Neil Wilson

2Thanks, Pulat, and morning, and hope you're doing well. So as you said, my name is Neil Wilson. I'm a litigation lawyer in Toronto at the firm of Stevenson Whelton LLP. And we are a litigation boutique firm, which means that Civil litigation is all that we do, and one of our practice areas is real estate litigation, which is what we'll be speaking about this morning.

4Well, there are many different types of real estate disputes that can occur, and in many ways it's similar to contract litigation or disputes over contracts because often real estate disputes turn on a contract, an agreement to purchase a piece of property, an agreement to lease a purchase— a piece of property. Et cetera. Some of the big issues that will come up in real estate litigation are often number one, disputes about closings. So somebody agrees to buy a piece of land from somebody else, and either through the fault of the person buying the land or through the fault of the person selling the land or both, the transaction doesn't close, the deal doesn't go through.

5And sometimes the litigators are left to pick up the pieces when there's a dispute about what happens when that deal doesn't happily go through. Another area where there are commonly disputes is if there's a purchase that does go through and there are disputes about the property itself. Was somebody told something about the property that wasn't true? Is there a problem with the property where the purchaser is not satisfied with it?

7Yes.

10Right. Well, we'll pull that out. As you point out, either side can default. So either the purchaser can default by, for example, not having the money to close or perhaps not being willing to close if the purchaser feels there has been a huge decline in the market value of the property. On the other hand, the vendor could refuse to close because they decide they don't want to sell the property anymore because they think there is some likelihood that the purchaser is not going to close, et cetera. What happens as a practical matter when the purchaser fails to close is, are two things. Number one, the purchaser in most cases, if the purchaser is at fault and the vendor was what we call ready, willing, and able to close the transaction, the purchaser is going to lose their deposit.

11And so that deposit will typically be forfeited to the vendor of the property. And the second important thing that can happen, depending on what has happened with the market value of the property between the time of the agreement to buy the property and the closing date, is that the purchaser could be liable for the difference between the purchase price of the property and the market value of the property as of the date of the closing or the period after the closing.

13Yes, yes. And so that, I mean, it, I mean, it's very cyclical. So that, I mean, happens from time to time. Certainly it happened a couple of years ago with the adjustment in the market values then. But I mean, it can happen for many reasons. It can happen for the reason of the purchaser wasn't able to get a mortgage commitment or had some other issue with performing their obligations on the agreement to purchase the property.

16Well, Pulat, the short answer is there aren't a whole lot of defenses available because it's intended to be and it should be a pretty predictable area of the law where if the purchaser is in default and doesn't comply with their obligations, then the consequences are what we've spoken about, which is liability for any decrease in the market value of the property, carrying costs for the property, et cetera. The probably two of the most common defenses that would be available to a purchaser in, in, in the right cases. Number one, there was some problem with the performance by the vendor. So purchaser didn't have the money, purchaser didn't tender the money on the closing date, but there was also a default by the vendor.

17So maybe it was that vacant possession wasn't available. Maybe it was that the house wasn't built yet, if it's a new home, or maybe it's that one of the conditions in the agreement wasn't satisfied. So that's the first area, would be looking for something that the vendor did wrong themselves. Of sufficient importance that it was also a breach by the vendor as of the closing date. The second point that's often raised is what we call mitigation. So did, when the vendor resold the property, if the vendor resold the property, did the vendor take appropriate steps to what we call mitigate or reduce their damages? So did they properly list the property? Did they take appropriate steps to sell the property at the highest possible value?

18And that's an argument that is often raised. Typically, if the property has been resold on the open market, that's a pretty good indicator of what the fair market value of the property was at the time. So maybe the purchaser would seek to retain an expert to say, no, no, no, no, that, that that wasn't fair market value, the property was worth X on the date it was sold, then it should have been sold by X. So that's another area that the parties, might create a dispute between the parties about what the damages are as a result of a purchaser's default.

20Correct, that's right.

22Yes. And so there, there, I mean, there are, there are two ways that a purchaser who's in default could attempt to do that. One is through an expert opinion. So retaining an expert, so for example, a realtor or an appraiser, someone with experience of values of real estate in the area where the property is, to say, wait a minute, during that period of time, the value of the property was X, or the similar properties in the area were valued at X. Another way to go about it, which people sometimes do without raising an expert, is saying, look, I've looked at the listings, I've looked at the other similar properties in the neighborhood. These other properties went for a price in the same period of time, significantly higher than what the vendor resold it for.

24I mean, I'd say it's very case-specific, so it may be prudent in some cases, but the reality is that if somebody has listed the property on the open market, you know, had a few people come through and look at it, received offers, taken the best offer that they could achieve at the time in order to resell the property, it's going to be very challenging for the, the first purchaser to be in a position to say that those steps weren't reasonable.

26I'd say it would be an uphill battle for the other party.

28Well, timing, timing, Pulat, is extremely important in real estate transactions and that's because the closing dates generally, unless parties agree to move them, are firm, and the parties' obligations have to be performed on the closing date. So if the closing date for a certain piece of property is, say, today's date, July 8th, and the time for closing, say, is 5:00 PM, that means that all of each party's obligations have to be performed by 5:00 PM, and that includes, of course, the most important obligation by the purchaser, paying the price of the property to the vendor. And so that means 5 o'clock, it doesn't mean the next day, it doesn't mean 5:15, it doesn't even mean 5:02.

29The timelines are firm and it's a concept that we call time of the essence. Time of the essence. And generally for real estate agreements, time will be of the essence and it's, essential for both parties to perform their obligations by the date that's set or risk being in default of the agreement. Now, of course, as a practical matter, if there hasn't been any huge shift in the value of a property and money comes in at 5:15, probably both parties are going to say that's fine and they're not going to raise a dispute about it. But the obligation is to, to, to perform, both parties to perform all of their obligations by the time set in the parties' agreement.

