September 1st - 2011

LEGAL BEAT by Merv Burgard: Shedding light on storage facility’s lakeside location

An unexpected municipal work order required the sellers to move a lakeside storage shed away from the shoreline.

An unexpected municipal work order required the sellers to move a lakeside storage shed away from the shoreline. The location of the shed was important to the buyers, who then refused to close. The issue is whether the buyers were entitled to repudiate the transaction.

The property was called "The Cliffs" because the cottage itself was built at the top of a steep incline above the lake. At the bottom of the cliff in the flat area behind the dock and 10 feet from the water, the sellers had built a large shed that housed a water pump and provided storage facilities for water-sport equipment.

Because of the steep walk up to the cottage, the shed’s location offered real convenience for the buyers to be able to store life preservers, water skis and other items right next to the dock. Floodlights attached to the storage shed provided lighting for the nearby fire pit area when it was being used for evening entertaining. The lakeside location of the storage shed was an important property feature that the buyers had agreed to purchase.

About two weeks before closing, the sellers received a work order from the municipality requiring that the shed be moved to comply with a local bylaw that prohibited any structure within 20 metres (65 feet) of the water line. Years ago, the sellers had built the shed too close to the lake, not realizing they had violated the setback requirement.

The shed was moved and the property was relisted at $669,000, the same asking price as before. It finally sold for $580,000. The buyers sued to recover their $20,000 deposit. The sellers counter-claimed for the losses sustained on the resale of the property.

The test, put simply, is whether the deficiency at the heart of this dispute would significantly affect the buyers' use and enjoyment of the property. The test is said to be primarily objective, but there is also some room in the analysis for the buyers' subjective views.

The judge accepted the buyers' evidence that, for them, the lakeside location of the storage shed was a significant benefit, a positive selling feature of the overall property.

The judge ruled in favour of the buyers, who got their full deposit back. He noted that the original property listing referred to the "large pump-house with storage shed at the lakeside."

Kelly v Semple 2010 ONSC 1020

Merv's Comments
The judge ruled that "If this was a more conventional property purchase -- say a downtown or suburban home -- the fact that a backyard storage shed had to be relocated a distance of some 30 paces into what was arguably a more attractive location would not, in my view, entitle the purchasers to repudiate the transaction."

Clearly, some sheds are more significant than other sheds.

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Ontario Real Estate Association
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