kadish Barrister and Solicitor

April 3–4, 2017

14TH ANNUAL Real Estate Law Summit

*CLE17-0031000-A-PUB*

Day 2

DISCLAIMER: This work appears as part of The Law Society of Upper Canada’s initiatives in Continuing Professional Development (CPD). It provides information and various opinions to help legal professionals maintain and enhance their competence. It does not, however, represent or embody any official position of, or statement by, the Society, except where specifically indicated; nor does it attempt to set forth definitive practice standards or to provide legal advice. Precedents and other material contained herein should be used prudently, as nothing in the work relieves readers of their responsibility to assess the material in light of their own professional experience. No warranty is made with regards to this work. The Society can accept no responsibility for any errors or omissions, and expressly disclaims any such responsibility.

© 2017 All Rights Reserved

This compilation of collective works is copyrighted by The Law Society of Upper Canada. The individual documents remain the property of the original authors or their assignees.

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Sidney troister C.arb., C.S., lSm Torkin Manes LLP

chairs

Joel KadishBarrister and Solicitor

#RESummit17

Welcome and Opening Remarks from Chairs9:00 a.m. – 9:10 a.m. Sidney Troister, C. Arb., C.S., LSM, Torkin Manes LLP Joel Kadish, Barrister and Solicitor

Planning Act: How Mistakes Happen, How to Stop Making Them (5 Minutes p ) 9:10 a.m. – 9:40 a.m. Sidney Troister, C. Arb., C.S., LSM, Torkin Manes LLP

Abutting Land Searches 9:40 a.m. – 9:55 a.m. Ronald Melvin, Rose, Persiko, Rakowsky, Melvin LLP

“Please Satisfy Yourself” and Other Passive Aggressive Responses to Invalid Requisitions 9:55 a.m. – 10:15 a.m. Simon Crawford, Bennett Jones LLP

“It’s Your Opinion, You Sign It” and Other Valid Reponses from Clerks to Lawyers (10 Minutes p ) 10:15 am – 10:25 a.m. Simon Crawford, Bennett Jones LLP

Super Priorities: Lending and Enforcement Issues 10:25 a.m. – 10:50 a.m.Amanda Jackson, Gowling (WLG) Canada LLP

Go Ahead and Ask Us (Question and Answer Session) 10:50 a.m. – 11:00 a.m.

Coffee and Networking Break 11:00 a.m. – 11:15 a.m.

Recent Changes to the Residential Tenancy Act: What Your Clients Need to Know 11:15 a.m. – 11:35 a.m.Joseph Hoffer, Cohen Highley LLP

Positive Covenants (Owen & Black Decision): Where are We Now? 11:35 a.m. – 12:00 p.m. Andrew Fortis, C.S., Hummingbird Lawyers LLP

Latest Environmental Issues 12:00 p.m. – 12:15 p.m. Rosalind Cooper, C.S., Fasken Martineau DuMoulin LLP

Go Ahead and Ask Us (Question and Answer Session) 12:15 p.m. – 12:30 p.m. Lunch will be provided 12:30 p.m. – 1:30 p.m. Your First Look at Second Units 1:30 p.m. – 1:45 p.m. Leo Longo, C.S., Aird & Berlis LLP

Understanding First Nations Land Claims1:45 p.m. – 2:20 p.m. Kathleen Lickers, Barrister and Solicitor In conversation with: Sidney Troister, C.Arb., C.S., LSM, Torkin Manes LLP

10 Things Real Estate Practitioners Need to Know about the Forfeited Corporate Property Act, 2015 2:20 p.m. – 2:45 p.m. Brenda Linington, Senior Counsel, Ministry of the Attorney General, Civil Law Division, Ministries of Energy / Economic Development and Growth / Research, Innovation and Science / Infrastructure / Accessibility

Marta Zoladek, Legal Counsel, Ministry of the Attorney General, Civil Law Division, Ministries of Energy / Economic Development and Growth / Research, Innovation and Science / Infrastructure / Accessibility Coffee and Networking Break 2:45 p.m. – 3:00 p.m. Abandonment of Easements 3:00 p.m. – 3:25 p.m. Craig Carter, C.S., LSM, Fasken Martineau DuMoulin LLP Key Covered Risks Which You Should be Aware Of 3:25 p.m. – 3:50 p.m. Karen Decker, Senior Vice President, Underwriting and Legal, Stewart Title Guaranty Company

Raymond Leclair, Vice-President, Public AffairsLawyers’ Professional Indemnity Company (LAWPRO®)

William McCarthy, Senior Legal Counsel and Chief Underwriter, FCT Go Ahead and Ask Us (Question and Answer Session) 3:50 p.m. – 4:00 p.m.

end of Day one 4:00 p.m.

Reception 4:00 p.m. – 6:00 p.m. Registrants attending live in Toronto are invited to join us for a reception immediately following Day One.

SCHEDULE OF EVENTS Day onE: april 3, 2017

Welcome and Opening Remarks from Chairs9:00 a.m. – 9:10 a.m. Sidney Troister, C. Arb., C.S., LSM, Torkin Manes LLP Joel Kadish, Barrister and Solicitor

ILA and ILR Simplified (30 Minutes p ) 9:10 a.m. – 9:40 a.m. Doug Bourassa, Chaitons LLP

Requirements to Pay: Don’t Let CRA Sneak One By You 9:40 a.m. – 9:55 a.m.Valerie Edwards, Torkin Manes LLP

Backdating Documents: Is It Ever Proper? (15 Minutes p )

9:55 a.m. – 10:10 a.m. Valerie Edwards, Torkin Manes LLP

Intersection of Family Law and Real Estate (10 Minutes p ) 10:10 a.m. – 10:40 a.m.Jennifer Wilson, Torkin Manes LLP

Go Ahead and Ask Us (Question and Answer Session) 10:40 a.m. – 10:50 a.m.

Coffee and Networking Break 10:50 a.m. – 11:05 a.m.

How to Prepare for a Spot Audit (30 Minutes p ) 11:05 a.m. – 11:35 a.m.Rimpal Hinduja, CPA, CGA, Supervisor, Spot Audit The Law Society of Upper Canada

Deborah Loh, CPA, CA, MAcc, Spot Auditor The Law Society of Upper Canada

Condominium Resale Searches on a Reasonable Budget 11:35 a.m. – 12:00 p.m. Robert Miller, Chaitons LLP

Go Ahead and Ask Us (Question and Answer Session) 12:00 p.m. – 12:15 p.m.

Lunch will be provided 12:15 p.m. – 1:15 p.m.

A Lot from the DOT: An Update on Recent Bulletins and Other Musings from The Director of Titles1:15 p.m. – 1:40 p.m.Jeffrey Lem, C.S., Director of Titles, Ministry of Government and Consumer Services

Preparing for Teraview Web® 1:40 p.m. – 2:05 p.m.Jennifer Connell, Product Manager, Teranet Inc.

5 Things to Look For When Your Client is Buying a Small Commercial Building (10 Minutes p ) 2:05 p.m. – 2:25 p.m.Alan Sless, Borden Ladner Gervais LLP

Coffee and Networking Break 2:25 p.m. – 2:40 p.m.

Addressing CRA Liens 2:40 p.m. – 3:00 p.m. Ian Speers, Barrister and Solicitor

Review of Agreements of Purchase and Sale with Builders 3:00 p.m. – 3:20 p.m.Mark Karoly, Harris Sheaffer LLP

When is Right, Wrong. And. When is Wrong, Right (10 Minutes p )

3:20 p.m. – 3:50 p.m.Reuben Rosenblatt, Q.C., LSM, Minden Gross LLP

Go Ahead and Ask Us (Question and Answer Session) 3:50 p.m. – 4:00 p.m.

Program Ends 4:00 p.m.

SCHEDULE OF EVENTS Day TWo: april 4 2017

Register online at store.lsuc.on.ca/cpd?realestate

1

Chairs: Sidney Troister, C.Arb., C.S., LSM, Torkin Manes LLP Joel Kadish, Barrister and Solicitor

April 3 - 4, 2017

SKU: CLE17-0031001-A-REG

Table of Contents

DAY TWO: TAB 1 Does the Client Need ILA or ILR? ……………….………………. 1 – 1 to 1 – 11 Practice Tips when Giving ILA …………………………………….. 1 – 10

Caterina Galati, Senior Competence Counsel The Law Society of Upper Canada

TAB 2 Requirements to Pay: Don’t Let CRA Sneak One

by You …………………………………………………………………………. 2 – 1 to 2 – 11 Valerie Edwards, Torkin Manes LLP TAB 3 Backdating Documents: Is It Ever Proper? ………………… 3 – 1 to 3 – 6 Valerie Edwards, Torkin Manes LLP

14TH

ANNUAL Real Estate Law Summit

2

TAB 4 Intersection of Family Law and Real Estate ………………. 4 – 1 to 4 – 2

Jennifer Wilson, Torkin Manes LLP

TAB 5 How to Prepare for a Spot Audit ……………………………….. 5 – 1 to 5 – 4

Rimpal Hinduja, CPA, CGA, Supervisor, Spot Audit The Law Society of Upper Canada

Deborah Loh, CPA, CA, MAcc, Spot Auditor The Law Society of Upper Canada

TAB 6 Condominium Resale Searches on a Reasonable Budget 6 – 1 to 6 – 4

Robert Miller, Chaitons LLP Alex Krancevic, Chaitons LLP

TAB 7 A Lot from the DOT: An Update on Recent Bulletins and Other Musings from the Director of Titles ………………… 7 – 1 to 7 – 5

Jeffrey Lem, C.S., Director of Titles, Ministry of Government and Consumer Services

TAB 8 Five Things to Look For when Your Client is Buying a Small Commercial Building ………………………………………. 8 – 1 to 8 – 9

Alan Sless, Borden Ladner Gervais LLP Anna Côté, Student-at-law

TAB 9 Addressing CRA Liens: A Brief Guide for the Conveyancing Solicitor ………………………………………………… 9 – 1 to 9 – 7

Ian Speers, Barrister and Solicitor

TAB 10 Review of Agreements of Purchase and Sale with Builders ……………………………………………………………………… 10 – 1 to 10 – 14

Mark Karoly, Harris Sheaffer LLP

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TAB 11 When is Right, Wrong? and When is Wrong, Right? ……. 11 – 1 to 11 – 7

Reuben Rosenblatt, Q.C., LSM, Minden Gross LLP

TAB 1

Does the Client Need ILA or ILR?

Caterina Galati, Senior Competence Counsel The Law Society of Upper Canada

April 4, 2017

14TH ANNUAL

Real Estate Law Summit

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DOES THE CLIENT NEED ILA or ILR?

(1) What is the difference between Independent Legal Advice (ILA) and Independent Legal Representation (ILR) in the Rules of Professional Conduct (Rules)?

ILA is a limited form of retainer. It is provided by a lawyer (ILA lawyer)

who does not have a conflicting interest with respect to the client’s

transaction or matter. The ILA lawyer is retained for the limited purpose

of providing ILA to a client of another lawyer or to a person so that the

other lawyer’s client or the person appreciates the nature and

consequences of a decision to be made. The role of the ILA lawyer is to

provide legal advice that is objective and unbiased regarding the

decision that the client is facing. Typically the recommendation or

requirement for ILA arises because the lawyer acting in the matter or

transaction has a conflict of interest.

The definition of ILA in Rule 1.1-1 sets out some of the requirements for

lawyers giving ILA pursuant to the Rules. The lawyer must:

• advise the client that the client has a right to ILR and the client

must expressly waive the right to ILR and elect to receive no legal

representation or legal representation from the other lawyer;

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• explain the legal aspects of the transaction to the client and

satisfy himself or herself that the client appears to understand

the advice given; and

• inform the client of the availability of qualified advisers in other

fields who would be in a position to give an opinion to the client

as to the desirability or otherwise of the proposed investment

from a business point of view.

If the client elects to waive ILR and to rely on ILA only, the retained

lawyer has a responsibility that should not be lightly assumed or

perfunctorily discharged - Commentary [1], Rule 1.1-1.

ILR, unlike ILA, is a retainer in which the lawyer acts as the client’s

lawyer in the transaction or matter – Rule 1.1-1.

(2) What are some examples of when ILA is or may be required under the Rules?

Conflicts of Interest

(a) Consent to a Conflict of Interest- Rule 3.4-2 A lawyer may recommend or require that a client receive ILA when the

client is making a decision to consent to a conflict of interest.

Section 3.4 of the Rules sets out the lawyer’s obligations regarding

conflicts of interest. A conflict of Interest is defined as:

…the existence of a substantial risk that a lawyer’s loyalty to or

representation of a client would be materially and adversely

affected by the lawyer’s own interest or the lawyer’s duties to

another client, a former client, or a third person. The risk must be

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more than a mere possibility; there must be a genuine, serious

risk to the duty of loyalty or to client representation arising from

the retainer- Rule 1.1-1.

Rule 3.4-2 provides that lawyers may act in certain conflict of interest

circumstances with the consent of all of the affected clients. Consent

must be fully informed and voluntary after disclosure and must be in

writing or confirmed in writing. In making such disclosure, the lawyer

should inform the clients of the relevant circumstances and reasonably

foreseeable ways that the conflict of interest could adversely affect the

client’s interest so that the clients can make a decision about the

conflict of interest – Commentary [2], Rule 3.4-2. While the rule does

not require the lawyer to advise the client to obtain ILA about the conflict

of interest prior to consenting to the conflict of interest, in some cases

the lawyer should recommend such advice to ensure that the client’s

consent is informed, genuine and uncoerced. This is especially so if the

client is vulnerable or unsophisticated - Commentary [2A], Rule 3.4-2.

(b) Advance Consent to Conflicts of Interest – Rule 3.4-2 A lawyer may be able to request that a client consent in advance to

conflicts that may arise in the future. The Rules provide that in some

circumstances it may be advisable for the lawyer to recommend that

the client obtain ILA before deciding whether to provide such consent -

Commentary [5], Rule 3.4-2.

(c) Consenting to a Joint Retainer – Rules 3.4-5 to 3.4-8 A lawyer may recommend or require that a client obtain ILA prior to the

client retaining the lawyer jointly with another client in a matter or

transaction. The joint retainer rules provide that when a lawyer is

retained to act for more than one client in a matter or transaction, the

lawyer must inform each of the clients that:

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• the lawyer has been asked to act for both or all of them;

• no information received in connection with the matter from one

client can be treated as confidential as far as any of the others

are concerned, and

• if a conflict develops that cannot be resolved, the lawyer cannot

continue to act for both or all of them and may have to withdraw

completely - Rule 3.4-5.

After the lawyer has provided this advice, if the clients are content that

the lawyer act, the lawyer must obtain their consent to the joint retainer-

Rule 3.4-7.

While the joint retainer rules do not require that the lawyer advise the

clients to obtain ILA before the lawyer may accept the joint retainer, in

some cases such as where one of the clients is less sophisticated or

more vulnerable than the other, the lawyer should recommend such

advice to ensure that the client’s consent to the joint retainer is

informed, genuine and uncoerced – Commentary [1], Rule 3.4-1.

In addition if the lawyer has a continuing relationship with one or more

of these clients for whom the lawyer acts regularly, before accepting

the joint retainer from this client and another client in the matter or

transaction, the lawyer must advise the other client of the continuing

relationship and recommend that the client get ILA about the joint

retainer- Rule 3.4-6.

(d) Transactions with Clients – Rules 3.4-27 to 3.4-36 While transactions with clients are not prohibited under the Rules, there

are some strict requirements regarding such transactions. Rules 3.4-

27 to 3.4-36 deal with transactions involving a lawyer and a client. A

transaction with a client is defined as:

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…. a transaction to which a lawyer and a client of the lawyer

are parties, whether or not other persons are also parties,

including lending or borrowing money, buying or selling

property or services having other than nominal value, giving or

acquiring ownership, security or other pecuniary interest in a

company or other entity, recommending an investment, or

entering into a common business venture - Rule 3.4-27.

Rule 3.4-28 provides that a lawyer must not enter into a transaction

with a client unless the transaction is fair and reasonable to the client.

The reason for this is that the relationship between a lawyer and a client

is a fiduciary one and the lawyer has a duty to act in good faith. In such

circumstances, the lawyer should be able to demonstrate that the

transaction with the client is fair and reasonable to the client. The rules

on transactions with clients, prohibit certain types of transactions with

a client such as the borrowing from a client except in certain limited

defined circumstances [3.4-28.1]. Where a transaction with a client is a

permissible transaction, the lawyer is required to take certain steps

prior to proceeding with the transaction. The lawyer must in sequence:

• disclose the nature of any conflicting interest and how and why

it might develop later;

• require that the client receive ILA or ILR as stipulated in Rule

3.4-29; and

• before proceeding with the transaction, obtain the client’s

consent to the transaction

o after the client has received the required

disclosure and ILA or ILR; or

o if the client is not required to receive ILA or ILR,

after the lawyer has recommended ILA or ILR and

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the client has chosen not to accept the lawyer’s

advice - Rule 3.4-29.

