QUICK HITS

 

• Anticipatory breach risk: Buyers requesting changes to a purchase agreement, such as a reduced price, may be seen as committing an “anticipatory breach,” allowing sellers to back out and even sue for damages.
• Court sides with sellers: A buyer’s demand for a $355,000 price reduction was viewed as an unwillingness to complete the deal, leading the court to rule in favour of the sellers, who remained committed to the original agreement.
• Financial consequences: The buyer was held liable for $345,121.98 in damages after failing to close the deal, illustrating the importance of framing renegotiation requests carefully to avoid breaching contracts.

When purchasing a property, buyers sometimes realize they might not be able to meet the agreed-upon terms, such as the completion date. In such cases, they may seek to extend the deadline, reduce the purchase price or make other changes to the agreement. However, buyers must be careful, as making certain demands could be seen as an “anticipatory breach,” which may allow the sellers to back out of the deal and even sue for damages.

The case of Zoleta v. Singh and Re/Max Twin City Realty illustrates this point clearly. In February 2022, a buyer agreed to purchase a home in Kitchener, Ontario, for $1,150,000, with a completion date set for June 30, 2022, and payment of a $50,000 deposit.  The Agreement of Purchase and Sale (APS) didn’t include any conditions.

Buyer requests reduced purchase price; sellers relist home for sale

Just a week before the completion date, the buyer’s lawyer informed the seller’s lawyer that the property had been appraised for $355,000 less than the agreed price and that the buyer “required” this amount to be reduced from the purchase price. The sellers refused this demand and their lawyer warned that failing to complete the purchase would breach the agreement.

Concerned about the buyer’s ability to finalize the deal, especially since they needed the sale proceeds to fund their own property purchase, the sellers relisted the home for sale. To be transparent, they informed the buyer’s real estate agent of this via text message. The buyer’s agent didn’t respond.

Nonetheless, the sellers didn’t enter into any new sale agreements before June 30, and they still showed up at their lawyer’s office on June 30, ready to close the sale if the buyer proceeded.

Buyer claims APS null and void, walks away

On the completion date, the sellers agreed to an extension if the buyer made a further non-refundable deposit of $50,000. Instead, the buyer claimed that the APS was void because the sellers had relisted the property, and he refused to finalize the purchase.

The sellers ended up reselling the property for $350,000 less than the buyer had agreed to pay (market conditions had changed). They sued the buyer for damages and moved for summary judgment.

Court rules in favour of sellers as they remained committed to completing sale

The buyer’s defense was that the sellers had “sabotaged” the transaction and his ability to get financing due to the relisting of the property before his completion date. The sellers argued that the buyer had committed anticipatory breach of the APS by demanding a $350,000 abatement.

The court ruled in favour of the sellers, stating that the buyer’s demand (by using the word “require”) for a $355,000 reduction was a clear sign they were unwilling to complete the purchase unless the price was lowered — it was not seen as a request.

The court found that the sellers remained committed to the original agreement and had not breached the contract: They gave notice to the buyer about wanting to close on the completion date but relisting the property for sale in the event that he wouldn’t close. They also agreed to an extension on terms that were not accepted.

Only once those negotiations failed, the buyer took the position that relisting the property made the APS null and void. The judge found that the sellers remained committed to completing the sale to the buyer as scheduled.

As a result, the buyer was held liable for damages, including the difference in the resale price of the property. The sellers sought damages of $345,121.98, which includes the carrying cost of the property ($9,962), costs they incurred to extend their scheduled purchase transaction ($4,934.98) and loss of sale value, net of real estate commission ($330,225).

This case serves as a warning: if your client needs to renegotiate the terms of their deal, the request can’t come across as a non-negotiable demand. Otherwise, they risk being seen as breaking the contract and facing significant financial consequences.

QUICK HITS

• In 2016, water pooling along a property line, traced back to a neighbour’s sump pump, contained harmful bacteria like E. coli. The neighbour failed to fix it due to financial constraints and lack of insurance.
• The Ontario Superior Court of Justice case highlighted the severe consequences of neglecting property maintenance, with the plaintiff’s home collapsing due to pooling water, leading to a significant legal battle.
• The neighbour was found liable for strict liability, negligence and nuisance, resulting in the plaintiff being awarded $487,211 for home replacement costs, $18,143.53 for additional expenses, $35,577.99 in pre-judgment interest and $100,000 in legal costs.

Neighbours owe each other a duty of care to avoid causing property damage, yet common sources of damage include water flooding from sump pumps, septic systems or poorly maintained eavestroughs.

The Ontario Superior Court of Justice case Warren v. Gluppe highlights the significant consequences of failing to uphold this duty.

Contaminated water encroaching on property

In 2016 in Prince Edward County, Ontario, the plaintiff noticed water pooling along the property line, traced back to his neighbour’s sump pump. The water contained harmful bacteria like E. coli. Despite acknowledging the issue, the neighbour did not fix it, claiming financial constraints and lack of insurance.

The municipality ordered the neighbour to redirect the sump pump water away from the plaintiff’s property, but the solution failed. By the end of 2016, the pooling water caused the plaintiff’s home to collapse, making it uninhabitable.

