Requisitions - Objections to Title, Study notes of Law

Download Requisitions - Objections to Title and more Study notes Law in PDF only on Docsity! Requisitions - Objections to Title 1. Requisitions generally There is a distinction with some difference. The former - Requisitions - applies to many matters which the solicitor for the purchaser will wish to raise with the solicitor for the vendor by way of reminders, requests or inquiries, including objections to title. The object of making the requisition in writing and early on may be simply to remind the other party of an obligation under the contract to produce or do some specific thing or it may be with respect to alleged title defects and must be made promptly to preserve the purchaser's rights under the contract. The latter - Objections to Title - refer to problems concerning the title, minor, major or even that the vendor has no title. Requisitions other than objections as to title can be as to conveyance and separately as to the contract, the offer to purchase terms. We will deal with them in that order from the point of view of the solicitor for the purchaser. But before doing so, two initial comments to make are that the different categories should be dealt with separately in your mind and in your correspondence, and secondly in almost every offer to purchase there is a date by which requisitions or objections to title must be made, or otherwise the purchaser has to accept the title as is. The Nova Scotia Real Estate Association form of agreement of purchase and sale covers this point in the following paragraph: 3. The Vendor is to furnish the Purchaser with a metes and bounds description of the property which is the subject of this Agreement, after receipt whereof the Purchaser is allowed days to investigate the title to the property, which he shall do at his own expense. If within that time any valid objection to title is made in writingto the Vendor, which the Vendor shall be unable to remove, and which the Purchaser will not waive, this Agreement shall be null and void and the deposit herein shall be returned to the Purchaser, without interest, and without liability by the Vendor for any expenses incurred or damages sustained by the Purchaser. That clause does not include the words found in many forms of offers to purchase - "except for requisitions made within the stipulated time the purchaser shall be deem to have accepted the vendor's title". Even though those words are not in para. 3 of the Nova Scotia offer to purchase, that must be the effect, imp if you will, that when a purchaser does not requisition as any title defects within the stipulated time the purchaser has to accept the title as is. But it should be noted that the clause only refer; to matters of title, about which there will be comments late on. If perchance there is no reference to this in the offer to purchase, the Vendors and Purchasers Act, R.S.N.S. 1967, c. 324, S. 5 applies: (b) the purchaser may search the title at his own expense and shall make his objection thereto in writing within 30 days from the date that the vendor delivered to him a copy of the metes and bounds description as provided for in clause (a) hereof: (c)the vendor shall have 30 days in which to remove any objection made to the title, but if he is unable or unwilling to remove any objection which the purchaser is not willing to waive he may cancel the contract and return any deposit made, but shall not be otherwise liable to the purchaser. There will be. reference later about objections to title, but we should not leave the quoting of the above section without some comment. The section states that the vendor shall have 30 days to respond to purchaser's objection to title. No time limit is specified for the vendor in paragraph 3 of the Nova Scotia offer to purchase. Di Castri in Canadian Law of Vendor and Purchaser, at p. 262 states that "where no time is stipulated, the relevant statute is applicable". Presumably for the same reasoning but said with less assurance a vendor may also resort to the words of S. 5(b) of the statute of being "unwilling" as well as unable to remove an objection; provided of course the vendor acts bona fide and not capriciously. With those preliminary remarks we will proceed to deal with the different categories of requisitions. 2. Matters of ConveYancinq (a) Preliminary You will wish a draft deed soon. This request should include your advising the vendor's solicitor how your client wishes to take title. You should also include a request for the survey, hoping that the vendor has one. These requests should be stated in writing and separately from any requisitions as to conveyancing or titl In fact if the letter is written promptly as it should you will not have yet searched the title and will not at this stage have any requisitions on title. If it is a rental property you would like copies of all leases and for a condominium purchase you will reque early production of the mass of condominium documents. As applicable there may be other requests at this early stage. (b)Later After your search of title, you may have some specific additional requirements for the conveyance. Any error in the legal description would be a mat of conveyancing, or it could be of contract. In Ontario the Planning Act controls severances of land into smaller parcels. If a consent to severance ha been granted then the production of the consent would be a matter of conveyancing, or if you will of contract as the d, would be invalid without the consent. If a consent has not been obtained, the offer to purchase must state that it is subject to compliance with the Planning Act, because without that term in the contract the contract will be null and void If a corporation is conveying, you will wish production of evidence that the requisite corporate action beef taken, where necessary a special resolution of directors, approval of shareholders and authorization of signing office and affixing of corporate seal, and supporting documentary evidence. If the sale is by a trustee in bankruptcy, has the trustee been properly appointed and inspectors approved of the sale and the other requirements properly documented. If it is an estate sale, has the executor power to sell, what are the terms of the will and so forth to support a valid conveyance. Some of the above requests or requisitions about the conveyance may be considered in law as matters of title. Just in case of that interpretation the time limit for requisitions on title must be observed. When what is required is the concurrence of some person whom the vendor does not control or whom the vendor cannot compel to execute the required documentation, a requisition requiring the concurrence would be a requisition on title. Halsbury, Vol. 34, 3rd., p. 286 states: The purchaser may also make requisitions as to the conveyance. These assume that the of the Nova Scotia formof offer to purchase - because a valid objection to titlehas not been satisfactorily answered by the vendor does not apply to matters of conveyancing. If the vendor does not produce a valid conveyance the purchaser can refuse to close and have the deposit refunded. To reiterate requisitions as to matters of conveyancing should be made early on. But can be made at any time providing you are certain that the problem is a matter of conveyancing. No particular words are necessary. The requests should be separately stated in the correspondence and not lumped in with any objections to title. 