The following are some examples of transactions with clients in which

the client must receive ILA:

• a loan to a client who is a “related person” – Rule 3.4-29; 1

• the arrangement or recommendation by the lawyer of the

participation of a client or other person as an investor in a

syndicated mortgage or loan where the lawyer is an investor –

Clause ( b ) of Rule 3.4-33.1;

Examples of transactions with clients in which the client must receive

ILR include:

• a loan to a client who is not a “related person”;

• the borrowing of money by a corporation, syndicate or

partnership from a client of the lawyer where either or both of the

lawyer and the lawyer’s spouse has a direct or indirect

substantial interest in the corporation, syndicate or partnership –

Rule 3.4-29.

Neither ILA nor ILR is required in a transaction with a client that involves

borrowing from a client who is a regulated lender, that is, a bank, trust

company, insurance company, credit union or finance company that

lends money in the ordinary course of business – Rule 3.4-27 and Rule

3.4-29.

1 A “related person” in relation to the lawyer means: a spouse, child, grandparent, parent or sibling of the lawyer; a corporation that is owned or controlled directly or indirectly by the lawyer or that is owned or controlled directly or indirectly by the lawyer’s spouse, child, grandparent, parent or sibling; or an associate or partner of the lawyer - Rule 3.4-27.

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In all other transactions with clients not specifically dealt with in Rule

3.4-29, the lawyer shall recommend that the client receive ILA and,

where the circumstances reasonably require, recommend or require

that the client receive ILR.

Some Specific Duties of the ILA Lawyer – Transaction with a Client The lawyer retained to give ILA relating to a transaction with a client

should document the ILA by:

• providing the client with a written certificate that the client has

received ILA;

• obtaining the client’s signature on a copy of the certificate of ILA;

• sending a signed copy of the certificate of ILA to the lawyer with

whom the client proposes to transact business Commentary [6],

Rule 3.4-29.

If a client declines the lawyer’s recommendation to obtain ILA or ILR in

circumstances where ILA or ILR is not a requirement under the rules on

transacting business with a client, the lawyer should obtain the client’s

signature on a document indicating that the client has declined the

advice or representation – Commentary [7], Rule 3.4-29. However if the

client is vulnerable and declines ILA or ILR, the lawyer should not enter

into the transaction – Commentary [8], Rule 3.4-29.

(e) Error or Omission – Rule 7.8-1 Another situation where a lawyer must recommend that a client receive

ILA involves the discovery of an error or omission. When a lawyer

discovers an error or omission in connection with a matter for which the

lawyer is responsible and that is or may be damaging to the client and

that cannot be rectified readily, the lawyer must recommend that the

client obtain ILA from an independent lawyer concerning any rights the

client may have arising from the error or omission – Rule 7.8-1.

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(3) What are some examples of when ILR is required under the Rules?

In addition to the situations regarding transactions with clients outlined

above, the following are some additional examples of when a lawyer

shall or may require that a client receive ILR.

(a) The Two Lawyer Mortgage or Loan Transaction Rule- Rules 3.4-12 to 3.4-14 Rules 3.4-12 to 3.4-14 provide that a lawyer or two or more lawyers

practising in partnership or association must not act for or otherwise

represent both the lender and borrower in a mortgage or loan

transaction except in certain limited defined circumstances and then

only if the lawyer is able to comply with Section 3.4 on conflicts of

interest. These circumstances include:

• the lender client is a bank, trust company, insurance company,

credit union or finance company that lends money in the ordinary

course of its business;

• the mortgage is a vendor take back mortgage;

• the lawyer practises in a remote location where there are no

other lawyers that either party could conveniently retain for the

mortgage or loan transaction;

• the consideration for the mortgage does not exceed $50,000.00;

• the lender and borrower are not at “arm’s length” as defined in

section 251 of the Income Tax Act (Canada)...

In all other circumstances, each of the borrower and lender if

represented by a lawyer require ILR.

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(b) Acting for Transferor and Transferee in Transfers of Title – Rule 3.4-16.7 to 3.4-16.8 Rule 3.4-16.7 provides that an individual lawyer cannot act for or

otherwise represent both the transferor and the transferee in a transfer

of title to real property except in certain limited defined circumstances

and then only if the lawyer is able to comply with the rules on conflicts

of interest in Section 3.4 of the Rules. These circumstances include:

• the Land Registration Reform Act permits the lawyer to sign the

transfer on behalf of the transferor and the transferee;

• the transferor and the transferee are “related persons” as defined

in section 251 of the Income Tax Act (Canada); or

• the lawyer practises in a remote location where there are no

other lawyers that either the transferor or the transferee could

without undue inconvenience retain for the transfer – Rule 3.4-

16.9.

In addition provided that there is compliance with Section 3.4 on

conflicts of interest, a law firm of two or more lawyers may act for or

otherwise represent a transferor and a transferee in a transfer of title to

real property if the transferor and the transferee are represented by

different lawyers in the firm;

In all other cases, each of the transferor and transferee must receive

ILR from separate lawyers with respect to a transfer of title to real

property - Rules 3.4-16.7 to 3.4-16.8.

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SOME PRACTICE TIPS WHEN GIVING ILA

� 1. Determine who is your client

Rule 1.1-1 – Definition of “Client”

http://lsuc.on.ca/with.aspx?id=2147502061#ch1_sec1-1-client

� 2. Determine if you have a conflict of interest

Rule 3.4 – Duty to Avoid Conflicts of Interest

http://lsuc.on.ca/with.aspx?id=2147502071#ch3_sec4-conflicts

Steps for Dealing with Conflicts of Interest under Section 3.4 of The Rules of Professional Conduct

http://www.lsuc.on.ca/with.aspx?id=2147499259

Steps for Dealing with the Joint Retainer Rules http://www.lsuc.on.ca/with.aspx?id=2147499258&langtype=1033 Sample Joint Retainer Form Acknowledgment and Consent for

Use in Real Estate Transactions http://www.lsuc.on.ca/with.aspx?id=2147499281

� 3. Determine the nature of your retainer. Is ILA sufficient or Should the client receive ILR? Definitions of ILA and ILR- Rule 1.1-1 http://lsuc.on.ca/with.aspx?id=2147502061#ch1_sec1-1-independent-legal-advice

� 4. Determine if you are competent to provide the ILA

Rule 3.1-2 – Competence

http://www.lsuc.on.ca/with.aspx?id=2147502071#ch3_sec1-competence

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� 5. Determine if there are any language or other barriers to Communicating effectively with the client Clients with Diminished Capacity http://lsuc.on.ca/with.aspx?id=2147502071#ch3-sec2-9-diminished-capacity Language Rights- Rules 3.2-2A and B http://lsuc.on.ca/with.aspx?id=2147502071#ch3_sec2-2A-language-rights Competence - Commentary [8.1], Rule 3.1-2 http://lsuc.on.ca/with.aspx?id=2147502071#ch3_sec1-2-competence

� 6. Consider whether it might be useful to use a checklist when Meeting with the client Independent Legal Advice Checklist

http://www.practicepro.ca/practice/pdf/Checklist.pdf

http://www.practicepro.ca/practice/checklist.asp

� 7. Consider making and retaining notes of your meeting with The client

� 8. If the client declines to follow your advice, consider having the client

sign an acknowledgment confirming the fact that the client has declined to accept your advice.

March 29, 2017

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TAB 2

Requirements to Pay: Don’t Let CRA Sneak One by You

Valerie Edwards Torkin Manes LLP

April 4, 2017

14TH ANNUAL

Real Estate Law Summit

Requirements to Pay: Don’t Let CRA Sneak One By You

Everyone knows what a garnishment is, and a Requirement to Pay is just that: a demand that a

person who is or will be liable to make a payment to a “tax debtor” direct that payment to the

Canada Revenue Agency (“CRA”).

What most people don’t appreciate is that unlike other garnishments, CRA does not need a Court

Judgment to issue a Requirement to Pay. If they do have a judgment, they can file an execution,

just like anybody else. And this is where the trouble starts.

Fact Situation

1. Jane acted as solicitor for the vendors on the sale of their house (the “Property”), which

was scheduled to close on March 20, 2015.

2. On March 18, 2015, Jane received a letter of requisition as follows from the solicitor for

the purchaser of the Property:

Instrument No. AB0123456 is a Lien registered June 6, 2010 by Her Majesty the Queen in Right of Canada as represented by the Minister of National Revenue in the amount of $74,299.00.

REQUIRED: On or before closing, production and registration of a good and valid Release of this Lien.

3. Prior to the closing of the sale of the Property, Jane contacted CRA to determine the

amount outstanding on their registered lien as of March 20, 2015 for the purpose of

obtaining a discharge of the execution.

4. On March 20, 2015, the day of closing for the sale of the Property, a representative of

CRA attended at Jane’s office and dropped off a letter dated March 20, 2015. The letter

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advised that the “CRA will provide this release upon the receipt of a certified cheque in

the amount of $22,184.40”. Three Requirements to Pay were attached to the letter.

5. The letter did not refer to the Requirements to Pay, nor did it advise Jane that additional

amounts above and beyond the $22,184.40 mentioned in the letter were owing and

payable. Neither Jane nor anyone at her office was orally advised by CRA that additional

monies were to be remitted. Unfortunately, no one noticed that the Requirements to Pay

were in respect of an unrelated tax obligation.

6. On closing, the gross sale proceeds from the sale of the Property were $350,721.66.

7. Unaware of the Requirements to Pay and under the assumption that the letter from CRA

indicated the full amount owing to CRA by his clients, Jane distributed the sale proceeds

to obtain a discharge of the existing first mortgage and executions on title. $22,184.40

was paid to CRA. The balance of the net sale proceeds were paid to Jane’s clients in the

normal course.

8. On April 15, 2015, Jane received letters from CRA following up on the three

Requirements to Pay. This was the first time Jane became aware of the Requirements to

Pay.

9. Jane was able to get her clients to make a modest payment towards the Requirements to

Pay, but some amounts remained outstanding.

10. On June 26, 2015, CRA sent a letter to Jane demanding payment of $35,799.45, being the

remainder of amount paid by her to the vendors which should have been paid to CRA.

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Jane subsequently received a Notice of Assessment/Reassessment dated August 20, 2015

from CRA.

Discussion

Requirements to Pay are governed by s. 224 of the Income Tax Act which states:

Garnishment

224 (1) Where the Minister has knowledge or suspects that a person is, or will be within one year, liable to make a payment to another person who is liable to make a payment under this Act (in this subsection and subsections 224(1.1) and 224(3) referred to as the “tax debtor”), the Minister may in writing require the person to pay forthwith, where the moneys are immediately payable, and in any other case as and when the moneys become payable, the moneys otherwise payable to the tax debtor in whole or in part to the Receiver General on account of the tax debtor’s liability under this Act.

. . .

(4) Every person who fails to comply with a requirement under subsection 224(1), 224(1.2) or 224(3) is liable to pay to Her Majesty an amount equal to the amount that the person was required under subsection 224(1), 224(1.2) or 224(3), as the case may be, to pay to the Receiver General.

The difficulty here was the manner in which CRA gave notice to Jane’s office of the

Requirement to Pay. It was attached to a letter that answered Jane’s question about the lien. The

letter not only did not explain the Requirement to Pay, it didn’t even refer to it. Although it is

unclear whether it was Jane or her law clerk who actually looked at the letter, a reasonable

person reading the letter would assume that the law firm was only being asked to remit the sum

of $22,184.40. They would also reasonably assume that the attached Requirements to Pay

referred to the $22,184.40.

The Requirements to Pay themselves are densely worded documents. The amounts to be

remitted under the Requirements to Pay are in the same small print as the balance of the

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document and easily missed. Typically, Requirements to Pay are sent to third parties as stand-

alone documents. In those cases, one would expect the third party to carefully review them to

understand what they mean.

Is Jane’s situation different? She asked CRA a specific question: “What is owing under the

lien?” CRA provided the letter with the answer: $22,184.40. Jane, or a law clerk working with

her, would have no reason to believe that the Requirements to Pay pertained to an unrelated tax

obligation. The letter had the (likely) unintended effect of misleading the recipient.

Jane filed a Notice of Objection, arguing fairness. CRA rejected it on the basis that the statutory

requirements were met.

The takeaway? Educate everyone in your office about these forms, and make sure they show

them to you if one comes in. If you see one, read the fine print and avoid a claim.

If you do get a Requirement to Pay, you must advise your client. Depending on the

circumstances, a vendor might elect not to close. If they ask for your advice on that point, send

them out for ILA.

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1M Canada Pension Plan; the l~meJ~ ~f;the tnoome Tax Act, 20tl0 • Newfoundand and Labrador; the lnoome Tax Act • Prince Edward Island; the Income Tax At:.t • Nova Scoli$; the Income Tax IvA • New Brunawlck; the Income Tax Act • Ontario; the Jncome Tax Act -Manitoba; the Income Tax Act -2000 - Sasi<atchewan; the Alberla Persona/Income Tax Act, the Alberta Co;tporate Tax Aot;

· the Income Tax Act - Brilsh Columbia; the Unemployment Insurance Act; the Income Tax Act- Northwest Territories; the Income Tax Act • Nunavut; tne Income Tax Act ·:Yukon Terrftory; the Petroteum and Gas Revenue Ta~e Act; the Employment Insurance Act. :

INFORMATION TO THE THIRD PARTY TO WifOM 'THIS REQUIREMENT TO PAY IS ADDRESSED .

This Requirement to Pay applies to each and all Ot the amounts described on the front of the form. You are requlfed to pay the Jesser of 1t1e total of sueh amounts or the maximum payable.

ThiS Requirement to Pay tlas a conti'lulng effect w;tn respect to the paymentS described In (3), unlll the maxlmurry payable Ia paid infuU. · ·

With the exception ot the payments descnbed In 1J;e pr~ paragraph where the requirement has a continuing effeCt until sattsfted, please ta\1:8 notice that this RecpremeJrt to Pay Is $ffeotlve for one year wilh respect to jlayments describad ln {2) and 90 days With resptet to payments described In (4). . :

This Req!Jrement to Pay should not be returned prior to one year trom the date It was issued. ·

RESPONSE TO TAX SERVICES OFRCE tf no amount is or wiJI b8 payaa,te t1J )'au to the ReceiVer General undei this Aequlrement to Pay please enter .the tjpj:lrOpriate details below ana return 1hl signed forin tti the.-serviCes office Indicated on the from of the foi'm.

We are not liable for any payments or adva~ as described on 0 the lront of the fOrm (Check box tt applicable). i

The last payment or advance was made on (dale)--------------

in the amount Of$

We will become liable to make a payment to. or we wW loan or actvance moneys to or make a payment on ~of, the tax debtor on (dale) · ·: · ·

Future dealings with the lax debtOr are not antldJ)ated D (check box If appliCable). :

There are presently $ : In disputed or contingent amounts outStanding Withjthis tax deblor (pravlde pertinent details). . :

..

~ure: Dilts:

Name (print): T8J:

Posttlon:

Returning 1he form does not relieve you of your QbHgatlon to comply with this Requirement to Pay. :

Le Regime de pensions du C~a, Ia Lol de nmpOt sur r• rtYanu; the Income Tax Act .20QO • Terr•Neuve-et·Labracfor; the Income Tax~- Tle-du Prll'lOe"Edouard; the Income Tax Act- •. Nouveii•Ecoase; Ia Loi de 11mootsur le revenu · ~-· ·, NouveaU-BIU1SWiok; Ia Lol de rrq>6t sur 1e revenu • o..-1o; Ia Lol de 11mp6t sur re revenu-Manltoba; the Income Tax Act. 2000 • Saikatchawan; the Alberta Pe1'800al Income TaxAot; the Alberta Corporate Tax Aot; 1M Income Tax Act • Colomble-Br1tannique; Ia LoJ sur l'aaaurana&dl6mage; Ia L.oi de l~mp6t sur le revenu • Terrttolres du Nord-Oue~; Ia Lot de l'lmp6t sur le revenu • Nunavut; Ia Loi dB l'imp6t aur le revenu • Termoire du Yukon; Ia Loi de l~mpOt sur 1es revenue plltrollers; Ia Lol sur rassurance-emplot

RENS£1GNEMENTS POUR LE 11ERS A QUI LA DEMAN DE FORMELLE DE PAIEMENT EST ADRESSEE

La presente Demandt formellt cit paiement S'~lque a chacun des montants c:Jecrits au recto du formulalre. Vous devez payer le montant le molns eleve entre 1e total de ces montants ou 1e maximum payable.

La presente Demande formelle de paiement prh,aut de fa!ton continue dana le cas des palements decr1ts au point (3) ju~·~ ce c,Jela maximum payabJe soit'payi.

Contraifement aux: paiements mentionn&s au paragraphe p-eoedent pour Jesquels Ia demands formelle prevaut de f890n comlnue J~u·~ ce qu'eDe BOlt respectee,la pesente Demande fOrmelle de paiemenl est en YigueiJr pour une annee dans le cas des paiements d!crtts au point (.2) et pour 90 jours dans le cas des paiemen1s ttecrlts au point (4).

La jrieeme Demande tormelle de paiem• ne devrait pas ttre retoumee avant que 1e delai d'un an ne se soft l!ooule a partir de Ia date a laqueNe eJie a ete produlle. .

RtpONSE AU BUREAU DES SERVICES FISCAUX

Dans 1e oas oO vous n•avez ou n•aure;z. aucun paiement a tafre au receveur general en vertu de Ia presente Demancle formelle de IXI.Iement, donnez lea details pertinents cl-dessous et retoumaz le present forrriulalre dOmant s~ a1,1 bureau deS serviceS fiScaux lncfrqu6 au reciD.