The plaintiff sued the neighbour in December 2016. The trial took place in 2023. An engineer testified that the neighbour’s failed attempts to reroute the sump pump water caused the house to collapse. The neighbour’s septic system also violated the Ontario Building Code, contributing to the problem. As well, the plaintiff showed that the neighbour failed to properly maintain his eavestroughs, resulting in further water saturation on this property and putting the property’s foundation at risk.

Neighbour liable for several reasons

The court found the neighbour liable for three reasons:

1. Strict liability (Rylands v. Fletcher): The neighbour’s sump pump and septic system were considered non-natural uses of the land (discharge of water from the basement through faulty pipes along the property), and their failure caused damage, which had nothing to do with “the laws of nature.”

2. Negligence (Alfarano v. Regina): The neighbour did not adequately reroute the sump pump water, maintain the septic system or repair the eavestroughs, all of which posed foreseeable risks to the plaintiff’s property.

3. Nuisance (Antrim Truck Centre Ltd. v. Ontario): The neighbour’s actions substantially and unreasonably interfered with the plaintiff’s use and enjoyment of his property, leading to its collapse and contamination.

The decision

The plaintiff was awarded $487,211 for the replacement cost of his home, $18,143.53 for maintenance, repair, travel and accommodation costs, $35,577.99 in pre-judgment interest and $100,000 in legal costs.

The BC Financial Services Authority (BCFSA) recently found that former real estate agent Jake Singh Kanda committed professional misconduct when he did not inform provincial licensing authorities that he’d been charged with crimes.

British Columbia’s Real Estate Services Act requires licensees to notify the BCFSA’s superintendent of real estate in writing if they are charged with or convicted of an offense, and also to provide their managing broker with the notice.

The decision notes that Kanda didn’t partake in the BCFSA’s hearing process and has not been licensed under the Real Estate Act since February 2023.

34 charges involved, requested information ‘withheld, concealed, or refused to provide’

The decision posted on the regulator’s website includes nine charges from February 2019, 10 from January 2021 and nine from July 2021.

Six charges from October 2016 (before Kanda was a licensed real estate agent) were withdrawn, about which, in May 2021, he submitted “a false or misleading statement in writing in response to the Real Estate Council of British Columbia (RECBC)’s investigatory requests made April 7, 2021.”

Few charges were proven, and the 2019 and 2021 charges were similar, coming from the 2016 incidents.

The document also notes Kanda “withheld, concealed, or refused to provide” information requested by the RECBC and that, in May 2022, he “failed to promptly notify the superintendent in writing” after being convicted of two crimes: assault, and pointing a firearm at a person, both in October 2016.

The decision

After requests from investigators in April 2021, Kanda’s lawyer responded with a letter in May 2021 stating the charges were withdrawn “because they were false charges” and that the court decided to “drop the charges permanently, and no longer seek prosecution.” The decision notes this is false or misleading since Kanda and his lawyers would have known the case was still being appealed (about 15 days before their statement was made).

In February 2022, an investigator emailed Kanda’s lawyer, noting that the stay of proceedings for the 2019 charges had been set aside, and requesting an update and court documents for the 2016 charges. The same request had been made in July and September 2021. The update and documents were provided in August 2022, along with information for the 2019 and July 2021 charges. However, the decision notes there was “no explanation for the significant delay.”

The decision notes that prior to this, the BCFSA had not been provided any of the information or the November 2020 reasons for the stay of proceedings for the 2019 charges being granted, despite the April 2021 request.

The BCFSA concluded that Kanda was guilty of professional misconduct since he did not notify the superintendent or his managing broker of his charges and convictions.

Review the regulator’s decision in full here.

A long-running dispute between neighbours over a strip of land just 21.9 centimetres wide ended in court after years of litigation and 10 affidavits.

In Margaritis v. Milne, the Ontario Superior Court of Justice ruled on whether the doctrine of adverse possession applied, ultimately granting the land to one neighbour based on lasting improvements made under the belief it was their property.

Negotiations fail over small property encroachment

Milne bought his property in 1996, while Margaritis inherited his in 2017. A wooden fence and stone retaining wall marked the boundary between their properties. After his purchase, Milne made extensive changes, including building a new fence and retaining wall.

When Margaritis planned to redesign his backyard, a survey revealed a small encroachment from Milne’s property. Negotiations failed, leading to the lawsuit.

Cannot claim adverse possession

Milne claimed the land through adverse possession, which requires 10 years of exclusive use. However, Margaritis argued that Milne had moved the fence line to its current location in 1996, while Milne maintained that he re-built the fence on the pre-existing fence line.

It was found that both properties were converted to Ontario’s Land Titles system in 2002, and registered land in the system can’t be obtained by adverse possession unless that 10-year period took place prior to registration. Milne’s use didn’t meet the 10-year requirement before this time.

The court couldn’t confirm where the boundary was before the 1996 renovations, as Milne was unable to provide surveys, plans, permits or engineering drawings showing the work done. So, his claim to title under adverse possession was denied.

