Legal Issues: Specific performance

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Here are notes from some recent court cases.

To many purchasers, it’s important to get a court order that the vendor specifically perform the sale – damages as the normal recovery in an action is the second-best outcome.

The owners of property on an island rented part of it to a tenant. The owners agreed in writing to sell the property to the plaintiffs. When the owners tried to have the tenant vacate, the latter refused, sued the owners and put a Certificate of Pending Litigation (CPL) on title to tie up the land.

The plaintiffs (purchasers) then also sued for specific performance of the contract to sell to them. 

The British Columbia Court ordered specific performance despite the CPL. That was because the owners sued the tenant and obtained an order that the tenant vacate. The fact that the owners as vendors did not remove the CPL was not an impediment because the tenant’s requirement to vacate (by court order) would no longer “support the registration” the owners refused to remove off title.  Even damage done by the tenant could not prevent the suitability of the owners performing the sale.

Obviously, the owners were influenced by the property’s increase in value.  The court found that it would be a hardship to the plaintiffs if they did not obtain this property.  The property was “unique” (a key to specific performance),  because it had waterfront for lots to be designated and residences built.  It was also zoned commercial and residential and no other property on the island would allow purchasers to build homes and operate a restaurant.

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The Ontario Court has upheld the right of the lender to sell a mortgaged property and exclude the borrower from title and possession.

A mortgage company took possession under a mortgage when the borrower defaulted on maturity.  The property was leased with an option to purchase.

Once the option to purchase was exercised, the court held that a sale defeated the borrower’s right to redeem the property.

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In Ontario, mediation and settlements resulting from mediation are privileged and without prejudice in order to encourage settlements.  They are also protected from public disclosure, and the Ontario Court of Appeal has confirmed this. The public interest in compelling or encouraging settlements overrode the public interest in “transparency”.  This is a very important case with regard to actions involving real estate agents and brokers, and vendors and purchasers, that go to mediation and result in a resolution. Mediated resolutions save the public the enormous costs of a trial (a public courtroom, a judge, officers of the court and a jury if applicable).

It also saves enormous costs to the parties litigating.  As a lawyer, I recognize and most lawyers would agree that the full-blown process of adversarial trial is very expensive.  The expense of your own lawyer, and should you lose the case, the expense of paying the other side’s lawyer could completely cripple a non-insured party, or individuals or corporations of limited financial means.

Donald Lapowich, Q.C. is a partner at the law firm of Koskie, Minsky in Toronto, where he practices civil litigation, with a  particular emphasis on real estate litigation and mediation, acting for builders, real estate agents and lawyers.

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