Nous ne devons aucune des sommes ou i1es avances decfdes au recto du formulalre (coclle~ Ia case le cas echeant).

Le demler paiement ou avanoe, a etewrsf le (date), _________ _

au montant de t. Nou~ clevron~ talre Ll1 paiement au ~tell" ftscal, lui oanse.ntlr un pr~t ou une ~n.ce, ou falre uri paiement en son nom Je (d&Je)

Nous ne prevoyons pas de transaction proohalne avec le debiteur tlscal (cochez Ia case le cas ec:IMant).

II exlste actuellement aveo oe Je d8biteur flsoal une obllgafJOn eventuerre ou conteS1ee, CJJI n·est pas reglee, s'elevant ~ ~ (foumlr tousles d&lalls pertinents) .

SlgnalUI'e : Date:

Nom (en tettres mouJ&es} : Tel.:

Po~: ____________ ____. __ .............................. ----

Le faJt de retoorner ce fonnulalre ne vous Ubere pas de YDII'& c:dgatlon de voua contormer lla pr&sente DemancJe 1onnelle de paiement. ·

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INFORMATION TO THe THif:tP.; .~~fi:p ~OM THIS REQUIREMENT TO PAY IS ADDRESSED i

This Requk'ement to Pay itJPHes d&splte any proVIsion of this or any 0111er Act (other man tht Bankruptcy a.nrJ InsolVency ActJ, any enaatment of a province or a~y law. . ·

lbis Requirement to Pay applies to each and all 91 lhe amounts desarlbed In (1) and (2) on the front of the form. '(ou are required 10 pay the lesSer ot such amounts or 1he maximum payab!Q.

This amount of these moneys that is required to ~ paid to the Receiver General shall, notwtthstandng any securitY Interest In these moneys, become lhe property of Her M~.

•secured ~means . (a) a particular person who has a securlly Interest In Ule property

of MOther person; or : (b) a person whO acts fOr or on behalf of tile pa)ticurar pel'$00

wl1h respect to the security lnte~st and includes: (i) a trustee appointed ooder a trust deed reia!lng to a

security Interest : (II) a r&celver or receiver-manager appointed by lhe particular

person or by a 00\lrt on 1he app11cat1Qn Of the particular person,

(Iii) a se<J~estrator, or . (IV) any olher person pet1onnlng a function similar to that Of a

person referred to In any subparagraphs ~)to {Iii).

•security Interest" means any fraterest In prt>pertf that secures payment or performance of an Obligation and lnel:udes an Interest created by or arising out of a debenture, mortgage, ilyp9theo, r.en, pledge, charge, •meet Qr ~ trust, asslgn~nt or encu!ilbrance of any kind wh!!tever'1 ~er or.Wh~never arising, created,, deemed to arise or otherwise prQvldeCf foi'.

RESPONSE TO TAX SERVICES OFAC£ Jf no amount Ia or will be payable by you to 1he Recewer General under this Requirement to Pay, please enter the appropriate detaBS ~ow and return the signed form to the taX servtoes office lndlca18d on the front of the form.

We se not Uable for any pa~ as desa'lbed )n (1) and (2} (Check box if applicable), ·

The last payment was made on (dale)--------;....----in the amount of$-:--____ .....;_ _______ .

We wm becOme Rabie to mal<& a payment to 1t1e debtor on or about (date) _ _.__· ------------'

0

RENSEIGNEIIIENT8 POUR LE 11ERS A QUI LA DEMAN DE FORMELLE DE PAJEMENT EST AORESSEE

La present& Oemande formelle de paiement s•appUqUE:·-~-,dePt de toutes.les clspositlcns de Ia lof enoncee au recto ou route a~ loi (ll rexception de Ia Lof sur Ia fall/fte st lfnso/Vabifite}, de tout texte leglslatif pwinoial ou de 1oute regie de droit.

La pr&sente Demande formelle de paiement S'appllque a Chacun des montants d6crits aux points (1) tt (2) au recto ckl formulalre. Vous devez payer le montant le molns 61eve entre le total de oes montants ou Ia maximum payable. Le montant de ces sommes payables a t'ordre du receveur general an dlpit de toute garantie sur ces sommes. d&vient ra propriete de SaMajeete.

« creanolar garantl , (a) per80nne donnee qui a un droit en garantie sur le bien d'une

autre peraonne : (b) mandataire de Ia personoe donnee quant a ce droit, y

oomprla: (i) un 1iduolalre designs dans un aote de flduoie portant sur un

droit en garantie, (IQ un s{lquestte oai un se<:Juestra-gerant non; me par Ia

personne donnee ou par aa1 tribunal lila demande de cette persorme, · ·

010 un admlnlsrrateur-sequeatre, ou (lv) toute B1ltle personne donlles fonctions sent semblabfes a

celles d'une personne vis8e a l'un des sous-aJineas (I) a (il). • garantle ~ drolt.aurun bien cp garanttt r8XOOullon d'une obligatiOn noiamment un paiement. s0nt en particulier des garanties fes d'oits nes DU decOulanl de cfebenb.tres, hypotl'leques, pliviltges, nantisserneMS. ~. fiducies reputees ou rooles, ces8ior)s et cha~, queUe qu'en soil Ia nature, de qu~ f89()n ou 6 qutlqW dati qu'•lles soltnt· oreees, ~ eJdater ou pr{wues par ailleurs.

REPONSE AU BUREAU DES SERVICEs FISCAUX Dans 1e caa ou voue n•avez ou n·auro aucun paiement a falre au receveur gen~al en vertu de Ia preaente Demande formelte de paiement. veuiUez clonner les dMalls pertlneniS ckfe880Us et retoumer 1e presents fennulalre dOment signEt au wreau des aer:vlee~ flscaux lndlqu6 au recto.

Nous ne dewns aucune des &OmR188 decr11es auxpoints (1) ou (2). (oochet Ia case le caa ech6ant).

Le damier paiement a ete verse 1e (date)--------------

au montantcle __ ..._ __ ~-~-----· $.

Nous deVrons faire un paiement au deblteur vers le {date) _______ _,..... __ ..........

Future dealings with the debtor are not anUoipated 0 Nous ne pr~ pas de transactions prochaJne tNeC te (oheok box if applicable). deblteur (c:oohez Ia case le oas eoh6ant).

Th~re ·are presenlly $ . : . in II exiSli actu&Hement avec ce deblteur une otfigatlon eventuele disputed or Ct)fllingent amounts outstanding wHh :Ulla debtor ou contest~, qui n'est pas reglee, s'81evant a (provide peninent delals). $

Signature:------~--- DS!e: __ _

Name (print): ________ Ttl:----

~i~n: _________________ ~---------

Relll'ning 11e fonn dOes not relieve you Of your Obligallon to oo~ wllh this Recprement to Pay.

(foumtr taus les details pertlnents).

Signature:----------- Date: __ _ Nom {en lettre8 moulees): ------- T61. : __ _

Poste; _____________________________ __

Le fait de retoumer ce forrm.~IU'e ne vous Ubere pas de vot'e obligatiOn de YOUS oonfonner a Ia presenle Demand& fOrmtlle de paiement.

-----·-·-··-----·---------------- . _______ .. _ ... ......... . .. ..... .

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The Canada Pension Plan; the ln,cptne··J~~flthe looome Tax Act. 2000 • Ntwfouneland and Labrad0r!'th81nc8n\e'Tax ld- Prince EdWard Island; the Income True Am- Nova Scotia; the Income Tax Act· New Brunswick; the Income Tax Aot- Ontario; lhe lnoome Tax Act - Manflcba; the lnoome Tax Ad - 2000- Saskatchewan; the Alberta Personal Income Tax Act; the~ Corporate Tax Act the Income Tax ArA • Brittan Columbia; the Unemployment lnsuranoe N:A; the fncome Tax Act· NorttMest TII'TitorieS; the Income Tax 1wt- Nunavut; the Income Tax Act- Yukon Terrttory; 1he Petroleum and Gas Revenue Tax Act; ti1e Employment Insurance Aot

INFORMAnON TO THE THIRD PARTY TO WHOU THIS REQUIREMENT TO PAY IS ADDRESSED

This Requirement to Pay applies to each and all of the amounts de!ICiibed on 1he front of the form. You are required to pay 1he lesser of 1he total of such amoutts 9f lhe maximum payable.

This Requirement to Pay has a oontinulng effectwnh reupect to the payments described in (3). until tha maximum payable Is paid lnfuU. · ·

With the exception of the payment& described. in 1he preceding paragraph Where the requirement has a comlnulng ettect until satisfied, please take nouoe that this Requirement to Pay is effective for one year wflh respect to payments deSCI1bed In (2) and 90 days wittt respect to payments described in (4).

This Requirement to Pay should not be returned prior to one year from the dale Jl was Issued.

RESPONSE TO '~;'AX SE~VJCE8 OFFICE If no am QUill ~or wtn be t;M!Yable b'f you ~ 1he Receiver General under this Requirement 10 Pay please ental' 1he apPI'oprlats details below and return the signed form to 1he ~ services office lndiC4ted on the ·front of the torm.

We are not liable for any payments or actvan<:e& as deSQ'Ibecl on 0 the 1tont of lhe fQml (check box If applloable).

The J8st payment or advance was made on (date)------------

In the amount of$--------------­We wll.beeome liable to make a payment to, Qi we will loan or adVance mone~ to or make a payment ori behatf of, the tax deblor on (da~) _____ __._ _______ :----'

Future· ciealings with 1he tax debtor are not antiCipated D (ahedc box if applicable). .

Thera are presently $ · In clsputed or cantlngant amounts ootstandlng with this tax debtor (provide pertinent details).

S~rumKe: ___________________________ Daw: ____ __

Name (print): ________ Tel:----

Poelllon;

Ret1.mlng the form does not relieve vou of your obligation to co~ with thiS Requirement to Pay.

Le R~lme de pensions du Canada, Ia Loi de 11mp6t sur 1e revenu; -the Income Tax Act 2000 • Terre-Neuve-et·Labrador; 1he Income Tax Act· ffe-du Pri'lce-Edouard; the lncom& Tax Act. Nouvei&Ecos~; Ia Lol de 11mc6t sur 1e revenu • · ~ .. Nouveau-Bruhswick; Ia Loi da (1mp6t sur Is revenu • 0.. 10; Ia L.o/ de l'lmpOt sur le revenu-Manllcba; lhe Income Tax At;t, 2000 • SasicBtchewan; 11te Alberta Personal Income Tax Act:, 1t1e Alberta Corporate Tax At:J.· the lnoome Tax ADt • Colombie-BrftannlquG; Ia Lol u J•assurance"':h6mage; Ia Lol de 11mp& sw 1e revenu -Territolres du Nord-Ouest; Ia Loi de Mmp6t sur.Je revenu- Nunavul; Ia Lol de l~mp6t sur le revei'IJ - Temtoire w Yukon; Ia Loi dG 11mp6t sur les revenus petroJiers; Ia Loi llUr l'assiJranoe-emplol.

RENSEIGNEMENTS POUR LE TIERS A QUI LA DEMANDE FORUELLE DE PAIEMENT EST ADRESSEE

La presente Demande formelle de paiement s'appltque a chacun dis montants d8crits au recto dJ 1ormu1aire. Vous devez payer 1e montant 1e moins eleve entre 1e total de cea montarrta ou te maximum payable.

La presente Demancle formelle de paiement prevaut cte fac;on continue dans le cas des paiement& d~ au point (3) JUSCJt'a ce que le maJdmum payable soit PIY'-Confralrement aux palements ~omes au paragraphe pr&cedenl pour lesquels Ia demande tormelle prevaut de faQOn oonliwe jusqata oe qu'elle BOlt respectee, Ia presente Demande forrne.fle de paiement est en vtgueur pour une annee d~n~le cas des paiement& cl6crita au point (2) et pour 90 ]ours d~a le cas des palements decrfls au point (4).

La present& Demande formelle de paiement ne devralt pas atre retournee avtllt que le delal dun an ne ae solt ~ a partir de Ia date a Jaquelle eUe aN proWIIB.

REPONSE AU BUREAU DES SERVICES RSCAUX Dans i& cas ofl vous n'avez au n'auraz auClB'I paiement a talre au rec:eveur ~ en vertu cJe Ia prsaente Demande fonnelle de paiement, donnez les details pertlnents cl-dessous et retoumez le present tonnW*e dOment slgne au bUreau des services ffsoaux ~aurecto. ·

Nous ne devons 81JCUne des sommes ou des avances dkrl19s au recto w tormulaire (OOChez Ia case le cas eoheant).

L.e demler paiement ou avance, a eteverse Je (date) _________ _

au montantde -------------$. Nous devrons falre un Paiement au deblteur lscal, lui con senti' · un pret au une· aVar1ce, ou fai'e un paiement en son nom le (date)

Nous ne prevo)'ons pas d& transacllon prochalne avec le dBblteur fiSCal (cochez Ia case le cas 8cheant).

H exlsle actuellement avec ce le debitelJr fiscal une obligation eventuelle ou contestee, c:p n'eSt pas reglee, s'81evant ~ ~ (foumir taus lea dBtalls pertinents).

Slgnature.: ________ ~------. Date: __ _

Nom . (en lellres moulees}: -~-----Tel. : __ _

P~:---------------------------

Lt tat c1e retoumer ce formultllre ne voos IIbera pas de votre obflgation de VOU8 conformer a fa presen18 Demancle formelle de palemtnt

·----··------------------,-----------------,--

TAB 3

Backdating Documents: Is It Ever Proper?

Valerie Edwards Torkin Manes LLP

April 4, 2017

14TH ANNUAL Real Estate Law Summit

Backdating Documents: Is It Ever Proper?

Introduction

Backdating refers to the practice of executing a document or agreement after the event has

occurred that is described in, or evidenced, by the document or agreement. Laypeople may

associate backdating with suspicious or nefarious conduct and may view it as an attempt to

obtain some sort of wrongful benefit. After all, common sense dictates that an agreement can

only become effective after the parties have signed it.

However, such rigidity is inconsistent with established practice and lawyers routinely backdate

documents in furtherance of perfectly legitimate commercial purposes. The propriety of

backdating documents can be determined by analyzing its purpose and effect.

Broadly speaking, backdating can be grouped into two categories; backdating that fabricates and

backdating that memorializes.1 Backdating that fabricates refers to the backdating of documents

or agreements in order to confer an unlawful benefit to a party at the expense of a third party or a

governmental agency. Backdating that memorializes refers to the backdating of documents or

agreements to evidence the correct date on which the agreement or document became effective.

It is also easier to justify backdating a document when no third party interests are engaged.

Backdating that Fabricates

Backdating documents in order to secure an otherwise unentitled benefit is wrongful and

tantamount to fraud. Such occurrences are not unusual in tax appeals as noted by Justice

Campbell in Bekenski v. Canada, “I do not believe that the alleged backdating of the Resignation

1 These terms were coined by the American authors, Jeffrey Kwall and Stuart Duhl in their article, “Backdating”, which is available at http://ssrn.com/abstract=1112845.

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is an improbable event…Documents of convenience are often part of the evidence in tax

appeals…backdating of a document is not an event that I would characterize as a highly unusual

allegation.”2

Backdating often occurs in the corporate context; it is standard practice to prepare resolutions

and other documents after a directors’ meeting and backdate the documents to reflect the date of

the meeting. Research in Motion (Re)3 demonstrates that care should be taken not to backdate the

issuance of options in order to secure a more favourable price for the individual exercising the

option.

In Research in Motion (Re), the directors of Research in Motion (“RIM”) were subject to

regulatory proceedings initiated under the Securities Act R.S.O. 1990, CHAPTER S.5, for

backdating the grant of options to a date when the price of RIM’s shares was less than the then

current market price. The backdating resulted in the grantee being able to obtain a windfall upon

selling his or her shares. The directors ultimately settled the proceedings and had to repay their

ill-gotten gains to RIM together with steep monetary penalties.

Apart from backdating which serves an obviously nefarious purpose, lawyers should take care to

avoid backdating any documents or agreements which may prejudice creditors’ rights. For

example, clients may request that a document be backdated to evidence the transfer of shares or

other property to a date that (unbeknownst to the lawyer) preceded a creditor’s claim. The client

will then seek to rely on that document to defeat the creditor’s claim that the property was

fraudulently conveyed. If suspicious circumstances arise, lawyers should take steps to ensure

2 Bekenski v. Canada [2014] TCJ No. 162, per Campbell J. at para. 29. 3 Research in Motion Ltd. (Re), 2009 LNONOSC 351, per Turner, Knight & Kennedy.

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that the transfer actually occurred on the date that the client says it did. Otherwise, the creditor

may take the position that the lawyer was a willing participant in a fraudulent scheme.

Backdating that Memorializes

Backdating that memorializes refers to drafting and/or executing a document or agreement after

the event in question took place in order to accurately reflect the date on which that event

actually transpired. Examples of legitimate backdating that memorializes include:

1. Backdating an agreement of purchase and sale to reflect the date on which the

parties intended that agreement to close, or to the date on which a verbal

agreement was concluded;

2. Backdating a promissory note to the date on which the borrower actually received

the funds from the lender; and

3. Backdating a declaration of trust to evidence the date on which property started

being held in trust for the beneficiaries.