Milne obtains land because of honest belief it was his

Despite rejecting the adverse possession claim, the court awarded Milne the land because he made lasting improvements, like the retaining wall and stairs, believing it was his. This decision was supported by section 37 of the Ontario Conveyancing and Law of Property Act, which allows a person to retain land if they made improvements under an honest belief it was theirs.

The court found Milne’s belief genuine and the improvements lasting and substantial. Changing the boundary now would require significant modifications to Milne’s property, plus the boundary existed for more than 20 years without complaint. As well, granting the disputed area to Margaritis would require significant renovations to Milne’s backyard to add an “objectively insignificant area” to Margaritis’ property — no compelling reason arose as to why Margaritis required the strip of land.

So, Milne was granted the land but had to compensate Margaritis for its value. The exact compensation method is yet to be determined. An appeal was dismissed, as the Divisional Court upheld the original decision, agreeing that the improvements were lasting and that the judge had exercised appropriate discretion.

Co-authored by Christina Tassopoulos

QUICK HITS

 

• The judge extended a homeowner’s time to appeal an Order to Comply because it was based on a misunderstanding by the owner and the municipality of the property’s legal use.
• Three complaints were issued from 2013 to 2021 about the building’s construction without a permit, an increase in the number of dwelling units and a zoning bylaw contravention for which an Order to Comply was issued. The homeowner eventually appealed this decision.
• The court rescinded the Order to Comply and required the homeowner to only use his property for three dwelling units.

Municipalities have zoning bylaws that regulate the number of separate residential units allowed in a property, and violation of these bylaws can result in orders to comply — often meaning expensive renovation expenses among other penalties.

In Vitale v. Toronto (City of), the Ontario Superior Court of Justice extended a homeowner’s time to appeal an Order to Comply because when it was issued, it was based on a misunderstanding by the owner and the municipality of the property’s legal use.

The property and its zoning

The property was a three-storey building constructed in about 1927. In 1963, it was zoned by the City of Toronto as a single-family dwelling. Sometime between 1927 and 2011, the property had been converted from a single-family dwelling to a five-unit residential multiplex.

In 2011, the applicant (Vitale) purchased the property. It had multiple entrances and five separate dwelling units at this point. Vitale moved into one unit and rented out the other four.

Before the purchase, Vitale hired a conveyancing lawyer to inquire about whether a three-family dwelling was legal (it’s not clear why the conveyancing lawyer inquired about a three-unit dwelling as opposed to five, but it could have been because only three units were occupied at the time).

The City confirmed that at the time it was built in 1927, there were no zoning by-laws in effect, but at present, the property was zoned for a single-family dwelling and there were no records confirming the dwelling had three apartment units.

Vitale was told to satisfy himself as to whether the uses complied with the zoning bylaw and the Ontario Building Code.

Repeated complaints

In 2013, Vitale began constructing a deck in the backyard. The City received a complaint that this was happening without a permit, so they issued an Order to Comply which required Vitale to obtain a permit. Vitale submitted an application, which falsely described the property as a detached single-family dwelling and included a site plan describing the same. The City issued a permit.

In 2017, the City received a complaint that there was an increase in the number of dwelling units in the property. An inspector attended and Vitale explained he’d recently engaged an architect to design and construct a new single-family dwelling at the property and planned to submit the permit application within four to six months. Nothing significant occurred for several years.

In 2021, the City received another complaint. This one was from a tenant in the upstairs unit, indicating that the property was being used as a five-unit multiplex and contravened zoning and the Ontario Building Code. The City inspected and concluded that the property had originally been a single-family dwelling but had been altered to be a multiplex with five apartment units.

On June 7, 2021, the City issued an Order to Comply with the Building Code Act requiring Vitale to “revert” the use of the building into a three-unit dwelling. But, as far as Vitale was aware, the building had never been used as a three-unit dwelling.

Eventual appeal

Although Vitale engaged in discussions with the City, he did not appeal the Order to Comply. The City delivered a demand letter in February 2022 and, again, Vitale did not appeal it. In May 2022, he was served with a summons to appear before the Ontario Court of Justice.

In September of that year, Vitale applied to the Superior Court of Justice for an appeal of the Order to Comply (beyond the deadline for doing so).

Under section 25(2) of the Building Code Act, a judge may extend the time for appealing if they’re satisfied there are reasonable grounds for the appeal and for applying for the extension, which typically requires a reasonable explanation for the delay.

Main issue: Number of units converted before and after 1963 bylaw is unknown

The application judge felt the main issue was it was unknown how many units were converted before the enactment of the zoning bylaw in 1963, and how many were converted after that.

Any use that was established before 1963 and continued uninterrupted afterward could be considered a “legal non-conforming use” — meaning it could continue despite the enactment of the zoning bylaw.

To prove a legal non-conforming use, a party must prove that 1) the use of the land, building or structure was lawful at the time of the enactment of the zoning restriction (in this case 1963), and 2) the use continued after that. On the other hand, any converted use that happened after 1963 besides as a single-family dwelling would have contravened the zoning bylaw.

