By Donald Lapowich
Here’s a quick summary of three recent legal cases:
A school board agreed to sell land to S, who intended to develop the parcel of land. The Agreement of Sale was conditional on the school board obtaining a severance before the closing date.
The closing was extended so the board could get severance, but it failed to submit a development plan with its application. It then refused to further extend the deal, and returned the deposit to S.
The court held that the board breached its obligations by not using its best efforts to complete the deal, but only nominal damages ($1) were granted by the Appeal Decision.
Why? The purchaser failed to take any steps to mitigate the loss by looking for another property to buy.
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Different factors command a court’s equitable sense of justice, even where there is no doubt of a breach by one of the parties.
In a recent case a tenant leased commercial premises to carry on the business of a marble/stone wholesaler. These operations caused excess humidity in the building the tenant was leasing.
The landlord served notice that the tenant must carry out repairs as specified within a time limit. When this was not done, the landlord terminated the lease and asked the court to make a declaration that the lease was over.
The tenant applied for relief from forfeiture, even though the tenant had breached covenants of the lease from doing damage to the building, and the failure to make repairs.
Relief was given to the tenant on strict grounds because the court was influenced by the following:
1. The tenant had invested a substantial amount in the building and its business;
2. Damage to the building was not significant.
3. The tenant was seriously addressing the problems caused by its operations and addressing remedies.
Under these circumstances, the tenant was granted relief from forfeiture of the lease, if the tenant immediately repaired the existing damage and designed and installed a system acceptable to the landlord to control the humidity.
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Three dentists’ wives jointly owned the premises where their respective husbands practised.
The agreement between the wives stated that if any one wished to sell her interest to a third party, she had to first offer it to her husband and second to the other co-owners (rights of first refusal).
As it turned out, two dentists sold their practices and the purchaser entered a lease with the two wives, obtaining an option agreement to purchase the wives’ interest in the property.
The purchasers exercised their options and entered agreements of purchase and sale. Despite this complexity of rights, the remaining wife asserted her right of first refusal.
It was held that all these rights could co-exist and the right of first refusal of the remaining wife was valid and had not been swept aside by the purchaser’s options under the lease they entered into. Only if the right of first refusal was not exercised, would the agreements of purchase and sale become binding.
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.