In Ricci v. Ricci4, the applicant, a beneficiary of his mother’s estate, sought to remove the trustee

(who was the husband of the deceased and the father of the beneficiary). The applicant alleged

that the trustee had breached his obligations as a trustee by transferring title to a trust asset, the

mother’s home (the “Home”), to himself.

Upon learning of the applicant’s concerns, and long after the transfer occurred, the trustee

executed a backdated declaration of trust which the trustee argued confirmed the trustee’s

4 Ricci v. Ricci, 2016 ONSC 6614, per Fairburn J.

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intentions to hold the Home in trust for the beneficiaries. The trustee also maintained that the

transfer was in the interest of the beneficiaries as it allowed the trustee to refinance the Home on

more favourable terms, which increased the value of the Home value.

The Court accepted the backdated declaration of trust as evidence of the trustee’s intention to

hold the Home in trust for the beneficiaries.

Real Estate Example

Real estate lawyers are, from time to time, asked to create trust agreements between the person

or entity registered on title, and an actual (or alleged) beneficial owner. This usually arises in a

tax context:

ABC Holdings owns development lands just outside London, Ontario, and unforeseen environmental problems have emerged. It now appears that the company will sustain significant losses.

Janet is the principal of ABC Holdings. Her accountant has asked whether she owns any other property that might be sold for a profit to offset the capital loss. She has a piece of land in Brampton that she bought in 1995 and has been renting out ever since. She comes to you for help.

You do a title search and, predictably, discover that the property is owned by 123 Ontario Inc. Janet says 123 Ontario Inc. holds the Brampton lands for ABC Holdings, in trust, and wants you to create a trust agreement she can send to CRA in due course.

The law is clear. If ABC Holdings was indeed the beneficial owner at the time the Brampton

property was acquired, you can prepare a trust agreement backdated to 1995. But how do you

know whether the client is trying mislead CRA, and potentially implicate you in a tax fraud?

You have a duty to ascertain what documentation exists which establishes beneficial ownership,

for example, financial statements and tax filings. As the Brampton lands are being rented, there

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should be both. On which company’s financial statements is ownership reflected? Which

entity’s tax returns include the rental income?

In this example, it would be surprising if the Brampton lands were not beneficially owned by

123 Ontario Inc. Janet would likely have wanted to keep these projects separate from one

another.

What if the property is vacant? Did ABC Holdings use its money to purchase the property and

pay the mortgage? Did it pay the property taxes? That might create a resulting trust in favour of

ABC Holdings.

Recently, the federal government announced that CRA may be requiring property owners to

report sales of principal residences. The registered owner might not qualify for the tax

exemption, and wish to assert beneficial ownership by someone else, a sibling for example.

Requests to prepare trust agreements must be handled very carefully in these circumstances.

In many cases, you simply cannot do what the client has asked you to do. In others, it is

reasonably clear that beneficial ownership has been established and you can proceed, always

with the warning to the client that CRA can disallow the desired tax treatment. The problem

really arises when there is some evidence of beneficial ownership, but it is not compelling.

Proceeding to prepare a trust agreement under these circumstances is a judgment call. If you

have a feeling that some or all of the supporting documents are themselves suspect, back off the

retainer.

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Conclusion

Lawyers should take care to analyse the purpose of the backdating and the potential effect that it

may have on third parties. To protect themselves from serious allegations, lawyers should ask

for reliable evidence which demonstrates that an event actually occurred before backdating a

document to confirm that it did.

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TAB 4

Intersection of Family Law and Real Estate

Jennifer Wilson Torkin Manes LLP

April 4, 2017

14TH ANNUAL

Real Estate Law Summit

14th Annual Real Estate Law Summit

A Checklist of Family Law Considerations for Every Real Estate Lawyer

By: Jennifer Wilson, Torkin Manes LLP

(This Checklist is to be used as a guideline or resource. It is not intended to create or replace a standard.)

Question 1: Who is your client(s)?

☐ Are you acting for more than one buyer or seller?

o If so, have you obtained consent?

Is a joint retainer appropriate?

o If so, have you obtained consent?

Does a party need independent legal advice?

o For example: refinancing of a matrimonial home for the benefit of one

party?

Question 2: Who is funding the purchase?

☐ Identify the source(s) of funds for the purchase

o Depending on the source(s) of funds, an agreement or additional

documentation may be appropriate

Question 3: Is the purchaser using funds that were gifted or loaned?

☐ Promissory Notes may be inadequate to protect a loan

o Promissory Notes “payable on demand” are not recommended forms of

security for family law purposes

o Registration of a second mortgage or confirmation of the loan by way

of a domestic contract may be preferable forms of security, if security

is required

o Even if a valid loan can be established, the value may be discounted for

family law purposes (See Poole v. Poole, 16 R.F.L. (5th) 397)

Was it a gift or a loan? (See Barber v. Magee, 2015 CarswellOnt 19620 (Ont.

S.C.J.)

o Contemporaneous documents evidencing a loan?

o Is the manner of repayment specified?

o Is security held for the loan?

o Are there advances to other children?

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o Is there demand for repayment prior to separation?

o Has there been partial repayment?

o Is there an expectation or likelihood of repayment

Question 4: How is the purchaser taking title?

☐ Thoroughly review the options available to the purchaser(s)

o Do the parties understand the difference between joint tenancy and

tenancy in common?

o Do the parties understand the concept of a life interest or other options

available to protect their investment under a domestic contracts?

Question 5: Is a domestic contract or trust agreement required?

☐ Does title reflect each party’s contribution to the purchase price and/or their

understanding of their interest in the property?

o If title does not reflect the true beneficial owner of the property, is a

trust agreement required? (See Andrade v. Andrade, 2016

CarswellOnt 7727 (C.A.).

o In the event of a breakdown of the relationship, is there a high risk that

one party could potentially receive a financial windfall if equity is

divided based on each party’s registered interest?

If so, consider again the necessity of recommending that a party

get independent legal advice and/or the parties enter into a

domestic contract. Litigating trust claims is extraordinarily

expensive.

Question 6: Does your reporting letter accurately reflect your discussions with the client?

☐ Your reporting letter should confirm the answers given to you by the client to

the issues/questions set out above

Your letter should also warn unmarried purchasers of the impact of the Family

Law Act.

o That is, if they marry in the future, their home may be become a

matrimonial home and their equity and rights of possession can be

affected by marriage

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TAB 5

How to Prepare for a Spot Audit

Rimpal Hinduja, CPA, CGA, Supervisor, Spot Audit The Law Society of Upper Canada

Deborah Loh, CPA, CA, MAcc, Spot Auditor

The Law Society of Upper Canada

April 4, 2017

14TH ANNUAL

Real Estate Law Summit

HOW TO PREPARE FOR A SPOT AUDIT

Rimpal Hinduja, CPA, CGA Supervisor - Spot Audit Program Deborah Loh, CPA, CA, MAcc Auditor – Spot Audit Program Objectives of this Session 1. Overview of Spot Audit Program 2. Tips for getting ready for a Spot Audit Authority Section 49.2 of the Law Society Act

Frequency – every 5 to 10 years – applies to ALL firms large and small

Overall goal: Assess compliance with By-laws and Rules of Professional Conduct and to educate Practitioners on those requirements Specific Areas of Focus By-Law 9 – Financial Records, Handling of Cash and Client Property Rule 3.4 - Avoidance of conflicts of interest:

3.4-12 - acting for borrower and lender 3.4-16 - Two Lawyer Rule for real estate transactions 3.4-5 to 3.4-9 - the Joint Retainer rule

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By-Law 7.1 assignment of tasks to non-lawyers (re: Teranet USB) Compliance with Client ID/Verification Requirements

Specific Areas of Focus

Rule 6.1 - electronic registration of title documents By-Law 8 – consistency of information reported in the Lawyer’s Annual Report By-Law 6 - LawPRO transaction levies

How are firms selected?

Random Newly Formed Law Practice Re-Audits Referrals from other LSUC departments (Professional Regulation, Practice Review) Lawyer Annual Report (LAR) indicators (Other Items of Concern)

How you are notified

Firm Contact – Sole Practitioner or “Reporting” Licensee

Questions - to determine scope and length of audit

Appointment confirmed within 2 to 3 weeks

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What is required from you? 1. Production of all financial records required under By-Law 9 section 18 2. Review of :

Trust reconciliations, bank statements trust listings

List of Private Mortgage files where you acted for lender

List of Estate/POA files

LPIC transaction levy filings/confirmation of payment

Period of Review

Primarily 12 months from the date of contact for all financial records Plus

Review of records to support reporting on Lawyer’s Annual Report (financial information, private mortgages, estates and POAs)

What happens after the audit is complete? 1. Audit Report to Licensees – Findings & Recommendations 2. Review and Disposition:

Close - Little or no findings Letter and Close – Issues not significant, not noted during audit or

unclear Monitoring – Issues need to be cleared before close Re-audit – Significant number of books and records issues Escalation/Referral – Significant conduct issues identified

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Resources Law Society of Upper Canada:

http://www.lsuc.on.ca/

416-947-3300 Guide to Opening Your Practice for Lawyers:

http://www.lsuc.on.ca/with.aspx?id=2147499495

Bookkeeping Guide for Lawyers: http://www.lsuc.on.ca/with.aspx?id=2147499736

How to Open and Operate a Trust Account:

http://www.lsuc.on.ca/For-Lawyers/Manage-Your-Practice/Financial-Management/Billing/Collections/Trust-Accounts/How-to-Open-and-Operate-a-Trust-Account/

How to Reconcile a Trust Account:

http://www.lsuc.on.ca/For-Lawyers/Manage-Your-Practice/Financial-Management/Billing/Collections/Trust-Accounts/Reconciling-a-Trust-Account/

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TAB 6

Condominium Resale Searches on a Reasonable Budget

Robert Miller Alex Krancevic

Chaitons LLP

April 4, 2017

14TH ANNUAL

Real Estate Law Summit

Doc#3861908v1

RESIDENTIAL CONDOMINIUM RESALE SEARCHES ON A

REASONABLE BUDGET

ROBERT A. MILLER | ALEX KRANCEVIC

APRIL 4, 2017

Purpose: Identify the minimum searches to properly perform on the resale of a residential condominium and the associated costs of such searches.

Title & Title Insurance

Confirm unit mix that your client is purchasing.

Dwelling unit, parking unit, storage/bicycle storage unit and/or locker unit(s).

Review title to ensure there are no construction and/or common expense liens or any other encumbrances.

Title insurance protects the purchaser from certain title and off-title risks such as existing liens, work orders and realty tax arrears.

Cost. The cost of title insurance varies based on the purchase price, amount of mortgage (if any) and whether the purchase is financed through a private or institutional mortgagee.

Status Certificate

Review thoroughly.

Confirm that the condominium corporation (the “Condo Corp”):

Is not expecting an increase in common expenses;

Has conducted a recent reserve fund study;

Is not subject to any legal action; and

Has insurance policies in place.

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Doc#3861908v1

Confirm the vendor is not in arrears of any common expenses (including special assessments).

Review the Condo Corp’s current budget and last audited financial statements.

Cost. $100.00 (inclusive of HST).

Declaration

The meat and bones of what is and is not allowed in the condominium.

Confirm:

Pet allowances and/or pet restrictions;

Common elements and exclusive use common elements;

Unit’s contribution to common expenses (i.e. Schedule “D”);

Maintenance and repair obligations;

Smoking restrictions;

Restrictions on short-term rentals (i.e. Airbnb, VRBO Vacation Rentals);

General restrictions; and

Anything else relevant to your client (fact specific).

Cost. Attached to the Status Certificate (no additional cost).

Description

Download the PIN from Teranet.

Confirm the Declaration (and any amendments) as well as the by-laws are registered on title.

Cost. $29.35 + $1.00 for each additional page.

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Doc#3861908v1

By-Laws

Review the by-laws to determine specific insurance requirements for the unit.

Cost. Attached to the Status Certificate (no additional cost).

Other Searches

Even with Title Insurance, the following searches are necessary:

Execution Searches: $11.50 per name.

Search each vendor.

Consider a search against the Condo Corp as well.

Tax Certificate: $65.00.

Water Certificate (in Toronto): $50.00.

Suggestions

Consider updating the Status Certificate if there is a lengthy gap between the date of the original certificate and closing.

Review the following for compliance:

Municipal Agreements;

Subdivisions Agreement; and/or

Condominium Agreements.

Note: these searches are not required if your client is purchasing Title Insurance.

Cost. Varies. Inquire with the local Municipal Building Department.

Conclusion: The prudent solicitor works diligently to ensure his or her client gets what he or she bargains for... on a reasonable budget that meets the client’s need.

A quick-reference handout of this material follows.

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Doc#3854026v1

A P R I L 4 , 2 0 1 7 | R O B E R T A . M I L L E R & A L E X K R A N C E V I C

Title & Title Insurance

Confirm unit mix that your client is purchasing (i.e. dwelling unit, parking unit, storage/bicycle storage unit and/or locker unit(s))

Review title for existing encumbrances such as construction and/or common expense liens

Explain the purpose of title insurance to your client

Cost of Title Insurance: Varies based on the purchase price, amount of mortgage (if any) and whether the purchase is financed through a private or institutional mortgagee

Status Certificate

Confirm that the Condo Corp: o Is not expecting an increase in common

expenseso Has conducted a recent reserve fund studyo Is not subject to any legal actiono Has insurance policies in place

Confirm the vendor is not in arrears of any common expenses (including special assessments)

Review the Condo Corp’s current budget and last audited financial statements

Cost: $100 (inclusive of HST)

Description

Download PIN from Teranet

Confirm the Declaration (and any amendments) as well as the by-laws are registered on title

Cost: $23.95 + $1.00 for each extra page

Declaration

Confirm: o Pet allowances and/or pet restrictionso Common elements and exclusive use

common elementso Unit’s contribution to common expenseso Maintenance and repair obligationso Restrictions on short-term rentals (i.e.

Airbnb, VRBO Vacation Rentals)o Leasing restrictionso General restrictionso Anything else relevant to your client (fact

specific)

Cost: Attached to the Status Certificate (no additional cost)

By-Laws

Review the by-laws to determine specific insurance requirements for the unit

Cost: Attached to the Status Certificate (no additional cost)

Other Searches & Suggestions

Even with Title Insurance, the following searches are necessary: o Execution searches against each vendor and

perhaps the Condo Corp ($12.00 per name)o Tax certificate ($65.00)o Water certificate (in the City of Toronto)

($50.00)

Review the following for compliance: o Municipal, Subdivision and Condominium

Agreementso Not required if purchasing Title Insurance

Consider updating the Status Certificate if there is a lengthy gap between the date of the original certificate and closing

CHECKLIST R E SI D E NTIA L CO N D O MI N I UM

R E SA LE S EA R C HE S O N A R EA S ON AB LE BU D G ET

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TAB 7

A Lot from the DOT: An Update on Recent Bulletins and

Other Musings from The Director of Titles

Jeffrey Lem, C.S., Director of Titles, Ministry of Government and Consumer Services

April 4, 2017

14TH ANNUAL

Real Estate Law Summit

A Lot from the DOT: An Update on Recent Bulletins and Other Musings from The Director

of Titles

14th Annual Real Estate Law Summit Law Society of Upper Canada

April 4, 2017

Jeffrey W. Lem

GENERAL NEWS FROM THE LRO Teraview Web, the first, totally-new re-platforming of Teraview, is on track for a pilot at the end of this year, and full release in early 2018. It will be fully AODA (Accessibility for Ontarians with Disabilities Act) compliant with a full French application. It will be phased-in by four regions (the boundaries of which will not be entirely intuitive), with very short overlap period (approximately one month), after which the current Teraview will no longer be available. Jennifer Connell from Teranet will be providing further details later in the Summit, but the key is to get on board quickly! OnLand also on track and looking good. Pretty soon, you will be able to “deep search” behind the PIN through historic books without attending at each relevant LRO. OnLand is being developed in two Phases. Phase 1 includes the Digital Library, which will provide access to historical books across the province from a single portal, and is set for release mid-December of this year. Phase 2, scheduled for release in 2018, will provide all other searching features, document and plan view, mapping, writs, etc. I have seen a demonstration and it is impressive. LROclientSubmit@ontario.ca serves as a one-stop-shop email address for PIN Corrections, overrides, pre-approvals and some general enquiries for those LROs that are in the Support Network. There are currently 26 LROs in the Support Network, with six new LROs entering this summer (Barrie, Windsor, Lindsay, Kingston, Woodstock, and Goderich). The Support Network will be province-wide by the end of 2017. Users can go to the Teraview Notice Board to see if their LROs are currently in the Support Network. The Client Request Form, which is needed for an email inquiry, can be obtained by emailing LROClientsubmit@ontario.ca and asking for it.