The City’s Order to Comply required that Vitale submit plans and obtain the necessary permits to change the occupancy of the building from three dwelling units to five dwelling units, or to revert the building to its legal use.

The judge commented that neither side seemed to understand that the only thing Vitale needed to do to comply with the Order was to decrease the total tenancy by one unit since only three units were being rented out (aside from his own family’s residence). Vitale needed to terminate one of the existing tenancies or vacate his unit to revert to the last legal use as a three-unit multiplex.

Vitale treated ‘fairly and reasonably’ as City could have sued for bylaw contravention

The City had tried unsuccessfully for over a decade to determine whether Vitale had created a legal non-conforming use. After it issued the Order to Comply, Vitale tried to appeal as he firmly believed his plan to restore the property to a single-family dwelling should have been reasonable, arguing that the Order to Comply was an example of a bureaucracy gone amok and was a “Kafkaesque impossibility” since the City wanted him to revert a building to something that never existed.

Vitale argued that the City had no evidence on which to make its Order to Comply and that it ought to be rescinded.

The judge determined that the City had treated Vitale very fairly and reasonably since they could have sued Vitale for contravening the bylaw, which would have placed the onus on him to prove that the property had been converted before the 1963 bylaw enactment.

Prosecuted for a crime not committed

The flaw in the City’s case was that they issued an Order to Comply under section 10(1) of the Building Code Act, stating in part, “[e]ven though no construction is proposed, no person shall change the use of a building”. It seemed the City assumed that Vitale had purchased the property as a three-family dwelling, that this was a legal non-conforming use and that he’d changed the property to a five-unit dwelling without a building permit.

However, evidence showed that Vitale did not change the use of the property. When he purchased it in 2011, it was already a five-unit dwelling. Then, when the Order to Comply was issued, there were only four units being occupied, and a reversion to a three-unit dwelling, which the City believed to be the last legal non-conforming use, could have been achieved without any renovations at all but by vacating his own unit or terminating one of the tenancies. So, Vitale was being prosecuted for an offense he hadn’t committed.

The court’s decision — an ‘ironic result’

The application judge noted that the Building Code Act was legislation for public health and welfare and was to be interpreted broadly and liberally. Here, the court decided to rescind the City’s Order to Comply and require that Vitale only use his property for three dwelling units.

The application judge noted that the ironic result was that had Vitale complied with the Order to Comply in the first place he not only would have avoided prosecution and the appeal, but it would not have interfered with his ultimate plans to demolish the multiplex and to build a single-family home, which was permitted.

The Toronto Regional Real Estate Board (TRREB) has launched a case against two Ontario realtors, and two additional (unknown) defendants.

Court documents provided to REM state that the defendants — Sandra Maher and Penny Dutkowski, who are not TRREB members, along with two unknown individuals — used TRREB’s confidential or proprietary information to communicate with TRREB members. This includes via websites like nomandatoryorwp.ca and change.org/p/say-no-to-mandatory-realtor-benefits-orwp.

TRREB’s claim

TRREB’s Statement of Claim says, “All of the Defendants used TRREB content without authorization, including links to TRREB’s proprietary and confidential material.”

The claim goes into specifics of this, including that defendants “opposed ORWP and engaged in efforts to stop the implementation of ORWP applying to all Ontario realtors. The Defendants, and others, created a Meta Facebook page called “OROMOO” … stated to be an acronym for: Ontario Realtors Opposed to Mandatory OREA ORWP.

However, rather than the Meta Facebook page being directed at OREA, it was directed at TRREB, its officers, directors, members and employees. The OROMOO Meta Facebook page became a forum for libelous, slanderous and defamatory posts about TRREB, its officers, directors, employees and suppliers.”

Among other things, TRREB is claiming “$1 million for civil conspiracy, wrongful interference with economic relations, tortious interference and wrongful interference with contractual relations,” and, “In relation to any Defendants who are former TRREB members, damages in the amount of $1 million for breach of contract, and breaches of their membership obligations.”

About the case, John DiMichele, TRREB CEO, says, “Out of respect for the legal process, we will not be commenting considering that the matter is before the courts.”

Dutkowski and Maher’s defense

Dutkowski and Maher’s Statement of Defence states they “deny each and every allegation in the Statement of Claim, unless expressly admitted herein, and put the Plaintiff to the strict proof thereof.”

It explains that TRREB is a trade association operating on democratic principles that represents more than 70,000 real estate agents and brokers practicing in the GTA and that it’s also a constituent board of OREA, a professional association that represents real estate brokers and salespeople across Ontario.

“OREA is also a democratic institution that represents the interests of its members … This lawsuit is about that democratic process. TRREB takes issue with the fact that the Defendants sought to influence OREA policy in a manner that the TRREB Board of Directors did not like.

Specifically, the Defendants Penny Dutkowski and Sandra Maher – two long-time realtors and senior members of the profession – opposed the introduction of a mandatory health benefits plan that they felt would harm them and other more senior members of the profession (and in particular senior citizens).

