December 3rd - 2011

Legal Beat: Title insurance can be a deal saver

A typical Ontario Agreement of Purchase and Sale (APS) requires that the sellers provide clear title on a property, subject to the stated matters that buyers accept.

A typical Ontario Agreement of Purchase and Sale (APS) requires that the sellers provide clear title on a property, subject to the stated matters that buyers accept. The buyers search the title and other matters and then advise the sellers of any concerns they may have. The sellers then attempt to answer the buyers' requirements -- failing which, the transaction can be terminated.

However, there is one more thing that the sellers can do. The APS provides that the sellers can "obtain insurance save and except against risk of fire in favour of the buyers and any mortgagee, (with all related costs at the sellers’ expense)....” If that insurance is available, it would satisfy the buyer's requisitions.

In this case, the buyers wanted to rescind the APS. They were concerned about an open file with the City of Toronto regarding the property. The decision does not specify what the particular concerns of the buyers were, or what the problem was with the file. (Some possibilities are: a zoning infraction, a lack of a building permit, or some other breach of a municipal bylaw.) The buyers may have been concerned about what the city might do and what the title insurance companies might then do to correct the problem.

The sellers were very diligent and obtained title insurance for the buyers. The buyers argued that the word insurance in the APS was vague and that part of the contract was unenforceable. They argued that they would suffer exposure to litigation and uncertainty and that the insurer would not solve all their concerns.

The judge ruled that the APS was clear. He noted that this clause is standard practice and that the buyers could have refused to agree to this provision. In the ruling, the judge stated that the buyers were not entitled to rescind their APS because their requisition was properly answered. The buyers were also required to pay the sellers' legal costs of $9,800.

Reminger v Marcoux

MERV'S COMMENTS
The Ontario Real Estate Association has revised its standard form APS to clarify the matter even further. The clause now states, “...or obtain insurance save and except against risk of fire (Title Insurance) in favour of the buyer and any mortgagee, (with all related costs at the expense of the seller) ...”

The message to buyers is clear -- read the APS before you sign it. Have your REALTOR® and lawyer explain the document to you. The message to sellers, their lawyers and REALTORS® is also clear -- spend a few dollars on title insurance and save your deal.

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