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Users are reminded that Pin Corrections, in particular, need to be submitted as early as possible. As soon as you know of the problem or receive the requisition, you should be submitting the request for Pin Correction using the Client Request Form. Coming later in the summer will be a new bulletin centralizing and standardizing the “override” process for those special transactions that require Teraview rules to be manually overridden by LRO staff. BULLETINS COMING SOON Withdrawals/Returns: At the Law Society’s 2016 Six-Minute Real Estate Lawyer, I introduced a brand new protocol to be put in place for documents that need to be returned or withdrawn. At the time, I announced that the only messaging modality that we would use would be the Teraview internal messaging system (in lieu of phones, faxes and emails). We received significant and meaningful input from solicitors, especially from “smalls and soles”, together with valuable input from the OBA and FOLA, all suggesting that Teraview messaging (only) would be a hardship for smalls, soles and occasional Teraview users. Being agile and responsive, we have decided to switch our messaging to a concurrent phone call to warn of the return for correction and/or pending withdrawal, as the case may be. The balance of the new protocol remains as previously announced and includes a confirmation of the long-standing policy prohibiting users from themselves requesting the withdrawal of an otherwise certifiable document -- users must be diligent when submitting documents for registration. Cautions: A caution under Section 128 of the Land Titles Act is available typically for 60 days. I have become concerned that a caution under Section 128 that is subsequently withdrawn by the LRO might be re-registered later. If it takes, say, 60 days for the “bounce” of the original caution, that gives the cautioner nearly double the protection if the cautioner then re-registers a corrected caution, which itself has a 60-day lifespan. The new withdrawal/returns bulletin referred to above should greatly lessen the possibility of any document taking 60 days to be withdrawn in the first place, but I expect to issue a supplemental bulletin that will make it clear that, if a cautioner registers a “second” caution after a “first” caution gets “bounced”, then the relevant “60 days” is the aggregate of the periods that both cautions were on title.

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Single Name: Neither the Land Titles Act nor the Registry Act currently allows for registration other than by surname, followed by given name and a second given name, if any. A new registration protocol is being implemented to permit the use of a single name when otherwise permitted to do so under the Vital Statistics Act or Change of Name Act. Not everyone who wants to use a single name can do so – the single name legislation requires being a member of “a specified culture with a traditional single naming practice”, all as more particularly set forth therein, but if the client fits that legislative criteria, the client can register in their own single name. It is incumbent on lawyers to always comply with all relevant “know-your-client” identification rules and best practices, especially when dealing with single names. No More Paper Tax Deeds: Although the system is 99+% digital, we still have some Land Titles Act documents that regularly come in paper (this is distinct from “non-converts”, which are governed by the Registry Act and can only transact in paper). The plan is to gradually wean-out all remaining paper documents under the Land Titles Act. Last year, I eliminated paper construction liens under the Land Titles Act (see Bulletin 2016-04). This year, I plan on eliminating paper tax deeds and related municipal tax filings. Writs Under $50K: Even though writs under $50K can be cleared by a client statement that “he/she is not the same person as a judgement debtor”, the LRO staff can still ask for a law statement confirming whether the “amount of the judgement debt is less than $50K”. There is also a proposal in my office that seems to be gaining momentum, to remove the $50K cap all together, essentially making the future writ clearing protocol: “all writs, all law statements, all the time”. It is still in the consulting stage and any decisions will be announced, hopefully, by the time of the Law Society’s 2017 Six-Minute Real Estate Lawyer. Disappearing Writ Statements: There remains a persistent problem of users not using the auto-fill function for writs when preparing the Transfer, and trying to manually type in writ details when making writ clearing statements. The MAG writs database is very sensitive, so, if you make any slight inconsistency – punctuation, spacing, number of zeros in the writ number, for instance – Teraview will delete your clearing statement and leave your Transfer subject to the very writs you thought you were clearing. This has been the subject of several Teraview newsletters, but we still get calls from lawyers, some very experienced veterans, saying “my writ statements disappeared”.

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Section 71 Notices (Mix and Match): Appendix A from Bulletin 96003 for Notice under Section 71 of the Land Titles Act has a number of specific statements, all set out as a form, but Appendix A was created before electronic registration. Thanks to the Carleton County Law Association for pointing out that some of the statements in Section 71 Appendix A are essentially replicated elsewhere in the electronic registration forms. Where they are already provided for elsewhere, you do not have to repeat them. You can, instead, “mix and match”, the statements so that you do not end up repeating statements. At this stage, I am not certain that we will be issuing a separate bulletin simply for the “mix and match” approach (although LRO staff are now certifying accordingly), given that Bulletin 96003 is due for a general replacement soon in any event, so the new permitted “mix and match” approach may be subsumed in the soon-to-come replacement for Bulletin 96003. Trust and Estate Bulletins: Later this month, at the Dealing with Real Property in Trusts and Estates Contexts Program being run by the OBA on April 25, 2017, I will be discussing a number of forthcoming bulletins relating to estates, probate and trusts:

• Change of Tenure from Tenants-in-Common to Joint Tenants, after death.

• First Dealings Exemption from Probate • Trusts in Land Titles • Fixing Erroneous Birthdates in Transfers

Other Ministries’ Bulletins: The Office of the Director of Titles operates under the Ministry of Government and Consumer Services and develops policy for the land registration program, but several other ministries also pass measures that affect land registration. From time to time, bulletins and other communiques may be issued to reflect what these other ministries do to land registration. At the Summit, participants heard about changes coming to land registration from the Ministry of Economic Development, Employment and Infrastructure arising out of the newly passed Forfeited Corporate Property Act, but that’s just one example of a ministry other than the Ministry of Government and Consumer Services that affects land registration. While not discussed at the Summit, the Ministry of Finance has similarly recently introduced a brand new land transfer tax reporting protocol that affects all transfers effective April 24, 2017. The Ministry of Finance’s bulletin detailing this new protocol is set out at the Ministry of Finance’s website:

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http://www.fin.gov.on.ca/en/tax/ltt/prescribedinfo.html

It is critical for users of Teraview to immediately read and incorporate the new Ministry of Finance Land Transfer Tax reporting protocol into their workflows, since Teraview will not allow a transfer to be signed for completeness after May 5, 2017 unless the Ministry of Finance protocol has been complied with, and any work-in-progress signed prior to April 24, 2017 will need to be re‑ signed thereafter, in compliance with the Ministry of Finance protocol, in order to permit registration. CONCLUSION Everybody needs to be on the lookout for new bulletins. Going forward, that will be my preferred method of communication to the profession. Finally, I want to take this opportunity to thank all of the LRO staff who work so hard to keep land registration up and running. There has been so much transformation in land registration over the past couple of decades, and there have been a lot of retirements in the same period, many of them coming in 2016 alone, but the staff have been resolute and remain the backbone of the land registration system, which, in turn, is the backbone of this economy. I will tell anyone who asks that I have the “best job in the world, for a real estate geek like me”, but the reason that the job is as good as it is, is because the land registration staff is the best team in the entire Ontario public service!

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TAB 8

Five Things to Look For when Your Client is Buying a Small Commercial Building

Alan Sless Anna Côté, Student-at-law

Borden Ladner Gervais LLP

April 4, 2017

14TH ANNUAL Real Estate Law Summit

14th Annual Real Estate Law Summit Presentation – April 4th, 2017

5 Things to Look For when Your Client is Buying a Small Commercial Building

Presentation by Alan Sless, partner at Borden Ladner Gervais LLP

Prepared with the assistance of Anna Côté, student-at-law at Borden Ladner Gervais LLP

INTRODUCTION

The purchase of a small commercial building can appear fairly simple, but there are numerous considerations in each transaction. This presentation will highlight 5 important areas of focus: (1) Leases & Rents; (2) Off-Title Issues; (3) Land Transfer Tax Issues (4) Documentation; (5) Risks & Title Insurance. (Note that these are only 5 areas selected to highlight in this presentation, and do not represent an exhaustive list of considerations. In some cases, other considerations may be of greater importance.)

To provide context for these considerations, I will be using the example of a building containing a restaurant on the bottom and a single residential apartment on top.

Representation and Joint Retainers

A note about representation: As a general rule, the Rules of Professional Conduct do not permit a lawyer to act for both the vendor and purchaser in a real estate transaction (Rule 3.4-16.7). However, the Rules make exceptions in certain circumstances (Rules 3.4-16.8-9). Nevertheless, it is not usually advisable to act for both parties in the transfer of title. The risk is that the interests of the parties may diverge, creating a conflict of interest. Furthermore, case law demonstrates that a lawyer in a joint retainer is more vulnerable to claims of breach of fiduciary duty and negligence due to the difficulty in demonstrating that the client received the same level of service they would have received if the lawyer was independent of the other side.1

The question of a joint retainer arises more frequently in more remote locations where there are fewer lawyers to choose from and the Rules provide an exception to the Rule against joint retainers. Always be sure to make an informed, prudent decision and err on the side of caution when deciding whether to accept or refuse a joint retainer.

A joint retainer requires proper disclosure and consent (see subrules 2.04(6)-(10) of the Rules). If you do accept such a retainer, encourage the parties to obtain independent legal advice before agreeing to a joint retainer, in order to ensure that their consent is informed, genuine and uncoerced.

In the case where there is no joint retainer but the other party is unrepresented, you must urge the other party to obtain independent legal representation and you must be careful not to give them the impression that you are protecting his or her interests.

1 Paul Perell, Real Estate Transactions, 2nd Edition (Toronto: Thomson Reuters, 2014) at 419.

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FIVE ISSUES TO LOOK FOR

(1) Legal Rents

When someone is purchasing a small commercial building, it is usually with a view to generating a long-term revenue stream. Therefore, in the context of an investment property, a thorough review of the leases affecting the property and the rents they generate may be one of the most important aspects of a lawyer’s role in assisting the client with the purchase of such a property.2

There is no governmental authority or organization through which rent rolls can be searched or verified. While major leases may be registered on title, few of them will contain the rent amount. This would be unlikely with a small commercial property.

There will be different parameters for obtaining information and assessing the revenue potential for different property classes. For instance, us ing our restaurant-apartment example, there will be a different procedure and different considerations for the rental unit and the restaurant business.

Residential Unit

For the residential unit, the current lease will have to be obtained from the landlord as evidence of the current rents. The legality of the rents must be verified and the extent to which the rent may be increased to lawfully maximize returns ought to be calculated. This can be done by consulting Part VII – Rules Relating to Rent of the Residential Tenancies Act. This section sets out the guideline for rent increases, at a frequency no greater than every 12 months or when a new tenant moves in. In the alternative, the rent can be increased in the case of an agreement between landlord and tenant when the landlord carries out a capital expenditure, or if a landlord applies to the Landlord & Tenant Board for an order permitting the increase of rent by more than the guideline.3

Retail Unit

For the restaurant unit, the current lease must likewise be obtained from the landlord as evidence of the current rents. It must be determined if the lease is a Gross Lease or a Net Lease. With a Gross Lease, the tenant pays a flat fee for rent and the landlord pays all property expenses, such as taxes, insurance and maintenance. With a N et Lease, a tenant pays for items such as utilities, property taxes, insurance, repair and/or maintenance in addition to the rent stated.

In both instances, Tenant Estoppel Certificates can be requested to prevent either tenant from later denying that the rents owed are the amount stated in the lease. As part of closing, the leases must be transferred over to the purchaser.

2 Jeffrey Lem, “Title and Off-Title Searches” in The Keys to the Successful Purchase of a Multi-Tenant Commercial Property (Toronto: OBA Continuing Legal Education, May 9, 2012) Tab 2, at 1-2. 3 See ss. 119 – 121.

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Finally, in addition to examining the leases and rents themselves, the tenant’s payment histories and credit files should also be verified to determine the security of the income stream.

(2) Off-Title Issues

Both title s earching a nd o ff-title s earching r equires a c onsiderable a mount of t ime. T hrough communication with your client, determine in advance how in-depth of a due diligence review is required given the value of the property, the risk and what your client is willing to pay for. Budget your time accordingly, and be sure to raise any issues you discover with your client well in advance of closing.

Liens

Clear title to the purchase property can be clouded by liens established against the property. These can be voluntary liens created by contract between creditor and debtor, such as a mortgage; or they can be involuntary, such as tax liens for the owner’s unpaid taxes or construction liens for unpaid construction or renovation costs. While a title search should identify any registered liens, it will not pick up on unperfected or unregistered liens which can similarly encumber the property. In order to identify the latter, searches must be done at the municipal clerk’s office, in addition to having the vendor provide a statutory declaration that there are no unregistered liens on the property arising from the Construction Lien Act.

Zoning

Zoning can dramatically affect what a purchaser may be able to do or change with the property they wish to acquire. It is therefore very important that real estate lawyers confirm the zoning for a property their client wishes to purchase by consulting Official Plans, local zoning by-laws and site plans. It may also be prudent to look at forthcoming planning changes. At the very least, the lawyer should confirm that the current use of the property is legal. In our example of the restaurant and residential tenant, that would mean ensuring that the property is zoned mixed-use for commercial and residential or that some exception applies.

Statutory, Municipal and Other Government Searches

There are many off-title searches that can be done, and which ones to undertake will depend on the purchaser, the property, the budget and the risk involved. They include:

• Writing to th e lo cal mu nicipality f or th e s tatus of r ealty taxes a nd lo cal imp rovement charges, and obtaining a tax certificate;

• Requesting searches for permits, licenses and other regulatory approvals from the relevant ministries (for a restaurant, these may include liquor licenses, patio licenses, sign permits, etc.);

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• Requesting s earches f or w ork or ders and ot her di rectives of non -compliance f rom t he Building Department of the municipality;

• Requesting ot her w ork s earches f rom ot her a pplicable a uthorities, s uch a s t he F ire Department, Health Department, the Technical Standards and Safety Authority, etc.;

• Searches with the local Conservation Authority to determine whether its regulations affect the property;

• Enquiries to ensure that any agreements registered on t itle in favour of the municipality, utility companies or any other entity are in compliance;

• Enquiries with public and private utility companies for the state of account and to advise them of the change of ownership.

In many cases, i t is necessary to obtain the consent of the owner before a municipality or other governmental authority will release any information concerning the property to a third party. This is a provision that should be included in the purchase and sale agreement.

Surveys

The completion of an up-to-date building location survey can confirm whether the lands described in the title deeds are accurate and whether or not any part of them has been lost or gained. For example, a survey could discover that an improvement built onto the restaurant has in fact been built onto neighbouring property. On the other hand, it could discover a right-of-way that has developed around to the back of the restaurant that may not be registered on title. Relying on pre-existing surveys should only be considered where the survey is very recent; this can be an important cost-saving move.

Environmental Considerations

A property’s potential environmental issues can be identified in a few ways. One is to write to the Ontario Ministry of Environment and Climate Change to request any information about the property’s non-compliance. Another option is to obtain a Phase 1 Environmental Report to ensure there is no history of the property being contaminated. Where risk factors are revealed, a Phase 2 Environmental Report may be required, which involves digging boreholes at various locations on the property and testing the soil removed from the boreholes for contamination. Subsequent remediation may be mandated.

Fraud

The purchase and sale of real estate is sometimes the vehicle used to commit fraud. Lawyers must therefore be vigilant for any red flags indicating real estate fraud and be sure to verify the legal and beneficial owners of the property and business entities, verify who has control of the business entities, and clarify the nature and purpose of a complex or unusual transaction where the purpose

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is not clear. A lawyer should furthermore make a record of these findings of these inquiries (Rules of Professional Conduct, Commentary to subrule 2.02(5)).

(3) Land Transfer Tax Issues

Tax payable in the purchase of a commercial property is an important consideration that your client must be aware of and budget for in advance of closing. This section will only discuss the land transfer tax issues, but HST payments are a separate, key issue to properly understand and plan for.

A purchaser of real property is required to pay provincial land transfer tax, and potentially municipal land transfer tax as well (in the City of Toronto). This will be a significant closing cost for the purchaser, not least of all because as of January 1st, 2017, Ontario has increased the percentage of land transfer tax owed on commercial properties purchased for over $400,000 (other than single-family homes) to 2%. Now both residential and commercial properties are caught in the same 2% bracket. Furthermore, for a purchase that exceeds $2,000,000 in value and the land contains one or two single family residences, an additional 0.5% on the amount above $2,000,000 is levied4.

While there may not be many instances of buying a small commercial property that has one to two single-family residences attached and whose value exceeds $2,000,000, when this does occur, apportionment of the value should be done in such a way so as to avoid the extra 0.5% if possible. To achieve this, the amount of the purchase price apportioned to the residential part of the land should be minimized and that of the commercial part maximized.5 This is done by completing an affidavit setting out the apportionment of consideration.6

In completing the transaction, it should be anticipated that the vendor will request a Land Transfer Tax Affidavit from the purchaser as a guarantee of payment of Land Transfer Tax. Final Word: For tax issues, a tax lawyer ultimately ought to be consulted as the area is complex and many real estate lawyers do not have adequate knowledge to deal comprehensively with tax issues.

4 Land Transfer Tax Act, RSO 1990, c L-6, s. 2(1)(b). 5 See the Land Transfer Tax Act, s. 2(2) 6 See Ontario, Ministry of Finance, “A Guide for Real Estate Practitioners - Land Transfer Tax and the Registration of Conveyances of Land in Ontario”, online: < http://www.fin.gov.on.ca/en/guides/ltt/3250.html>.