TRREB now brings this lawsuit to silence dissent and to intimidate the Defendants and other realtors in Ontario. In reality, this claim is a political dispute disguised as a tort claim and bears all the hallmarks of strategic litigation against public participation (SLAPP). It should be summarily dismissed.”

Statement from defendants’ lawyers

Dutkowski and Maher are being represented by lawyers Robert Stellick and Simon Bieber of Adair Goldblatt Bieber LLP in Toronto. They made the following statement on behalf of their clients:

“As the Statement of Claim makes clear, our clients have been sued by TRREB for their efforts to overturn the OWRP. The specific claims being made against them are set out in the Statement of Claim.

As the Statement of Defence makes clear, it is our view that this lawsuit has no merit and has been brought to silence and intimidate our clients and other realtors in Ontario. We intend to bring an ‘anti-SLAPP’ motion to seek to have the claim summarily dismissed.”

What is a SLAPP suit?

A SLAPP suit (Strategic Lawsuit Against Public Participation) is defined by the Toronto Metropolitan University’s Centre for Free Expression as follows:

“SLAPPs are lawsuits brought by individuals, corporations or others to intimidate and silence critics by forcing them into legal battles that would be extremely costly and time-consuming to fight. The goal was not to obtain justice; it was to exhaust, defeat and intimidate their critics into being silent.

A typical example is publishers, newspapers or media outlets being sued to stop publications which expose corporate or political wrongdoing. Similar tactics are used to mute the voices of community activists and researchers who are exposing harms from development projects or toxic chemicals or corporate malpractice.”

On Wednesday, the Government of Ontario introduced new housing legislation outlining the latest steps it’s taking to cut red tape and help municipalities get more homes built in their communities. This is key to the province’s commitment to building at least 1.5 million homes by 2031.

Paul Calandra, Ontario’s minister of municipal affairs and housing, minister of legislative affairs and government house leader, describes the Cutting Red Tape to Build More Homes Act will help to “keep cutting red tape and make it cheaper and easier for Ontario families, workers and businesses when it comes to interacting with the Ontario government.”

Calandra says that all actions to date including the announcement are “saving people and businesses 1.5 billion hours and $1.2 billion each year.”

Over $1.8 billion in funding to help build housing-enabled infrastructure

He went on to highlight that municipalities know their communities best, including where it makes sense to build homes, and that this is why the government is providing funding and tools to build more homes and infrastructure needed to support homes of all types.

“Our government is providing over $1.8 billion to help build housing-enabled infrastructure across the province,” the minister announced. “This is on top of our $1.2 billion Building Faster fund, which is rewarding municipalities for hitting their housing targets.

Cutting red tape

Calandra outlined measures to build homes faster and at a lower cost:

• Letting homebuilders decide the right number of parking spaces in new residential near transit
• Making it easier to build new garden, laneway and basement suites by eliminating barriers to these units including maximum lot coverage and limits on the number of bedrooms allowed per lot
• Prioritizing infrastructure for ready-to-go housing projects with a new “use it or lose it” process to ensure that builders get moving once they receive their approvals
• Improving consultation in providing municipalities and builders with greater certainty to get more homes built faster including by limiting third-party appeals to the Ontario Land Tribunal
• Building more types of homes for more people by streamlining approvals for student housing, supporting standardized designs to reduce delays and costs and supporting innovative construction measures like mass timber

Where OREA and Ontario boards stand

Tim Hudak, CEO of the Ontario Real Estate Association (OREA), says the association is pleased to see progress on important solutions from its housing supply report and advocacy on modular construction, aimed at streamlining approvals and getting more homes built: 

• Exploring new financing and governance to support critical infrastructure like water and wastewater, which would reduce upfront costs to homebuyers by as much as $50,000
• Developing business service standards for permit/license services to reduce regulatory delays
• Eliminating parking minimums near transit to enable greater density along transit
• Making it easier to build more garden, laneway and basement suites
• Permitting mass timbre structures up to 18 storeys
• Supporting standardized designs to reduce delays and costs for modular homes

OREA notes another important solution in the Bill is streamlining approvals for student housing.

The Ottawa Real Estate Board (OREB) feels similarly. Its president, Curtis Fillier, says, “Ottawa’s housing crisis — like many others throughout the province — is rooted in a chronic lack of supply, and OREB is encouraged by the Ontario government’s focus on getting more homes built faster. Measures such as eliminating parking minimums near transit and making it easier to build garden, laneway or basement suites will help drive progress.”

Likewise, the Chatham-Kent Association of Realtors (CKAR) commends the Ontario government for its efforts to reduce red tape and for recognizing the barriers that limit the ability to increase housing supply. Specifically, the association feels the “use it or lose it” housing strategy for builders can help accelerate new home construction and increase overall supply, reduce bureaucratic obstacles and steer builders towards more affordable housing options.

Jennifer Pearce, president of the Toronto Regional Real Estate Board (TRREB), says the new legislation would enact several important measures GTA realtors have worked closely with the government and real estate industry partners on over the last year.

