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Legal Issues: Recent decisions

Don Lapowich 2007The purchaser of a motel sued both the vendor and the husband and wife team of real estate agents.

The court found that there was no doubt that the vendor misrepresented revenues and therefore the value of the motel. The purchaser spent nearly $1 million on the property but in the end was unable to afford to keep it.

Significantly, it was found that the real estate agents were relied upon by the purchaser as advisors and influenced the purchasers’ interests to purchase. A fiduciary duty clearly was created with a dependency on the agent.

Both the vendor and the agents were liable and the agents were responsible for restitution of almost $1 million.

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Another case involved a purchaser who did not enforce a condition of sale, and ended up losing the benefit of the condition.

The purchaser agreed to buy a house conditional on a home inspection. That inspection indicated items needing repairs, including the roof. The purchaser and vendor signed a paper that stated six items must be repaired before closing. The condition was waived, and the deal closed without anyone raising any issues with respect to repairs.

Two and one half years later, the purchaser said a leak in family room was caused by the vendor failing to repair the roof.

Under these conditions, it is no wonder that a court held there was a merger on the deal closing:

1. Repairs were said to be done before closing.

2. The purchaser raised no questions about repairs for a very lengthy period after closing.

3. The purchaser did not before closing look into whether repairs were done or were satisfactory.

4. The parties intended the repair obligations to merge with the closing.

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In another case, a vendor retained a real estate agent to sell its restaurant. The listing expired but the agent found a buyer willing to pay $1.5 million. The buyer was flipping the restaurant to another entity for $1.85 million.

Once the buyer asked the agent to get an extension from the purchaser to remove conditions in the first sale transaction, the agent, in trying to obtain the extension (without disclosing the flip) became a fiduciary to the vendor – and needed to fully disclose all the information he had.

Even so, the court determined that the original vendor did not sustain any loss as a result of the agent’s breach.  As we have pointed out in the past, if there are no damages “caused by” the agent, then there is no recovery. No damages were awarded to the vendor.

Donald Lapowich, Q.C. is a partner at the law firm of Koskie, Minsky in Toronto, where he practices civil litigation, with a particular emphasis on real estate litigation and mediation, acting for builders, real estate agents and lawyers.