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(4) Required Documentation Checklist7

Pre-Closing Matters: • Agreement of Purchase and Sale • Delivery of Deposit • Statement of Adjustments • Representation and Warranty of Ownership (that should survive past closing)

Closing Documents List: Vendor’s Closing Deliveries • Legal opinion re Title must be written honestly and in plain language. • Transfer/Deed of Land • General Conveyance, Assumption and Indemnity Agreement • Bill of Sale • Assignment and Assumption of Contracts • Assignment of Guarantees, Warranties and Indemnities • General Assignment of Leases • Tenant Estoppel Certificates • Notice and Direction to Tenants • Certificate and Indemnity re Leasing Commissions • Statutory Declaration of Possession • Non Merger Covenant • Assignment of Business Name, Trade Name, etc. • Statutory Declaration re Construction Lien Act • Bulk Sales Act/Retail Sales Act Indemnity • Bring Down Certificate • Undertaking to Re-Adjust • Direction re Funds • Re-Direction re Funds • General Holdback Agreement • Corporate Resolution Authorizing Sale • PPSA Comfort Letters • Original Leases, Contracts, Tenant Files and Other Documentation • Keys and Other Access Devices • Plans, Specifications and Construction-Related Documents Related to the Property

7 This list has come, largely, from Sherri Lavine, “Closing and Post-Closing Matters” in The Keys to the Successful Purchase of a Multi-Tenant Commercial Property (Toronto: OBA Continuing Legal Education, May 9, 2012) Tab 7.

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Closing Documents List: Purchaser’s Closing Documents • Balance Due at Closing • General Conveyance, Assumption and Indemnity Agreement • Assignment and Assumption of Contracts • General Assignment of Leases • General Holdback Agreement • Direction re Title • HST Declaration and Indemnity • Bring Down Certificate • Undertaking to Re-Adjust

Documents Specific to a Restaurant (May Vary Case by Case) to be Verified Prior to Closing: • Liquor Licence • Patio Permit for patios that encroach on municipal sidewalks/lands • Sign Permit (for advertising)

As part of good practice management, the preparation of the required closing documentation should be organized via a c losing document check-list and c losing agenda to ensure that everything i s verified and finalized. In advance of closing, important dates and deadlines should be diarized in a reminder system to ensure that all documents are prepared in time.

(5) Risks & Title Insurance

Risks

Some of the risks to consider with respect to our example are:

(1) Whether the residential tenant is a desirable tenant (i.e. do they maintain the premises, do they pay their rent on time, is there a high turnover of tenants, etc?);

(2) Whether the retail tenant is a desirable tenant (i.e. do they maintain the premises, do they pay their rent on time, are they likely to be profitable and stable in the long-term, etc?);

(3) Whether the tenants can co-exist comfortably so as to create a minimal burden on the landlord to manage the tenant relationship; and

(4) Whether the purchaser is inheriting good title of the land and building.

Title Opinion

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With respect to the latter, the purchaser has the responsibility to make title and title-related searches to determine that they will be receiving good title and at what risks. Based on these searches, a solicitor’s opinion can cover a wide range of matters, including and beyond title and title-related matters. This t itle opi nion doe s not act l ike an i nsurance on t itle, but it doe s pr ovide a good guarantee that the purchaser is inheriting title to the property as set out in the opinion.

However, title insurance has become increasingly popular.

Title Insurance

With respect to title and title-related matters, a title insurance policy can provide coverage with respect to certain items that a solicitor cannot provide such as fraud, forgery, specified losses and a duty to defend the insured in the event of a claim. It can also, to an extent, “replace” due diligence searches, as determined according to the needs of the client and the nature of the transaction. In addition, insurers will almost always provide reduced requirements for due diligence for deals under specific thresholds. The purchase of a small commercial building such as a restaurant-apartment combination will likely fall under a reduced category.

Note, however, that the zoning of the purchase property should always be verified, regardless of title insurance coverage. This is because a property’s zoning is central to being able to operate the property for the reasons for which it was purchased, particularly the commercial component. Therefore you do not want to rely on the title policy for claims. Rather, the uses permitted on site should be determined through proper zoning searches.

Depending on the premiums charged by insurers, title insurance can be cost-efficient in comparison to what would normally be required to provide a solicitor’s opinion. This is more so true, however, in residential transactions than commercial transactions. Therefore, in our example, there needs to be careful calculation to determine whether the due diligence required to provide a sound legal opinion on the restaurant and residential property costs more or less than the required title insurance, and which one best diminishes the purchase risks. One important consideration, however, is that opting for title insurance in the context of a commercial real estate purchase can significantly speed up the process to get to closing.

Different title insurance products vary in their coverage and their exceptions. It is critical to ensure that your client understands these thoroughly before they make a decision on which title insurance product to use, if at all.

Lawyer Obligations

The Rules of Professional Conduct require that real estate lawyers be knowledgeable about different title insurance options and must assess all reasonable options to assure title when advising a client in a real estate transaction. The lawyer must advise the client that title insurance is not mandatory and is not the only method of protecting the client’s interests (Rule 2.02(10)). The lawyer must additionally not receive and must inform their client that they do not receive any commission or fee for recommending any particular insurance product (Rule 2.02(11) –(12)). If the lawyer discusses LSUC’s TitlePLUS insurance, the lawyer must disclose the relationship between the legal profession, LSUC and LawPRO to the product (Rule 2.02(13)).

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CONCLUSION

The purchase of a small commercial real estate building has many moving parts. This presentation highlights only five considerations which are both typical and integral to the transaction. There are many more. What is key is to ensure that you fully understand your client’s goals in purchasing the commercial property, ensuring that the property selected matches those goals, and doing your due diligence to ensure that the client is actually getting what they think they are buying. Taking care to properly examine and address these five central issues is a good first step.

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TAB 9

Addressing CRA Liens: A Brief Guide for the

Conveyancing Solicitor

Ian Speers Barrister and Solicitor

April 4, 2017

14TH ANNUAL Real Estate Law Summit

1

Addressing CRA Liens: A brief guide for the conveyancing solicitor

Ian Speers, Barrister and Solicitor

The Canada Revenue Agency (“CRA”) has many collection tools to realize on tax arrears. The method most likely to impact a conveyancing lawyer is the CRA lien on real property, which assists CRA in collecting tax arrears from the proceeds of real estate transactions. This paper aims to give a basic outline of considerations in dealing with a basic CRA lien to the extent they may arise in a real estate transaction.

A summary of the process of certification of liens in federal courts does not form part of this paper.1 From the real estate lawyer’s perspective, a lien appears as a title encumbrance that must be addressed to deliver good title, whether to a mortgagee or purchaser.

With CRA liens come the collateral nuances of deemed trusts and super priorities, whereby a failure to remit source deductions or HST to CRA may result in CRA having priority over other interests, including mortgages. These super priority rights arise the instant the remittance is not made, so their existence may or may not be known to CRA.

This paper will focus on “simple” CRA liens, and will generally not address the intricacies of or exceptions to these super priorities beyond the foregoing simplified summary, except in relation to situations where a super priority interest may require the conveyancing solicitor to consider that topic in greater depth.2

My vendor client has a CRA lien on title. How do I get rid of it?

Who to approach at CRA?

Given the size of CRA’s administration, and the lack of a single centralized office for processing collections and lien discharges, it is important to locate the specific agent with whom you can discuss your client’s lien, and arrange for its payment and discharge.

1 For a detailed summary of the certification of tax debts, see Louis L’Heureux, “CRA Issues Affecting Real Estate Transactions: A practical review of two intertwined tax collection tools – the certification of tax debts and the deemed trust”. 11th Annual Real Estate Law Summit. (Toronto: LSUC, April 24, 2014).

2 For further reading on deemed trusts and super priorities, see “Information on deemed trusts” (online: http://www.cra-arc.gc.ca/gncy/cllctns/dmdtrst-eng.html, retrieved March 20, 2017); Amanda Jackson, “Super Priorities – Federal Deemed Trust Claims”, A Primer on Liens, Encumbrances and Other Instruments Affecting Real Property. (OBA: September 27, 2016); William J. Walker, “Federal Deemed Trusts”, Power of Sale – New and Interesting Cases. (OBA: March 10, 2011).

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CRA will have assigned an individual collections officer to each outstanding account associated with each lien. This officer will be the point of contact for getting a statement of the amounts of principal, interest, and other amounts required to obtain a discharge of the lien. As CRA assigns work on a national basis, the officer may or may not be physically located in the territorial jurisdiction of the taxpayer’s normal tax service office. There are typically three ways of locating the appropriate collections officer:

1. As a lien is often not the first collection activity undertaken by CRA, the liened vendor client will either have been in direct contact with the collection officer, or have received correspondence indicating the person to whom the account has been assigned along with their contact particulars.

2. The registered lien will indicate the address for service and contact telephone number for further particulars about the lien.

3. If all else fails, CRA provides a current online list of toll-free numbers for reaching collections agents3, through which one may be directed to the appropriate collections agent. One may need the liened debtor’s identifying information, such as Social Insurance Number or Business Number, to locate the appropriate collections agent.

Ensuring authorization to talk with CRA

In accordance with the Privacy Act¸ CRA is obliged to maintain the confidentiality of individual taxpayer information. Accordingly, unlike many mortgage lenders or judgement creditors – who are often quite eager to talk with counsel for a debtor who will soon have funds to pay them – CRA will not release information to a solicitor who simply states that they represent a tax debtor. Instead, CRA will disclose information relating to a lien debtor only if authorized in writing by the debtor.

Such authorization is ideally on the following prescribed CRA forms:

Form T1013: Authorizing or Cancelling a Representative. This form relates to matters of income tax disclosures.

Form RC59 : Business Consent Form. This form relates to business account disclosures, which may include HST

The most recent version of the forms can be downloaded from the CRA Web site. If in doubt as to the appropriate form, it is prudent to have your client sign copies of both authorizations. In the 3 As at March 20, 2017, the URL was http://www.cra-arc.gc.ca/gncy/cllctns/cntctbtyrdbt-eng.html

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pinch of a short timeline, CRA may accept an alternate signed letter of authorization to start communication with your office.

Paying CRA and obtaining a discharge

Once in contact with the collections officer, he or she will calculate and provide a payout statement of amounts owing on the lien, with confirmation that the lien will be discharged once payment in full has been received. Payment must be tendered by certified cheque, although there is no requirement that it be drawn on a solicitor’s account. Thus, if a client has funds, he or she may arrange prior to closing for the payout and discharge of the lien.

Pay attention to the office to which the funds must be forwarded – it may be different from the location at which the collections officer is located.

The general timelines for obtaining a registered discharge can be reasonably short in electronic registration, but can depend on whether the payment has to be sent to the same office as that where the collections officer is physically located. If the collections officer is located at the same office as that to which the payment must be sent, a discharge may in some circumstances be obtained by the next business day. More often, the collections officer is physically located outside of the recipient office, in which case CRA will not provide a discharge until the funds have been posted to the taxpayer’s account, which may take some time longer. In Registry, the paper registration may take somewhat longer to prepare and register. The discharge should normally be registered within 30 days of payment, although if the precise timeline is critical to your transaction, the logistics and timing should be discussed with the CRA collections officer.

The lien amount exceeds the equity in the property

It is not uncommon for the CRA lien to use up any remaining equity in the property, as illustrated by the following illustrative scenario:

o Sale Price: $700,000

o Outstanding mortgage amount: $500,000

o CRA lien arrears: $250,000

In a “normal” lien without a claim of a deemed trust or super priority, CRA would in these circumstances have second call on the proceeds after the satisfaction of the first mortgagee. The collections officer contacted previously would serve as the point of contact with CRA to negotiate a discharge of the lien based on partial payment. Such partial payment would normally take the

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remaining equity in the property, subject to legal rights that may have priority over CRA’s lien. Allowances should be sought for realtor commission and legal fees for the closing.

CRA may require some documentary disclosure about the transaction to ensure its legitimacy. Accordingly, such negotiation may take time – CRA won’t be able to resolve a same-day enquiry.

The foregoing presumes that there is no claim of a CRA super priority over any mortgagees. In such a scenario, CRA may have first call on the proceeds of sale of the property, with the mortgagee(s) fighting over any remainder.4 Counsel for any such mortgagees will unquestionably become involved in such a scenario. Amanda Jackson’s paper “Super Priorities: Lending and Enforcement Issues”, delivered yesterday at this programme, addresses the key issues that underpin deemed trusts and super priority claims. The reader is referred to Ms. Jackson’s paper for further considerations relating to super priority issues.

Face amount vs. amount owing

The amount owing on a CRA lien may grow following registration. CRA claims priority over subsequent encumbrancers regardless of whether the amount owing has exceed the face amount of the registered lien. Accordingly, a lien with a face amount of $25,000 may have more (perhaps substantially more) owing on it. One should therefore be cautious of proposals to close without confirmation in writing from CRA as to the amounts owing. A holdback limited to the face amount of the lien may not be sufficient.

Avoid waiting until the last minute

In conversation with past and current CRA representatives in the course of preparing this paper, the author was advised of a “pet peeve” relating to last minute requests from lawyers. Enquiries less than 3-5 business days ahead of closing may simply not be resolved in time. This last-minute crunch period can be increased if there is a shortfall that will not allow the debtor to pay out CRA in full, or if a broader repayment plan is proposed, where CRA may require disclosure and review time to assess its course of action. Accordingly – act early once you become aware of a CRA lien against your client, and be realistic about timelines if the lien is discovered on the eve of closing.

My client is buying property subject to a CRA Lien. Should I be worried?

The nuances of deemed trusts and super priorities can cause some understandable unease with those having only passing familiarity with them. While the minutiae of these issues are outside of

4 For more detailed practical scenarios in which priority may be an issue, see L’Heureux, op. cit. (supra, note 1), especially pp. 44-50.

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the scope of this paper, generally speaking an arm’s-length purchaser of property subject to a CRA lien can generally take a great deal of comfort from the Supreme Court of Canada’s decision in First Vancouver Finance v. M.N.R.5, which held that a deemed trust attaches to assets owned by the tax debtor only while in their ownership, not after their sale:

[T]he deemed trust is in principle similar to a floating charge over all the assets of the tax debtor in the amount of the default. As noted above, the trust has priority from the time the source deductions are made, and remains in existence as long as the default continues. However, the trust does not attach specifically to any particular assets of the tax debtor so as to prevent their sale. As such, the debtor is free to alienate its property in the ordinary course, in which case the trust property is replaced by the proceeds of sale of such property.6

[...]

[W]hen an asset is sold by the tax debtor, the deemed trust ceases to operate over that asset; however, the property received by the tax debtor in exchange becomes subject to the deemed trust.

Accordingly, the discharge of the lien from title subsequent to a sale releases any encumbrance on the liened property sold by a tax debtor. Any deemed trust follow the proceeds – it does not permanently attach to the asset. Procedures similar to addressing a mortgage discharge on closing – a payout statement, a redirection of the appropriate amount from the balance due on closing, and unqualified undertakings to pursue and obtain a discharge – should be required.

With that said, a purchaser’s solicitor may wish to consider the following practices when a property subject to a CRA lien is being purchased:

1. As with any unusual or exotic title issue -- contact the seller’s lawyer as soon as you become aware of the lien, so as to maximize the time the seller has to resolve the lien. As noted above, the timelines for a tax debtor to release a lien do not lend themselves to last-minute troubleshooting. Do not assume that the seller’s lawyer is aware of the lien and is simply awaiting your requisition letter to advise you of the proposed resolution.

2. Confirm with any title insurer as to any additional underwriting requirements they may have, as title insurers may in certain circumstances require you forward the paperwork in

5 [2002] 2 SCR 720

6 Ibid. at para 40, 42

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support of the payout and discharge of the lien for underwriting review.7 Title insurers concern on purchase transactions is generally limited to ensuring that the lien is properly discharged, however a quick discussion with an underwriter may be prudent as to any further concerns.

I’m acting for a lender on a refinance. The borrower’s property is subject to a CRA Lien. Should I be worried?

The procedures for getting rid of a CRA lien previously discussed in the context of acting on a sale generally apply to a refinance, with a significant caveat: in certain circumstances, getting rid of the lien on title may not give the lender a mortgage free of an encumbrance associated with the CRA lien, as CRA may later discover that it has a super priority.

Simply put, the discharge of the lien may indeed get rid of the encumbrance on title, but if CRA later discovers that, as the date of the mortgage registration, there remained outstanding remittances that give rise to a deemed trust, CRA may have a super priority claim over that of the mortgage.

While the nuances of deemed trusts and super priorities are beyond the scope of this paper, it bears emphasis that the comfort a purchaser derives from First Vancouver Finance v. M.N.R. does not extend to lenders in a refinance scenario. The deemed trust, if it is not extinguished, continues to attach to the real property while it is in the hands of the debtor, and later may take priority over the charge, despite the discharge of the lien from title.

Accordingly, in a refinance transaction, a CRA lien against the borrower associated with a deemed trust may carry a risk that the mortgagee may not emerge with its desired priority. If the known lien arises from a failure to remit source deductions or HST has given rise to a deemed trust, and/or if the borrower continues to operate a business, some further due diligence may be beneficial to the lender to ensure that any possible deemed trust claims in priority to the mortgage are extinguished. Further review of the laws of deemed trusts and super priorities may become necessary when one is in such a situation, which is beyond the scope of this paper. But two courses of action might be considered at the outset when these concerns align:

1. The lender’s solicitor should discuss the matter with any title insurer as to additional underwriting requirements and possible coverage exclusions from the insurer’s standard policy. The degree of title insurer concern may be fact dependent on the current status of the borrower and the nature of the existing lien. For example, concern may be heightened

7 Karen Decker and Frank Maggisano, “Title Insurance Underwriting & Claims Issues.” Stewart Title Lecture Series, 2016. (Toronto, Sept. 22, 2016), pp. 5-9.

