May 5th - 2013

Legal Beat: Confusion over condo boundaries leads to decade of litigation

The buyer in this case bought a condominium unit in Toronto. She was under the impression that the unit comprised three floors, from the basement floor up to the ceiling of the third floor of a townhouse complex.

The buyer in this case bought a condominium unit in Toronto. She was under the impression that the unit comprised three floors, from the basement floor up to the ceiling of the third floor of a townhouse complex.

The purchase price was $975,000, and after taking ownership, she began extensive renovations to the upper part of the property that totalled about $700,000. Numerous problems developed on issues of construction and ownership and lawsuits followed.  Prior to the sale, the previous owner had extended his unit upwards by building into the common element attic space without permission from the condominium corporation.

The new owner took legal action against numerous parties, including her lawyer, whom she said failed to clarify what she was buying. Prior to closing, the buyer had not seen horizontal and vertical floor plans of the unit, which would have revealed that the third floor was not a part of this property.

Should lawyers review condominium documents with their buyers, including the horizontal and vertical plans?  Should the boundaries of the unit (usually described in a Schedule) be shown to the client?

In deciding the case, the judge noted that, “Purchasing a condominium unit is far different from purchasing other types of real estate such as a detached house or a recreational property.  I agree with the opinion expressed … that it is the lawyer’s responsibility, when acting for the purchaser of a condominium unit, to ensure that the client is getting title to what they believe they have transacted for.”

The judge added that, “In order to confirm this, the client must be shown the plans to ensure that their unit is the one identified, in the correct location, the size, whether it has a terrace which might be an exclusive use common element, whether it is a single-storey unit or multi-level.”

The lawyer in this case was found liable for negligence. The court ruled that the lawyer had failed to check the floor plans and inform the buyer that the third floor was not part of the unit. The owner also sued the condo corporation, the property manager, and some condo board members in what was a complex and lengthy case.

Orr v MTCC 1056, 2011 CanLII 66010

MERV’S  COMMENTS
Should all professionals involved in a real estate transaction know what is being sold? The buyer had also sued her real estate representatives some years earlier, but that had been settled. The judge also noted that “[The buyer] testified that the listing agreement described the townhouse as a three-storey unit. Obviously, the real estate agents composed the listing agreement, presumably from information given to them by the seller.”

“One wonders what enquiries the agents made before drafting the listing agreement,” the judge asked. “Obviously, as experienced real estate agents, they would have known that potential purchasers would rely on the information contained in the listing agreement.” Since the majority of the townhouse units in the complex did not have three floors, the judge concluded that one would expect that the salespeople would check the configuration of this particular unit “and that they would make further enquiries before committing the information to a formal document.”

The court dismissed the buyer’s claim for an order legitimizing the third floor. It also granted the request by the condominium corporation for an order requiring that the unauthorized third floor be closed up. This case spawned more than a decade of litigation. Taking the time to verify facts and information at an early stage will prevent multiple problems later on.

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