She explains the proposal to limit third-party appeals of official plans, official plan amendments, zoning by-laws and zoning by-law amendments is a policy change “that could speed up the necessary approvals to get shovels in the ground faster on new housing. TRREB is advocating for changes to expedite housing approvals and we are encouraged the province is responding.”

TRREB also acknowledges the proposal to remove the requirement for a minimum amount of parking spaces in developments near most major transit stations will remove thousands of dollars in construction costs per parking space, making units more affordable for home buyers and more projects viable.

‘Still work to be done’

However, Hudak points out there is still work to be done: “Any changes to the Ontario Land Tribunal should be focused on preventing abuse and eliminating backlog. Similarly, any changes to how municipalities collect and spend development charges cannot increase costs for future homebuyers.” 

He highlights the association’s disappointment that two key recommendations by the Province’s Housing Affordability Task Force — strongly supported by Ontario realtors — were not included in the Bill.

Call for eliminating exclusionary zoning

“We need to build more homes on existing properties and allow upzoning along major transit corridors if we’re going to address the housing affordability and supply crisis in our province. The Province is making significant investments in transit and passenger rail, and building more homes along those lines is common sense. Eliminating exclusionary zoning and allowing four units, as-of-right, province-wide, is an essential key to unlocking affordable homeownership,” Hudak stresses.

Fillier agrees: “If Ontario is going to achieve its goal of 1.5 million new homes in Ontario by 2031, we need direct solutions to build up our communities — including building more homes on existing properties and allowing upzoning along major transit corridors.

That’s why OREB has been and will continue advocating for exclusionary zoning to be eliminated. We need the Ontario government to enable ‘as of right’ zoning for four units per lot, which will go a long way in developing middle housing that is sorely lacking in our markets. Without this, Ontarians will remain locked out of the housing market due to a lack of suitable and affordable housing.”

Standardized and widely accepted definitions for housing starts and completions needed

Pearce says that going forward, TRREB encourages the province to commit to standardized and widely accepted definitions for housing starts and completions as it tracks its progress towards meeting the 1.5 million homes target.

“Ontario was the first province in Canada to report on its housing supply progress and it’s crucial that we continue to present a consistent picture of the progress towards our goal,” she says.

“Building more types of homes for more people allows smaller municipalities like ours to explore creating affordable solutions to meet the wide needs of our community while considering cost-effective approaches for construction,” says Amber Pinsonneault, chair of CKAR Government Relations Committee.

“We are commending Minister Calandra and Premier Ford for introducing this piece of legislation that encourages all MPPs to get behind a bill to deliver more homes Ontario families can afford,” Pearce expresses.

Hudak says, “We commend Premier Ford and Minister Calandra for the actions put forward in this piece of legislation, but we hope to see them go further. The government needs to keep its foot on the gas with bold action if we’re going to accomplish the goal of building 1.5 million new homes by 2031.”

In a landmark development, the National Association of Realtors (NAR) recently settled a series of commission lawsuits, agreeing to pay $418 million USD in damages and pledging to overhaul its rules regarding real estate agent commissions.

This settlement, prompted by legal claims alleging artificially inflated commissions, has sparked widespread speculation about its potential impact on housing affordability and market dynamics.

While proponents hail it as a game-changer that could lead to substantial cost savings for homebuyers and sellers, skeptics remain cautious, questioning whether it will truly translate into lower housing prices. As the real estate industry braces for change, examining the nuances of the settlement and its implications becomes paramount.

High-profile endorsers

The settlement has drawn enthusiastic endorsements from high-profile figures like President Joe Biden and former Treasury Secretary Larry Summers, who suggest it could lead to significant savings for homebuyers and sellers, potentially up to $10,000 per transaction.

We’ve seen similarly themed claims made even in Canadian media. Advocates in the United States and Canada argue that the elimination of standard commission structures could result in more competitive pricing among real estate agents, leading to lower transaction costs for consumers. Summers even suggests that breaking the “realtor cartel” could save U.S. households $100 billion over time, implying substantial long-term benefits for affordability.

Gradual commission reductions “unlikely to happen”

Getting rid of the decades-old commission system, which is criticized for inflating costs, by eliminating compensation details on MLS platforms could lead to more negotiation power for sellers, potentially driving down commissions.

Economists predict gradual reductions in commissions, potentially down to 4-5 per cent over time, with the majority of savings captured by sellers. This, however, is unlikely to happen according to NAR and those with years of experience understanding how sellers and buyers determine the value of a home.

Lower housing prices not certain — here’s why

Despite the optimism, experts caution that the settlement may not immediately translate into lower housing prices. Critics argue that sellers are unlikely to lower prices simply because transaction costs decrease. NAR’s response suggests that commissions were already negotiable, indicating that lower commissions may not necessarily lead to reduced housing prices.

In Canada, for instance, buyer agents and seller agents already offer a range of commission and compensation structures and, notwithstanding this reality, prices continue to rise across the country. Additionally, uncertainty remains about how the changes will ripple through the market and who will ultimately benefit from lower commissions.