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if the current lien relates to failure to remit HST or source deductions, and the borrower continues to operate a business. The insurer may in some circumstances require disclosure of documents from the borrower, to make an underwriting risk assessment of whether or not to exclude CRA super priorities as an insured risk of its standard lender policy.8

2. Bringing the matter to the attention of the lender client early in the transaction may also be prudent. This lender communication becomes particularly essential if a title insurer excludes any standard covered risks from the lender policy, but is also likely advisable in any matter in which the CRA lien is associated with a deemed trust, for at least two reasons that can be stated simply as follows:

a. While losses arising them super priorities may be “covered” under standard lender policies, the insured risk typically relates only to the quantum of the super priority lien as at the Policy Date. Accordingly, a lien that may be a mere $5,000 at the Policy Date could grow to a much later figure when a mortgagee seeks to enforce. Regardless of the lien amount at the date of enforcement, the coverage in favour of the lender may be limited to the $5,000 owing at the Policy Date. As the lender’s coverage is significantly limited in these circumstances, it may wish to take further underwriting risk assessment.

b. In addition, title insurance coverage under lender policies typically ceases when the mortgage is no longer registered on title – thus, the policy is spent upon discharge or a transfer under power of sale. If the lien is discovered after enforcement or discharge and CRA makes a demand on the proceeds, the lender’s losses are not an insured risk.

The lender should frankly satisfy itself that there are no further amounts owing that might give rise to a deemed trust, beyond those currently claimed by CRA. If the lawyer does not have specific expertise about CRA deemed trusts or super priorities, he or she should advise the lender client accordingly, and be cautious about offering any specialist advice or opinions. Any assessment of loan underwriting risk should be handled by the lender, not the conveyancing lawyer.

Acknowledgements

The author wishes to acknowledge with gratitude the assistance of Andrea Campbell (Director, Underwriting, Chicago Title Insurance Company), Karen Decker (Vice President Underwriting and Legal, Stewart Title), and Lisa M. Weinstein (Vice President, TitlePLUS) in responding to his enquiries in the course of preparing this paper.

8 Ibid.

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TAB 10

Purchasing From a Builder

Mark Karoly Harris Sheaffer LLP

April 4, 2017

14TH ANNUAL

Real Estate Law Summit

1

PURCHASING FROM A BUILDER

Mark L. Karoly1 1. Introduction

The purpose of this paper is to briefly discuss a few common issues that arise when acting

for buyers purchasing new homes from a builder. The issues discussed will apply to both freehold

and condominium pur chases. T o t he e xtent t hat t here i s a di fference b etween t he t wo, s uch

differences will be highlighted. This paper is not intended to comprehensively deal with this topic,

but rather, deals only with those topics selected by the writer.

2. The Tarion Addenda – Closing/Occupancy Dates

Pursuant t o t he Regulations t o the Ontario New Home Warranties Plan Act2, it i s a

condition of registration under the Tarion Warranty Corporation that every vendor insure that one

of the prescribed forms of Addendum be attached to every Agreement of Purchase and Sale for

the sale of a new home in Ontario. The requirement for the Addenda came into effect on July 1,

2008, at which time, four separate forms were created; two for f reehold properties (one with a

Tentative Closing Date and one with a Firm Closing Date) and two for condominium properties

(one with a T entative Occupancy Date and one with a F irm Occupancy Date). T he forms were

updated as of October 1, 2012 a t which t ime six separate forms were created; two for freehold

1 Mark L. Karoly is a partner of the firm Harris, Sheaffer LLP and has been practicing real estate law since 1988 with particular expertise in all facets of condominium and subdivision development. Mark received an LL.M. in Real Property Law from Osgoode Hall Law School in 2001 2 Ontario Regulation 165/08 (the “Regulation”)

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properties ( one w ith a T entative C losing D ate and one w ith a F irm C losing D ate)3, t wo f or

condominium properties (one with a Tentative Occupancy Date and one with a Firm Occupancy

Date) and two for freehold properties appurtenant to common element condominiums (one with a

Tentative Occupancy Date and one with a Firm Occupancy Date)4. For purposes of this paper, I

will refer only to the forms created in 2012 as nearly all agreements entered into at this time are

required to include one of the 2012 forms.5 In this portion of the paper, I will provide an overview

of the provisions of the Addenda that address the closing/occupancy dates. In referring to specific

provisions of t he A ddenda, I w ill be pr imarily r eferring t o t he A ddenda f orms for T entative

Closing/Occupancy Dates rather than the Addenda forms for Firm Closing/Occupancy Dates.

The pr ovisions i n t he Addenda f or f reehold p roperties di ffer gr eatly from t hose f or

condominium properties and accordingly, I will deal with each separately. However, by way of

introduction, it is very important to note that there are two separate (and often confused) concepts

covered in these provisions of the Addenda. One concept deals with the right of a purchaser to

delayed closing/occupancy compensation in circumstances where the required amount of notice

of an extension of a closing/occupancy date has not been given. A separate concept deals with the

right of a purchaser to terminate the Agreement of Purchase and Sale. In the case of all relevant

properties, closing/occupancy dates must be listed in the Statement of Critical Dates forming the

first pa ge of t he A ddenda a nd t he ve ndor’s r ight t o extend those d ates ar e m andatory6 and

prominent features of the Addenda.

3 Under Section 7(1) of the Regulation, the Freehold Addenda must be used for a home built or to be built on a unit within a vacant land condominium plan 4 For convenience, I will refer to these as the “Potl Addenda” 5 Refer to subsections 8(3), (4) and (5) of the Regulation for transitional rules for condominiums and common element condominiums where sales within the project commenced prior to October 1, 2012 6 See for example paragraph 4(a) and paragraph 10(c) of the Freehold Tentative Addendum

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Freehold Properties

For purposes of this section, the provisions of the Freehold Addenda and the Potl Addenda

are identical except that the Freehold Addenda refer to closing dates and the Potl Addenda refer to

occupancy dates. A ccordingly, a ll references to the Freehold Addenda in this section shall be

understood to include the Potl Addenda.

In the Freehold Addenda, the vendor must select a “First Tentative Closing/Occupancy

Date”. A ll o ther critical d ates lis ted o n th e form a re not s elected b y t he ve ndor but r ather,

automatically flow from the choice of the First Tentative Closing/Occupancy Date. The vendor is

permitted to extend the First Tentative Closing/Occupancy Date for up t o 120 da ys to a Second

Tentative Closing/Occupancy Date provided the vendor delivers notice of such delay at least 90

days prior to the First Tentative Closing/Occupancy Date. The vendor is permitted to extend the

Second Tentative Closing/Occupancy Date for up to 120 days to a Firm Closing/Occupancy Date

provided i t de livers not ice of s uch d elay a t l east 90 da ys pr ior t o t he S econd T entative

Closing/Occupancy Date. P rovided that the required notice of those extensions is given by the

vendor, t he purchaser i s not entitled t o any compensation a rising f rom these extensions of t he

Closing/Occupancy D ate7. The S tatement o f C ritical D ates w ill a lso lis t a n O utside

Closing/Occupancy Date.

7 If the vendor fails to deliver notice extending the First Tentative Closing/Occupancy Date or the Second Tentative Closing/Occupancy Date with the required notice period, the First Tentative Closing/Occupancy Date or the Second Tentative Closing/Occupancy Date as the case may be automatically becomes the Firm Closing/Occupancy Date and accordingly any further extensions beyond that date give rise to a claim for delayed closing/occupancy compensation.

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The ve ndor i s pe rmitted t o extend the C losing/Occupancy D ate beyond t he F irm

Closing/Occupancy Date to the Outside Closing/Occupancy Date. Such extended date is referred

to i n t he A ddenda as t he D elayed C losing/Occupancy Date. If t he vendor s ets a Delayed

Closing/Occupancy Date, the purchaser is entitled to delayed closing/occupancy compensation for

any delay beyond the Firm Closing/Occupancy Date. The compensation is a set amount of $150.00

a day for living expenses for each day of the delay until the date of closing/occupancy together

with other expenses such as moving and storage expenses (supported by receipts) incurred by the

purchaser due t o t he de lay. T he m aximum c ompensation pa yable i s $7,500.00. Delayed

Closing/Occupancy Compensation is payable only if closing/occupancy occurs or the purchase

transaction is terminated by the purchaser during the Purchaser’s Termination Period (described

below).

If the vendor is unable to close the sale transaction (in the case of freehold properties) or

provide occupancy of the property (in the case of Potls) prior to the Outside Closing/Occupancy

Date, the purchaser is given a 30 day period (referred to as the Purchaser’s Termination Period)

during which the purchaser is entitled to terminate the transaction by written notice to the vendor.

If the purchaser does not terminate the transaction during the Purchaser’s Termination Period, the

Agreement o f P urchase an d S ale continues t o be bi nding on bot h p arties a nd t he D elayed

Closing/Occupancy D ate can b e s et and r eset b y t he ve ndor until t he hom e i s r eady f or

closing/occupancy.

Condominium Properties

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In the Condominium Addendum, the vendor must select two separate critical dates; a “First

Tentative O ccupancy Date” an d an “Outside O ccupancy D ate”. T here i s n o r estriction i n t he

Condominium Addendum on the period of time between the First Tentative Occupancy Date and

the Outside Occupancy Date. A ll other critical dates listed on the form are not selected by the

vendor but rather, automatically flow from the choice of the First Tentative Occupancy Date and

the Outside Occupancy Date. T he vendor is permitted to extend the First Tentative Occupancy

Date on one or more occasions by setting subsequent Tentative Occupancy Dates provided the

vendor de livers not ice of s uch extensions at l east 90 da ys pr ior t o t he applicable Tentative

Occupancy Date. By no later than 30 days after the Roof Assembly Date8, the vendor shall set a

Final Tentative Occupancy Date or a Firm Occupancy Date. Such notice must be sent at least 90

days prior to the applicable Tentative Occupancy Date or else the applicable Tentative Occupancy

Date automatically becomes the Firm Occupancy Date. If a Final Tentative Occupancy Date is

set the vendor may set a Firm Occupancy Date provided that notice is sent at least 90 days prior to

the Final Tentative Occupancy Date and a Firm Occupancy Date is no more than 120 days after

the Final Tentative Occupancy Date. Provided that the required notice of those extensions is given

by the vendor, the purchaser is not entitled to any compensation arising from these extensions of

the Occupancy Date9.

The Statement of Critical Dates will also list an Outside Occupancy Date which, as noted

above, is selected by the vendor. The vendor is permitted to extend the Occupancy Date beyond

8 Being the date upon which the roof slab or roof trusses and sheathing as the case may be are completed 9 If the vendor fails to deliver notice extending the Tentative Occupancy Date with the required notice, the applicable Tentative Occupancy Date automatically becomes the Firm Occupancy Date and accordingly any further extensions beyond that date give rise to a claim for delayed occupancy compensation

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the Firm Occupancy Date to the Outside Occupancy Date. Such extended date is referred to in the

Addenda as t he D elayed Occupancy D ate. If t he vendor s ets a D elayed Occupancy D ate, t he

purchaser i s e ntitled t o de layed oc cupancy c ompensation f or a ny d elay b eyond t he Firm

Occupancy Date. The compensation is a set amount of $150.00 a day for living expenses for each

day of the delay unt il the date of occupancy together with other expenses such as moving and

storage expenses (supported by receipts) incurred by the purchaser due to the delay. The maximum

compensation pa yable i s $7,500.00. D elayed Occupancy C ompensation i s pa yable onl y i f

occupancy occurs or the purchase transaction is terminated by the purchaser during the Purchaser’s

Termination Period.

If the vendor is unable to provide occupancy of the property prior to the Outside Occupancy

Date, the purchaser is given a 30 day Purchaser’s Termination Period during which the purchaser

is entitled to terminate the transaction by written notice to the vendor. If the purchaser does not

terminate the transaction during the Purchaser’s Termination Period, the Agreement of Purchase

and Sale continues to be binding on both parties and the Delayed Occupancy Date can be set and

reset by the vendor until the home is ready for occupancy.

3. Will the Home be Built?

It is common for new homes/condominiums to be purchased prior to the commencement

of c onstruction. In a dvising pur chasers i n t hese c ircumstances i t i s i mportant t o c onsider a nd

advise on t he possibility of t he home/condominium never be ing bui lt. T here a re a number of

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provisions i n t he A greement of Purchase and S ale t hat should b e considered in providing this

advice.

In t he f reehold w orld, t he Planning Act prohibits a ve ndor f rom, among ot her t hings,

entering into an Agreement of Purchase and Sale to sell land by a description in accordance with

an unregistered plan of subdivision unless the plan of subdivision has received draft approval in

accordance with section 51 of the Planning Act.10 Accordingly, when purchasing a home on an

unregistered plan of subdivision, one would expect that the vendor has received draft plan approval

for t he pl an of s ubdivision.11 A t t he bot tom of pa ge 2 of t he Freehold T entative form of

Addendum, the vendor is required to disclose a number of details concerning planning approvals

received for the property including whether or not draft plan of subdivision approval has been

given (in circumstances where the plan of subdivision is not yet registered). T hese provisions

should be explained to buyers as the possibility of the vendor being unable to receive approvals to

build the home should be considered in determining whether to proceed with the purchase.

In the standard condominium world, there are no statutory provisions restricting the ability

of a vendor to commence marketing units until approvals are in place. In other words, the vendor

does not need the lands to be zoned for the contemplated use in order to commence selling units.12

10 See section 52(1) of the Planning Act 11 Please note however that Eastwalsh Homes Ltd. v. Anatal Developments Ltd. (1993), 12 O.R. (3d) 675 (C.A.) stands for the proposition that as long as the agreement contains a provision that it is subject to compliance with the subdivision control provisions of the Planning Act, an agreement that violates section 52(1) of the Planning Act is not void as such section is a penal provision but does not impact on the enforceability of the Agreement of Purchase and Sale 12 Section 52 of the Planning Act referred to above does not apply to standard condominiums but, by virtue of Section 9(12) of the Condominium Act, 1998, does apply to vacant land condominiums. Furthermore, if proposed Potls are to be described on a plan of subdivision that is not yet draft plan approved, the provisions of Section 52 of the Planning Act may be applicable

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At the bottom of page 2 of the Condominium Tentative form of Addendum, the vendor is required

to disclose whether or not it has obtained Formal Zoning Approval for the condominium project

and w hether o r not c onstruction of t he pr oject has c ommenced. T hese pr ovisions s hould be

explained to buyers as the possibility of the vendor being unable to receive approvals to build the

condominium should be considered in determining whether to proceed with the purchase.

Another part of the Agreement of Purchase and Sale that should be reviewed are the Early

Termination C onditions which c an be f ound i n pa ragraph 6 of t he T arion A ddenda or i n a n

appendix t o t he T arion Addenda. T he va rious A ddenda l imit t he t ypes of e arly t ermination

conditions that are permitted to be included in an Agreement of Purchase and Sale. The permitted

conditions include receipt of an approval from an approval authority for things such as official

plan amendments, zoning by-laws amendments, minor variances, consents for creation of a lot,

etc.13 If an Agreement o f Purchase and Sale contains any of these conditions, they should be

pointed out to purchaser clients as they clearly show that the vendor does not yet have the approvals

needed to proceed with construction of the home or condominium. The purchaser should also be

encouraged to conduct its own due diligence (perhaps by calling the relevant municipal planning

13 For a complete list, refer to Schedule A of the various forms of Addenda

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department) to determine the status of any approval applications that may be pending with respect

to the property.

4. How safe is a deposit?

Under the provisions of the Ontario New Home Warranties Plan Act, a person who enters

into a contract to purchase a home from a vendor is entitled to receive payment out of Tarion’s

guarantee fund for the amount that the person paid to the vendor as a deposit under the Agreement

of Purchase and Sale i f the purchaser exercised a s tatutory right to rescind the contract before

closing or the person didn’t receive title to the home because the vendor has gone into bankruptcy

or the vendor has fundamentally breached the contract.14 The limits of Tarion’s liability under this

section are set out in Section 6 of Regulation 892 under the Ontario New Home Warranties Plan

Act. Effectively, T arion’s liability f or return o f deposits is limited to $ 40,000.00 f or f reehold

homes and $20,000.00 for condominium dwelling units.

Under the provisions of the Condominium Act, 199815, deposits paid for a proposed unit in

a condominium16 are required to be held in trust by a trustee of a prescribed class or the declarant’s

solicitor. Within 10 days of the delivery of any deposits, the declarant is required to deliver to a

purchaser w ritten e vidence i n t he pr escribed f orm of c ompliance w ith s uch t rust pr ovisions17.

Once the trustee receives such trust funds, the funds shall be held in trust until the person holding

14 See Section 14(1) of the Ontario New Home Warranties Plan Act 15 See Section 81(1) of the Condominium Act, 1998 16 As these provisions apply to a “proposed unit” in a condominium, they do not apply to a purchase from a declarant after the condominium is already registered 17 See subsection 81(6) of the Condominium Act, 1998

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the m oney i n t rust di sposes of i t t o t he pe rson e ntitled t o i t, w here s uch di sposal i s done i n

accordance with the Condominium Act, 1998 and the relevant Agreement of Purchase and Sale or

until the declarant ensures that prescribed security is provided for the deposit monies.18 In simpler

terms, once deposits are delivered to the trustee, they can only be released by the trustee when: i)

the trustee has prescribed security to insure the deposits; ii) the transaction for which the deposits

were d elivered is c ompleted; o r iii) th e tr ansaction f or w hich th e d eposits w ere d elivered is

terminated.

