March 7th - 2008

LEGALBEAT: Wrong measurement leads to abatement

The Agreement of Purchase and Sale described the lands as being approximately 98,950 square feet as outlined on [a Schedule] attached.

The Agreement of Purchase and Sale described the lands as being approximately 98,950 square feet as outlined on [a Schedule] attached. The purchase price was $680,000. After the Agreement was executed, but before the date fixed for closing, it was discovered that the seller did not have title to all of the lands described. The seller owned only approximately 86,745 square feet (about two acres) – a difference of about .26 acres, or 12%.
 
The origins of this innocent mistake lie in the documents prepared by the seller's agent. The Listing Agreement described the lands as "Block 59 R.P. 4M-916. However, the seller did not own the whole of Block 59; it owned Block 59 except Parts 1 and 2 on Plan 4R12988.
 
The buyer wanted the property for its intended use as a townhouse development. But, instead of the 62 units it expected to be able to erect, the buyer learned it would only be able to erect 54. In court proceedings the parties were ordered to close the transaction with monies paid into court for any possible abatement claim by the buyer. Since the deal was closed the seller could not rely on the usual clause in the Offer to terminate the transaction. The buyer was given an abatement of $83,848.
 
The Court of Appeal noted, "In the case of a contract for the sale of land, where there is a discrepancy between what the vendor has agreed to convey and what the vendor can convey, the rule is that a purchaser is generally entitled - if the purchaser is otherwise entitled to specific performance, and so elects to specific performance of the contract with an abatement in the purchase price…. Ordinarily, where the vendor is unable to convey the whole of the land which he has contracted to sell, the purchaser has two courses open to him: either to refuse to complete the purchase, in which case he may sue for damages; or to require the vendor to convey that to which he can make title and to submit to a proportionate reduction or abatement of the purchase-money in respect of the remainder of the land.... The quantum of the abatement is generally calculated on the basis of a pro-rata reduction in the purchase price based on the amount of land that cannot be conveyed."

3999581 Canada Inc. v. 1394734 Ontario Inc., 2007 ONCA 312

MERV'S COMMENTS
It may be possible for the parties to cancel the deal based on the language of the typical OREA offer but, if the deal is closed, the issue becomes one of whether there should be any abatement, and, if so, how much.

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