31Well, typically in my experience, solicitors will refer their client to a litigator or will call a litigator when it appears that there's going to be a dispute between the parties. And so sometimes that can be prior to closing, Sometimes that can be, you know, at closing or very shortly after closing, at the closing date if it doesn't close. But really, whenever there is kind of the writing on the wall that there's going to be a dispute, a lawsuit, a fight between these two parties that is not going to be resolvable through correspondence back and forth between the real estate solicitors.

33Yes, it'll be evidence of what the positions the parties took with, and you know, if things were agreed to, conditions were waived, things were accepted, et cetera, when things come to litigation.

35Well, I mean, the role of real estate agents is to provide, you know, advice and representation to the standard of care of a, of a, of a a competent real estate agent to their clients. And that would include explaining the effect of the agreement, explaining what's being agreed to, the key terms of the agreement. Often we'll see in real estate litigation cases where once things have gone to a dispute, often if parties are looking for somebody to blame, in some cases that blame will be shifted towards the real estate agent. And so that can be something as simple as, "You didn't explain this to me. This isn't what I understood. This isn't what I agreed to."

36And people naming their, potentially their own realtor and having that individual in their brokerage involved in a litigation dispute. The other way that realtors sometimes, in some circumstances, need to become involved is disputes against, with respect to deposits. So typically when there's a fight about a deposit after a failed closing, most realtors will require either the consent of the parties directing what the realtor is to do with the deposit, if it's to be returned to the purchaser, if it's to be forfeited to the vendor, or a court order prior to releasing that deposit.

38Yeah, I mean, I don't think it would be to the same level of, of, of, you know, memo making and correspondence. So, I mean, real estate agents aren't held obviously to the same standard as lawyers in terms of things like letter writing, memos to file, recording every single thing that happens, and probably for good reason. But I think that the best answer is that it's important to have that communication to make sure that there are no misunderstandings and to make sure that both sides of the agreement understand exactly what is being agreed to and understand the consequences if the parties don't fulfill their obligations in what they're agreeing to do and some of the consequences that we spoke about earlier in terms of defaulting on an agreement to buy or sell a piece of land.

40The top 3 things to, to that are notable about the area, I would say, is number one is it's an area where there, it has the potential to be resolved by way of a summary judgment motion. And so typically if there is a default in, by a purchaser, by a vendor, if the default is clear, if there aren't any material facts in dispute, and if it's something where the damages have crystallized and can be assessed because the property has been resold, that in my view would typically be something that is appropriate for summary judgment. And so summary judgment motions are common in the scenario that you've described and can be actually a very effective way to bring the litigation to a close relatively quickly and cost-effectively.

41I'd say the other issue to be aware of is there are, different kinds of motions that may arise as a result of an anticipated closing that's coming up where there's a dispute about the property and who has an interest in the property. And that's where we get in, we'd get into a discussion of what's called a motion for a certificate of pending litigation or CPL, which is essentially a motion for something that goes on title to the property to indicate that the plaintiff, the person seeking the CPL has claimed an interest to the land. And typically that, that person's interest will be, will, what they're claiming will need to be resolved or somehow dealt with before a closing happens to another party.

43That's right. So the most common reason for seeking a CPL is that a purchaser has a claim to what we call specific performance. And specific performance, in short, is it's I don't want damages. I don't want money as a result of this. I want what I bargained for, which is I want that property right there, the one that's important to me, the one that I want to close on. And so in order to get an order for specific performance, one of the most important factors is to show that the property is unique. So you can't just go over to the next subdivision and buy an identical home in a similar neighborhood. And then sue and fight over the damages that accrued as a result of you doing that.

44It's, this property is unique to me and it's important to me for these reasons. So that's part of what the test is for specific performance. And that is a very important factor that's considered on a motion for a CPL.

46It can be brought ex parte. I mean, there are different views on what the pros and cons are of doing that. Of course, if you bring a motion ex parte, there's an extremely high obligation of candor and full and fair disclosure of everything to do with the case, including the other side's position to the court. And if that, if not fulfilled, that alone is grounds for the party, once they do receive notice of the CPL, coming back to court and saying, "This wasn't disclosed, that wasn't disclosed, could have changed the decision, please remove the CPL." So my general view on that subject is if a CPL has required a short notice period or a quick turnaround time where things are urgent, is in many cases the more prudent course unless there is a real and valid concern that the property is about to be dissipated or sold if notice is given to the other side.

48Yeah, I mean, I think would be not necessarily be the quality of the legal advice, but perhaps the sophistication of the parties of the parties or how familiar the parties are with the court process or with litigation generally. And the other thing that plays into that is, of course, cost. Because as disputes become bigger and there are larger numbers involved, the legal costs become less of a concern than it would be if, for example, you're fighting over a $100,000 deposit and everybody is burning money through litigation and there's just an immediate imperative that the thing has to be resolved because the economics don't make sense to litigate it. Typically in cases of residential disputes, this may be the first time that somebody is involved in litigation and can be very stressful.

49Litigation can be uncomfortable versus a situation where if it's a large commercial transaction, and it's a business deal and it's sophisticated parties who are familiar with both real estate deals and with litigation, it can create a very different flavor for the litigation.

51No, I just say it's an interesting practice area. I'd encourage if anybody has questions, you can feel free to reach me. Our firm's phone number is 416-599-7900, and you can reach me at nwilson@swlawyers.ca.

53And same to you, Pulat. It was an absolute pleasure speaking with you. Thank you.