As a result of these provisions, deposits paid for freehold homes should be looked at from

the pur chaser’s s tandpoint a s qui te di fferent f rom de posits pa id f or condominium uni ts.19

Notwithstanding the recent case involving a solicitor who released trust funds to a client without

prescribed security, deposits paid for condominium units should generally be considered not to be

at risk. However, because deposits paid on the purchase of freehold homes are not required to be

held i n t rust20 and a re on ly pr otected b y Tarion t o t he e xtent of $40,000. 00 pe r transaction,

solicitors acting for purchasers should be careful to warn purchaser clients of the risk involved in

paying deposits in excess of $40,000.00 di rectly to the vendor. S olicitors may try to negotiate

arrangements with the vendor whereby deposits paid in excess of $40,000.00 are either held in

18 See subsection 81(7) of the Condominium Act, 1998 19 For purposes of this discussion, the purchase of a Potl appurtenant to a common element condominium should be treated as a purchase of a freehold home 20 A limited exception to this exists in the purchase of Potls. If an agreement to purchase a Potl includes an Early Termination Condition making the agreement conditional on the sale of a certain number of homes within the project or upon the vendor securing construction financing for the project, all monies paid to the vendor shall be held in trust by the vendor’s solicitor or the vendor until such conditions are waived. Please refer to paragraph 1(c)(iv) of Schedule A to the Potl Addenda

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trust unt il c losing or i nsured w ith de posit i nsurance a lthough i n t he e xperience of t he w riter,

vendors are generally not receptive to such requests.

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5. Adjustments

Perhaps the most scrutinized portion of a builder’s form of Agreement of Purchase and

Sale is th e s ection that d eals w ith a djustments. I t is q uite c ommon i n th e G TA f or th ose

adjustments to e ffectively represent a s ignificant in crease in th e p rice u ltimately p aid b y t he

purchaser for the home. Some forms of Agreements of Purchase and Sale list most or all of the

adjustments in one place so they are easier to identify. H owever, some forms of Agreement of

Purchase and Sale spread the adjustments throughout the Agreement of Purchase and Sale which

makes t hem ha rder f or a pur chaser’s s olicitor t o i dentify without t horoughly r eviewing t he

Agreement of Purchase and Sale. For this reason, Tarion stepped in when it revised the Tarion

Addenda in 2012 by adding a new schedule to the Tarion Addenda. Each of the Tarion Addenda

contains a S chedule B where the vendor is required to l ist a ll additional charges, fees or other

anticipated a djustments t o t he f inal pur chase pr ice or ba lance due on c losing. T his S chedule

contains two parts. Part I is required to list all adjustments with a fixed dollar value and Part II is

required to list all other adjustments. Paragraph 8 of each of the Tarion Addenda provides that

only i tems s et out i n S chedule B (or a n A mendment t o S chedule B ) s hall be s ubject of a n

adjustment or change to the purchase price. Paragraph 8 further provides that the vendor shall not

charge as an adjustment any reimbursement for a sum paid or payable by the vendor to a third

party unless the sum is ultimately paid to that third party, either before or after closing. This

provision only applies to items listed in Part II of Schedule B.

In m y ex perience, l awyers w ho act f or p urchasers t ypically r eview t hese ad justments

carefully and, when they have the opportunity to do so, attempt to negotiate the contents of the

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adjustments by deleting and/or requesting caps on certain adjustments. Every vendor reacts to

these requests differently and these reactions are also dependent upon the demand for the product

at the relevant time . S ome vendors a re not prepared to ne gotiate any changes t o t he s tandard

Agreement o f P urchase and S ale w hile o thers c reate s tandard p olicies f or d ealing w ith t hese

requests s o t hat al l p urchasers r equesting ch anges t o t he ad justments ar e t reated i n t he s ame

manner. Some vendors will negotiate requests for changes to adjustments on a case by case basis

but, in my experience, this is rare and occurs mostly in the case of more expensive homes.

In advising purchasers on these adjustments, a solicitor should be mindful of the fact that

some of the adjustments can easily be quantified (i.e. those listed in Part I of Schedule B to the

Addenda and those listed in Part II of Schedule B to the Addenda that are based on relatively stable

criteria such as realty taxes, Tarion Enrolment Fees and the LSUC Transaction Levy Surcharge)

while others are much more difficult to quantify and may represent a s ubstantial increase in the

cost of the home (such as adjustments related to development charges, meter costs, park levies,

public a rt l evies, pa yments unde r S ection 37 A greements, e tc.). W here opportunities e xist to

negotiate caps t o or reductions i n t he adjustments, purchasers should pr imarily focus on t hose

items that are more difficult to quantify and may represent a substantial cost to the purchaser.

6. Conclusion

Agreements of Purchase and Sale prepared by builders are generally lengthy, complicated

and on occasion, difficult to read. An attempt was made a number of years ago to create a standard

form of Agreement o f Purchase and Sale that al l GTA builders would use but predictably, the

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lawyers involved in the process could not agree on an acceptable form. Since the implementation

of the Tarion Addenda in 2008 a portion of every Agreement of Purchase and Sale for new homes

in O ntario i s now s tandardized. W hile t his pa per doe s not address t he entirety of t he T arion

Addenda21, it does address what I believe to be the major components of the Tarion Addenda. All

lawyers i n O ntario t hat act on t he pur chase a nd s ale of ne w hom es s hould be come i ntimately

familiar with its terms.

21 In particular, I have not addressed the requirement for an Occupancy Permit on closing or occupancy closing contained in paragraph 9 of the Freehold and Condominium Addenda and in paragraph 10 of the Potl Addenda

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TAB 11

When is Right, Wrong?

and

When is Wrong, Right?

Reuben Rosenblatt, Q.C., LSM Minden Gross LLP

April 4, 2017

14TH ANNUAL

Real Estate Law Summit

When is Right, Wrong? and

When is Wrong, Right?

14th Annual Real Estate Law Summit The Law Society of Upper Canada

Monday, April 3, 2017 Tuesday, April 4, 2017

By: Reuben M. Rosenblatt, Q.C., LSM

Partner, Minden, Gross LLP

Too often we, as real estate lawyers, are required to deal with transactions which Binney

J. described in Sylvan Lake Golf & Tennis Club Ltd. v. Performance Industries Ltd. 1 a

rectification case bef ore the Supre me Cour t of Canada , as a “contr act f or a real estate

development dream that turned into a nightmare for the warring partners”

RULES OF PROFESSIONAL CONDUCT: Courtesy and Good Faith – Section 7.2-1 A lawyer shall be courteous, civil, and act in good faith with all persons with whom the

lawyer has dealings in the course of their practice. To Disclose or not to Disclose? 1. Your client, the seller, has asked you whether he/she is legall y obliged to notif y

the buyer that the c ommercial property for which an of fer has been submitted is being downzoned.

2. Your client, the seller, has asked you whether he/she is legall y obliged to notif y

the bu yer that the bas ement in the Proper ty leaks after a rains torm (or that t he furnace does not work in winter).

1 (2002) SCC 19

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3. Your client, the seller, has asked you whether he/she is legall y obliged to notif y the buyer that a waste sewer disposal plant is going to be bui lt in the immediate vicinity (or that a convicted pedophile lives across the road).

In Marathon Realty Co. Limited v. Ginsberg2 the purchas er was u nder the i mpression

that the land coul d be used f or residential purposes. He did not k now of the Township’s

intention to down grade the zoning to agricul tural. The vendor did know. W as there a

duty on the vendor to disclose?

The Ontario Court of Appeal held that the vendor was under no obligation to inform the

purchaser that there was a plan to downgrade the zoning from residential to agricultural.

…The learned trial judge found that the appellant had 15 years of experience as a builder-developer; a lthough r epresented by e xperienced s olicitors h e di d not m ake hi s of fer conditional on the zoning or, on any form of residential development and, in fact, made no search of the zoning before making the offer.3

Is there a dut y on t he vendor or its solici tor to di sclose the ex istence of an

unregistered agreement to the pur chaser which could co mpel the purchaser of the

property to pay a substantial sum in order to gain access to that property?

Although in Outaouais Synergest Inc. v. Keenan4. the Trial Judge understood that a

purchaser would expect a vendor or his solicitor to unambiguously disclose an obligation

such as a “collect-back clause” as i ncidental to an honourable and fair dealing during the

process of negotiating the agreement of purchase and sale or later thr ough the requisition

process prior to closi ng, the Trial Judge ultimately held that it was the purchaser’s

solicitor’s obligation to carefully represent the pur chaser and conduct t he pro per

investigations. The C ourt held that it was up to the purchas er to make inq uiries a nd

21982 CarswellOnt 644. 3 Ibid at para 6. 4 2013 ONCA 526; 2013 CarswellOnt 11723

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investigations as it deemed appropriate within the stipulated time and if unsatisfied could

withdraw with impunity.

As t he t rial j udge c oncluded, t he A greement of P urchase a nd S ale be tween t he Keenans and Outaouais i s an agreement to which the doctrine of caveat emptor (let t he bu yer b eware) a pplies. W hile t hat doc trine i s popul arly r educed t o t he term caveat emptor, i t i s he lpful t o r ecognize f or our pur poses t hat t he m ore complete description is “caveat emptor, qui ignorare non debuit quod jus alienum emit”, which translates as: “let the purchaser, who ought not to be ignorant of the amount and nature of the interest, exercise proper caution” (emphasis added).5

In this c ase the Court of Appeal agreed with the Tria l Judge in holding that aside f rom

prohibiting active con cealment or a f ailure to disclose a latent defect rendering the

premises dan gerous, the vendor was u nder no dut y to dis parage his propert y a nd may

remain silent. (So what happened to the expectation of honourable and fair dealing?)

Supreme Court of Canada and Good Faith

In Bhasin v. Hrynew6, Cromwell J. stated (McLauchlin C. JC. and LeBel, Abella ,

Rothstein, Karakatsanis and Wagner JJ. concurring):

I conclude from t his r eview t hat e nunciating a g eneral or ganizing pr inciple of good faith and recognizing a dut y t o pe rform contracts honestly will he lp br ing certainty and co herence t o t his ar ea o f t he l aw i n a w ay t hat i s co nsistent w ith reasonable commercial expectations.7 … I would hold that there is a general duty of honesty in contractual performance. This means simply that parties must not lie or otherwise knowingly mislead each other about matters di rectly l inked to the performance of the contract. …… The requirement to act honestly i s one of the most widely recognized aspects of the organizing principle of good faith. ….8

5 Ibid at para 68. 6 2014 SCC 71 7 Ibid at para 62. 8 Ibid at para 73.

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…… I am a t t his point concerned onl y with a n ew dut y o f honest pe rformance and, a s I s ee i t, t his should not be t hought of a s an implied t erm, but a general doctrine of contract law that imposes as a contractual duty a minimum standard of honest contractual performance.9

In LeMesurier v. Andrus10 Grange J. stated:

Vendors and purchasers owe a dut y to each other honestly to perform a contract

honestly made. As Middleton J. put it in Hurley v. Roy, (1921), 50 O.L.R. 281: the

Policy of the Court ought to be in favour of honest bargains…”11

What is the oblig ation or role of a law yer, even after the agreem ent has been signed, to

the client who is faced with une xpected e xposure in t he event the transaction was to

close? W hat if , after explaining the o ptions available to the cli ent and what if, af ter

explaining to the cli ent the ri sks and consequences of closing or not closing, the clien t

changes his or her retainer to take steps not to close the transaction?

Morgan v. Lucky Dog Ltd.12 and Vandervliet and Margo Vandervliet v. 639708 Ontario

Corp.13 are two decisio ns where the Court d isapproved of the law yers’ atte mpts to

terminate transactions. In both cases the lawyers were acting in what they believed to be

in the best interests of their clients.

In Morgan v. Lucky Dog Ltd.,14 Catzman J. stated,

… It i s m y assessment on a ll of t he evidence t hat t he f ailure t o close t he transaction on J uly 31 w as the effectuation of the very result which the vendor’s representatives d eliberately o rchestrated and s trove t o a ccomplish f ollowing receipt o f t he E stoppel l etter, and w as t he s uccessful i mplementation of a stratagem w hich t hey i ntended a nd expected would t hrow t he pur chaser i nto disarray and – to use the lawyer for the vendor’s phrase – would make it “quite likely” that the purchaser would e ither wish to delay c losing be yond July 31 9a

9 Ibid at para 74. 10 (1986) 38 RPR 183 11 Ibid. 12 1987CarswellOnt 676 13 1994 CarswellOnt 721 14 Supra

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request which they were expressly i nstructed to r efuse) or t o a sk for i ts deposit back and terminate the sale (a request which would accomplish the objective they knew t heir pr incipal de sired). In t hese c ircumstances, t he l aw pr ecludes t he vendor from relying on the provision making time of the essence of the agreement … and from taking advantage of the existence of a s tate of affairs which it itself produced. 15

In Vandervliet v. 639708 Ontario Corp.16, McFarland J. stated: In my view, the situation here simply is that the plaintiff purchasers wanted out of

the t ransaction b ecause they were f inancially s trapped t o close t his transaction after t heir o wn d eal t o sell t heir M arkham hom e f ell t hrough. T hey t ook t heir solicitor’s advice, and sought to rely on a mere conveyancing technicality to avoid closing this transaction.17

They did not ask for the consent of the Town at any time prior to closing because

they (and by “they” in this particular context, I mean their solicitor) knew it could, and would, be readily obtained. Instead, they chose to raise i t only for the f irst time at the actual closing, knowing full well that it would take twenty-four hours to obtain, and then insisted on the time of the essence provision and declared the transaction terminated.18

In my view, the plaintiffs failed to act in good faith. Fairness would demand that

in those circumstances, they close in escrow until the consent was obtained, and then register.19

RULES OF PROFESSIONAL CONDUCT: Courtesy and Good Faith – Section 7.2-2

A lawyer should avoid sharp practice and shall not take advantage of or act without fair warning upon s lips, irregularities, or mistakes on the part of other legal practitioners not going to the merits or involving the sacrifice of a client’s rights.

Oops – A Mistake 1. What if your client, the mortgagor, is served with a Notice of Sale which provided

for 34 da ys’ notice instead of 35 da ys’ notice? Your client instr ucted you not to bring the “mistake” to the attention of the lawyer who issued the Notice of Sale.

Is this different than a mistake made during the negotiation of an agreement?

15 Ibid at para 64. 16 Supra 17 Ibid at para 14 18 Ibid at para. 15 19 Ibid at para. 17

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In the words of Grange J., as he then was, in Stepps Investments Ltd. v. Security

Capital Corp.20

In the circumstances of this case I believe that the plaintiffs should have known of the mistake made by the defendant and I believe it would be equitable accordingly to g rant r elief t o t he de fendant. It i s not unr easonable, i n m y vi ew, i n m odern commercial relations, t o r equire t he p arties, where an i mportant amendment is being made to ensure that knowledge of such amendment comes to the other side. I do not mean that a party must overcome obtuseness in his opposite number but he must at least give him a real opportunity to appreciate the change. A nd if the circumstances ar e s uch t hat t hat the a mendment mig ht r eadily b e missed he should be pa rticularly reluctant t o a ssume s uch knowledge. H ere t he pl aintiffs could have resolved the whole problem by a clear reference to the amendment in the correspondence or in the recitals or the operative parts of the agreement itself. It could even have been resolved in a clear, unambiguous, oral conversations with the de fendant’s s olicitors a nd I cannot f ind t hat s uch a c lear and un ambiguous conversation ever took place. 21 …The th rust o f th e a uthorities is to s how th at e quity will r elieve a gainst performance of a c ontract obt ained b y a pa rty w ho kne w t he ot her s ide w as mistaken about a material fact and who took advantage of that mistake.22

In Stevens v. Stevens23, Harper J. stated:

The hus band kne w t hat w ith t he e rroneous dr afting of t he c ontract, he w ould receive the “full value” of the matrimonial home, which granted him $2,500,000. With th is h uge d isparity th at e ntitled h im to tw o millio n mo re d ollars t han h e would ot herwise r eceive, he de liberately c hose t o not s eek c larification of t his inconsistency between the cover letter and the Marriage Contract.24

The Trial Court an d the Court of Appeal held that whe re there is a d iscrepancy between

an agreement as draf ted and a cover letter, the client and counsel h ave an obligation to

seek clarification as to the adverse part y’s position before the agreem ent is signed. The

Trial Judge wrote that a simple phone call f ollowed by a confirmation in writing was al l

that was necessary. Harper, J. concluded that without that simple clarifying act, the client

20 14 O.R. (2d) 259. 21 Ibid at para 15. 22 Ibid at para 16. 23 2012 ONSC 706; 2012 CarswellOnt 1063 24 Ibid at para 164.

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and his lawyer took advantage of the mistake and allowed the process to conclude while

knowing that there was no meeting of the minds on this material issue.

So back t o the q uestion – Is the 34 da ys’ notice in the Notice of sale a “ mistake” which

should be brought to the attention of the lawyer who issued the Notice of Sale?

Although we are continually faced with and complaining about the lack of certainty in the

law, to parap hrase Richard B rinsley Sheridan, an Iris h Pla ywright, the glorious

uncertainty of the law may be considered to be its greatest excellency.

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