NAR’s assertion that commissions are driven by the market and not the cause of the affordability crisis raises doubts about the direct impact on housing prices. Economists highlight the complexity of determining who benefits from lower commissions, particularly in different market conditions such as seller’s markets. For example, as many real estate agents can attest to, a seller wants their home to sell for a specified amount not because of a cold rational calculation, but because their house is the best house in the neighbourhood!  

Gradual adjustment to settlement ramifications, not quick seismic shifts

While the settlement sparks discussions about potential changes in Canada, it’s crucial to manage expectations. Real estate professionals have long since offered reduced commissions or flat fee services, with little impact on housing prices, suggesting a gradual adjustment process to ramifications of the NAR settlement (if any at all in the near term) rather than immediate seismic shifts.

The settlement may encourage broader adoption of innovative pricing models and increased transparency in services provided by real estate agents. However, overblown expectations about the immediate impact on housing prices should be tempered, as broader challenges such as housing supply shortages and regulatory barriers remain significant factors in housing affordability.

Fear and uncertainty drive varying interpretations of the settlement’s implications, highlighting the complexity of its effects on the real estate market. It’s this very complexity that makes me believe that those claiming significant changes or no changes at all will both be wrong; rather, we’ll see a slow evolution in how we do business with likely little impact on housing prices. 

Nonetheless, the prudent real estate agent won’t wait around for these changes. Exploring alternative pricing models and emphasizing the value they provide to clients is the best way to be part of the future. 

QUICK HITS

• JKSD made two loans to Jaymor – $250,000 and $125,000. Security was personal guarantee of Jaymor’s principal or a fourth mortgage’s registration against property.
• Jaymor defaulted on both loans. No fourth mortgage was registered on property, partly because Jaymor refused to execute authorization.
• First, the judge decided appellants didn’t have equitable fourth mortgage and lender’s remedy was to sue.
• Court of Appeal determined judge erred in finding terms of agreement uncertain as subsequent promissory note stated fourth mortgage would be registered on property in event of default.

 

In Greenspan v. Van Clieaf, the appellants, Greenspan and her lending company JKSD Management Inc. (JKSD), made two loans to Jaymor Securities Ltd., the first being for $250,000 secured by a third mortgage on a property in Richmond Hill, Ontario owned by Jaymor. Jaymor’s principal looked for another loan and provided an appraisal to show that the property could support a fourth mortgage.

Promissory note for second loan — default on both

On August 1, 2019, the parties executed a promissory note under which JKSD agreed to lend Jaymor a second loan of $125,000, which Jaymor was to repay within 30 days. Security for the loan was to be the personal guarantee of Jaymor’s principal, provided by a related company, and, if the loan was not paid in full on maturity and the default was not received afterward, then by a fourth mortgage’s registration against the Richmond Hill property.

Jaymor defaulted on both loans. No fourth mortgage was registered on the property, partly because Jaymor refused to execute an authorization for the mortgage registration.

Creditors obtained a judgment for $1,152,373.72 against Jaymor and registered a writ of seizure and execution against the property.

Property sold, equitable mortgage claimed

On March 12, 2021, the Richmond Hill property was sold for $1,560,000. After the payout of the first and second mortgages, tax arrears and the real estate commission, a balance of $548,437 remained that was subject to a dispute between the appellants and the respondents.

The appellants claimed an “equitable mortgage” over the property that took precedence over the respondents’ writ of execution. An equitable mortgage enforces “a common intention of the mortgagor and mortgagee to secure property for either a past debt or future advances, where that common intention is unenforceable under the strict demands of the common law.” It can be made in different ways, with the main element being the common intention of the borrower and lender to secure property for a past debt or future advances.

Lender to sue for breach of contract and/or negligent misrepresentation

At first, the Ontario Superior Court of Justice decided the appellants didn’t have an equitable fourth mortgage on the property. The application judge noted that Jaymor refused to execute the fourth mortgage and, at the time of maturity, had no intention of granting one — it wasn’t as though the parties didn’t intend to register a mortgage but formalities couldn’t be completed or a mistake was made.

The judge felt the right remedy for the lender was to sue for breach of contract and/or negligent misrepresentation rather than impose an equitable mortgage that interfered with the rights of execution creditors who had no other means to pursue and had taken all required steps (even during the COVID-19 pandemic) to solidify and register their interest.

Application judge made error of law

Once appealed, the Court of Appeal for Ontario held that the application judge erred in finding that JKSD did not have a valid equitable fourth mortgage. The decision focused on the written terms of the promissory note which indicated the parties intended that a fourth mortgage would be registered on the property if Jaymor defaulted on the loan. Nothing suggested that Jaymor had the discretion to decide whether or not the mortgage would be registered.

Based on the terms of the promissory note, the parties had a common intention when it was signed to grant a fourth mortgage to the appellants. That Jaymor refused to consent to the fourth mortgage’s registration and sought to retract from the agreement didn’t create ambiguity or uncertainty in the agreement to provide the fourth mortgage.

To consider the conduct of the parties after the formation of the promissory note without first determining whether the note was ambiguous was an error of law.

