Law Times - sample

Page 4 OctOber 15, 2018 • Law times www.lawtimesnews.com Decision important to real estate lawyers Closing date not essential to enforce real estate deal BY ANITA BALAKRISHNAN Law Times T he Ontario Superior Court of Justice says a purchase agreement of 48 Ontario residen- tial lots is enforceable, despite the seller's claim that the un- meetable closing date invalidat- ed the agreement. In the case, Rolling Meadows v. 2560262 Ontario Inc., 2018 ONSC 5063, Rolling Meadows Land Development Corporation agreed to sell the lots in Thorold, Ont. to 2560262 Ontario Inc. on Feb. 7, 2017 for $4.3 million, with a deposit of $1.3 million. The decision in Rolling Meadows reiterates the core el- ements of property agreements the court will enforce, says law- yer Fabio Soccol, who repre- sented the purchaser of the lots. Soccol says the decision may be useful for lawyers who are drafting agreements on proper- ties where the value increases during the development process. "The takeaway is [to] be care- ful how you draft agreements of purchase and sale. If you really, truly intend there to be a con- dition precedent, that should be clearly and expressly stated in the agreement," says Soccol, who practises at Soccol Law in Vaughan, Ont. The agreement between the purchaser and the seller said that the closing date for the lots would be 12 months "following the date that the Vendor has completed permit servicing requirements for the lots and the Vendor's so- licitors have provided to the Pur- chaser the Property Identifier Numbers for each lot promptly following their designation by the Land Registry Office; provid- ed that in no event will the Clos- ing Date be before November 1, 2017, or after November 1, 2018," according to the decision. However, the permit servic- ing requirements were not met until Jan. 15, 2018, not the stat- ed Nov. 1, 2017 date that would have started the 12-month clos- ing window. The vendor said that the agreement was "at an end" as of Nov. 1, 2017, since the clos- ing date could not be properly scheduled by Nov. 1, 2018. In a cross-application, the purchaser said the agreement was valid and enforceable, since there is no express time period for completing the permit servicing. Ultimately, the judge said the essential elements of the agree- ment that made it enforceable — property, price and parties — were all "defined with certainty" in the agreement. "The closing date provision was neither an essential term nor, as the Vendor has admit- ted, a true condition precedent," Justice Robert Reid wrote in the decision. Doug Bourassa, a partner at Chaitons LLP, who was not in- volved in the case, says he sus- pects many real estate lawyers would be surprised to learn that a closing date is not an essential term of an agreement. Indeed, Bourassa says, the decision notes that in the nego- tiations of the purchase agree- ment in this case, one draft did propose the ability of the pur- chaser to terminate the agree- ment if permit servicing require- ments were not completed by a certain date — although that did not make it into the signed agreement. "Most people expect that if a closing date passes, the agree- ment is concluded. In the cir- cumstances of this case, the court found that the closing date was not an essential term of the contract and that it was open to set a new reasonable date for closing," Bourassa says. "Par- ticularly where the timing of the transaction is dependent on the occurrence of an external event, counsel would be well advised to explicitly draft provisions addressing the consequences of failing to meet that date." Another element of the dis- agreement was an amendment to the purchase agreement, pro- posed by the seller's lawyer in May 2017. The decision said: "After identifying (?) that the permit servicing requirements could not be completed by November 1, 2017, he wrote that: 'I think it was intended that completion of permit servicing requirements, not the closing date, would not be after November 1, 2018, such that the closing date would not be after November 1, 2019. Please confirm. If so, we can pre- pare an amendment. If not, we can prepare a mutual release.'" A draft amending agreement was not signed and submitted by the sellers until Nov. 6, 2017, the decision said, and the two par- ties disputed whether there was a formal verbal deadline of Nov. 1, 2017 for the document to be returned. Although the vendor did not want to proceed with the pro- posed amendment by Novem- ber, Reid wrote that the vendor erred in deciding the deal was dead. "A logical response to those concerns on the part of the Ven- dor would have been to clearly articulate a deadline, whether November 1 st or otherwise, in correspondence between the so- licitors, even if the deadline was somewhat artificial," Reid wrote. "The absence of a written no- tice of the deadline serves to call into question the good faith of the Vendor in its reliance on the passing of November 1 st as the basis for alleging that the Agree- ment was frustrated." The vendor's lawyer, Harry Korosis of Chown Cairns Law- yers LLP in St. Catharines, Ont., said he was unable to comment on the decision. Soccol says he is not aware of any appeal on the case. Tannis Waugh, a Toronto law- yer who is certified as a specialist in real estate, says he didn't find the judge's finding surprising. "If the parties intended the closing date to be an essential el- ement, they could have indicated that in the contract," Waugh says. He referenced in an email that the Supreme Court of Can- ada case Bhasin v Hrynew 2014 SCC 71, which shed light on the duty of good faith in contracts. It's a case, Waugh says, that is "likely to be considered when there is a significant change in value." "It may be a warning to real estate lawyers to make sure they act in good faith, particularly surrounding drafting and deliv- ering of amending agreements . . . even if your client changes his mind and refuses to sign, it could still be upheld, as it was in our case," Soccol says. "You could see this case be- ing particularly relevant for somebody acting in the sale of development property — that is conditional on taking raw land and taking it through the development process. It's sort of a warning to the real estate lawyers' profession to be careful how they cross their T's and dot their I's, so to speak." Soccol says there are impor- tant takeaways from the case. "You've got to be careful act- ing for the sellers because — you can imagine — let's say the development process took a lot longer or was a lot more expen- sive than what the seller thought, their hands would be still be po- tentially tied if there was no ex- press condition precedent," says Soccol. LT NEWS NEWS NEWS Fabio Soccol says a recent Ontario Superior Court of Justice ruling may be useful for lawyers who are drafting agreements on properties where the value increases dur- ing the development process. The closing date provision was neither an essential term nor, as the Vendor has admitted, a true condition precedent. Justice Robert Reid Available risk-free for 30 days Online: store.thomsonreuters.ca Call Toll-Free: 1-800-387-5164 | In Toronto: 416-609-3800 © 2018 Thomson Reuters Canada Limited 00250IZ-A92149-CM Keep pace with the most current terminology used in the e-commerce and IT industries with this comprehensive glossary of legal and technical definitions. One of Canada's foremost authorities on IT, online and copyright law, author Barry B. Sookman draws definitions from Canadian, U.S., U.K., and European cases, statutes, and regulations. His concise, comprehensive dictionary arms you with the language you need to: • Understand your clients • Analyze regulations, statutes, and case law as they apply across global jurisdictions • Conduct litigation or render opinions • Draft agreements — both national and international New in this edition This year's edition encompasses the latest digital terminology, with added definitions for terms such as BitTorrent Protocol, cloud services, Domain Name System server, IP Address blocking, swarm, and software as a service. Where necessary, multiple definitions are provided for clarity across global jurisdictions. New Edition Computer, Internet and Electronic Commerce Terms: Judicial, Legislative and Technical Definitions 2017 Barry B. Sookman Keep pace with evolving trends in global e-commerce and IP law Order # L7798-8606-65203 $147 Softcover approx. 700 pages March 2018 978-0-7798-8606-7 Annual volumes supplied on standing order subscription Multiple copy discounts available Shipping and handling are extra. Price(s) subject to change without notice and subject to applicable taxes.

• Cover