Accepting subsequent conduct gives undue power to create ambiguity

The Court of Appeal determined that the application judge made an error of law in finding that the terms of the agreement were uncertain because a subsequent promissory note also stated that a fourth mortgage would be registered on the property, in the event of default.

This involved subsequent conduct and there was never any conflict between enforcing the two promissory notes. Plus, the existence and terms of the subsequent promissory note could not create ambiguity with the earlier one if none existed when the parties entered into it.

The Court of Appeal’s view was that accepting the subsequent conduct created ambiguity and would give undue power to contracting parties to create ambiguity where none existed by refusing to follow through on their obligations in an agreement, or by acting in a self-serving manner after forming an agreement.

Finally, the Court of Appeal noted that considering the appellants had other means of enforcing their rights under the promissory note than by granting an equitable mortgage, or whether they had delayed taking steps to enforce their rights, was an error of law. The focus should instead stay on the terms of the promissory note when it was made. Based on the note, it was clear that the parties agreed that JKSD would have a mortgage on the property if Jaymor defaulted on the loan.

This decision affirms the fundamental principles involved in deciding whether an equitable mortgage may be enforced in circumstances where a charge or mortgage was not formally registered. The outcome may seem unfair to the execution creditors at first, but it doesn’t turn upon competing equitable claims between the parties.

The terms of the agreement between the appellants and Jaymor were not uncertain and later events or surrounding circumstances at the time of enforcement aren’t relevant in deciding whether there was an equitable mortgage to begin with.

In response to a flurry of commission-related lawsuits causing upheaval, the National Association of Realtors (NAR) recently brokered a groundbreaking settlement, pledging reforms and financial restitution.

Valued at $418 million over four years, the agreement promises “sweeping” changes to the process of buying and selling homes in the United States. At the heart of this settlement lies NAR’s decision to no longer mandate listing agents to determine compensation for buyer brokers on MLS, aiming to enhance transparency and fairness in real estate transactions. 

This shift means that compensation for buyer agents will no longer be publicly displayed in multiple listing services (but can be available on brokerage websites or non-MLS sites). While many non-industry journalists claim this settlement will herald a dramatic new era of negotiation dynamics between agents and clients, this remains to be seen as we unpack the details of the settlement. 

Delving deeper: Understanding the impact of the settlement on the industry

Despite the appearance of resolution, the settlement has left a sour taste for many industry insiders, according to commentator Rob Hahn. Critics argue that the terms of the settlement, particularly NAR’s perceived concession, fall short of providing a clear victory.

Hahn suggests that NAR’s agreement, while seemingly substantial, exposes the organization to disproportionate liability compared to other defendants. With NAR bearing a significant portion of the damages and instituting extensive reforms, concerns linger regarding the long-term ramifications for the industry.

Furthermore, the settlement has notable exclusions.

First, it only covers over one million NAR members, state and local realtor organizations — the settlement specifically leaves out certain brokerages that continue to engage in litigation or have reached their own settlements, and it excludes non-NAR member MLSs as well as brokerages with transaction volumes exceeding $2 billion in 2022.

Second, the agreement doesn’t prohibit buyer agents from collecting fees and it doesn’t restrict where selling agents can advertise buyer agent fees. In other words, buyer agents can still receive compensation, and real estate agents can continue to advertise buyer agent compensation on various platforms, including non-NAR member websites like Zillow, OJO and Realtor.com. This aspect raises questions about whether the lawsuit will truly instigate significant changes.

Brokerage responses to the settlement

In the aftermath of the settlement, the real estate industry faces divergent responses to the ongoing legal saga. Some brokerages view the settlement as a means to mitigate legal risks and establish stability. Companies like Anywhere Real Estate and Re/Max have opted for compromise, settling lawsuits and agreeing to adapt business practices.

Conversely, a faction led by HomeServices of America remains steadfast in resisting the settlement, advocating for continued litigation and defending existing norms. Amid these opposing viewpoints, a group of reformers champion proactive measures to tackle industry challenges, aligning with the reforms outlined in the settlement.

The reforms advocated, however, would not be viewed as revolutionary to real estate agents in Canada. Rather, reforms such as requiring that buyer representation agreements (BRAs) are signed and that real estate agents no longer claim that “buyers don’t pay” for the agents’  services is standard practice in Canada. 

Anticipated changes in practice

Considering the settlement terms and existing practices in Canada, it remains uncertain what substantive changes might occur if a similar settlement were to arise in Canada. Agents in this country are already required to discuss compensation with clients, typically through BRAs. 

However, should sellers cease offering compensation to buyer agents en masse, agents would need to articulate their value to buyers, a requirement already present in Canadian BRAs. So, unless significant new brokerage models emerge in the U.S. that influence Canadian consumer habits and demand, the impact of such a settlement on Canadian real estate practices may be minimal.

As the dust settles on the NAR settlement, many claim that we’ll see profound changes. It’s my opinion that Canadian real estate agents and brokerages should take this claim with a truckload of salt, let alone a grain. Nonetheless, it’s prudent that brokerages and real estate agents adapt to evolving commission structures and negotiation norms, while also sharpening their ability to articulate their value to the consumer — something that we should already be doing.