3. Matters of Contract These requisitions will also be separately stated from requisitions on matters of conveyancing and requisitions as to objections to title. These relate to provisions in the offer to purchase, for example, to completion of a building, fulfilment of conditions precedent, mortgages being assumed, area of pro- perty being conveyed if not in conformity with what purchaser bought according to offer to purchase, and compliance with zoning by-laws if that is a contractual term of the offer to purchase. As for conditions precedent the leading case is Zhilka v Turney, 11959, S.C.R. 578 and put simply a condition precedent is one that must be performed or happen before a duty of performance by the other party arises. The offer to purchase usually stipulates a date well before closing by which the condition must be fulfilled or the contract is at an end. The terms and conditions precedent should be spelled out clearly. This has not always been so as witness the many cases litigated on the effect of such clauses. If for example there is a clause in the offer to purchase that there will be no by-law or restriction in effect prohibiting the use of the property for any commercial purposes, and in fact the property can only be used for residential purposes, then there is no right i to insist upon performance of the contract. Unless the offer to purchase provides that a term of the contract or a condition is to be fulfilled by a specific date, fulfilment or compliance can be effected up to the date of closing - Smith v Butler, 1900] 1 Q.B. 694. And a requisition for compliance can be made right up to the date of closing. Here again the time for submitting requisitions on title does not apply, nor does the annulment clause, providing of course the annulment or rescission clause doe not also include specifically that objections re noncompliance must be submitted within a time limit. Strictly speaking it is not necessary to requisition for what the purchaser is entitled to under the contract. It is however good practice to make such a requisition, simply to remind the vendor's solicitor as well as yourself: for your client the purchaser of certain specific things to be expected in fulfilment of the contract. For example when the contract provides for the assumption of a mortgage and the registered mortgage does not appear to comply it would be prudent to requisition the production of an amending agreement, or if applicable renewal agreement, or mortgage statement from the mortgagee confirming that the mortgage does in fact comply. i In paragraph 4 of the Nova Scotia form of agreement of purchase and sale the property "is to be conveyed free from ... encumbrances" other than as may have been specifically referred to. And in some offers to purchase it is provided that the vendor shall register discharges of any existing encumbrances. In either case there should be a requisition for a discharge of whatever appears from your search of title to be outstanding. While the requisition would relate to a matter of title, it is submitted that it could quite properly be classified as a requisition on a matter of conveyance or a matter of contract. Schlumberger v Burke, (1978) 21 N.S.R. (2d) 190 is an example. There was an outstanding mortgage and the vendor sought to annul the contract because of the cost of paying off the mortgage. The court referred to the words of the offer to purchase that the vendor contracted to remove all encumbrances, saying - "part of the bargain was to remove all encumbrances". The other ground for the decision was that the vendor should not be allowed to rely on the rescission provision in S. 5 (c) of the vendors and Purchasers Act just because the mortgagee required a payment of bonus interest before it would give a discharge. Our concern that what would appear to be a matter of contract is held by the courts to be a matter of title is best illustrated by the case of Petrofina Canada Ltd. v Markland Developments Ltd. (1979) N.S.R. (2d) 158, 3 R.P.R. 33. There were arrears of charges owing to the City of Halifax and therefore liens for sewers and sidewalks. The purchaser's solicitors received a tax certificate showing the liens only 3 days before closing and long after the time for submitting requisitions on title. The court stated: There is no question that the charges as shown on the certificate are encumbrances ... and one would normally expect that a vendor would remove such encumbrances .... The agreement provided a mechanism to object to title, and failing the same, title was deemed to be accepted There was no objection to title made by the purchaser. If the purchaser had so objected and the vendor had refused to clear the encumbrance in favour of the City of Halifax, the vendor could have terminated the agreement and the deposit would be returned to the purchaser. As Markland did not object then in accordance with the clause for objecting to title it must take title to the property subject to the encumbrance as inequitable as this may be. It would seem that the clause that the purchaser who fails to requisition in time must accept the vendor's title overrides the clause that the title will be free of encumbrances. When the offer to purchase refers to the terms of a mortgage to be assumed, the purchaser is entitled to objec if the mortgage terms are different. "The parties should be held strictly to the thing agreed upon and the Court should I not enter into any discussion of the question how nearly the thing tendered as compliance with the contract corresponds with the thing stipulated for" -Garfreed Construction Co. Ltd. v Blue Orchard Holdings, (1977) 15 O.R. (2d) 22. Also that case held that the purchaser did not have to accept a tenancy with a right of renewal when the contract referred to the expiry date of the lease and did not mention the tenant's right to renew. The judgment refers to both these matters as terms of the contract, but also said they were matters of title. If it is a matter of contract the purchaser may refuse to close if the vendor is unable to sell what was contracted for. A rather obvious case is Maglario v. Simon, (1979) 27 N.S.R. (2d) 674 when the purchaser refused to close because the vendor had not completed the building of the house which had been contracted for by the closing date. In Ritchie & Hayward Realtors v. Sackett, (1976) 36 N.S.R. (2d) 598, 11 R.P.R. 308 (ICS. App. Div.) the question was whether s. 3 of the Vendors and Purchasers Act, R.S.N.S. 1967, c. 324 could be resorted to to determine whether the description in the contract covered the land being purchased. The court stated that "the question here is not merely a question of a title defect. It is a question of interpretation of the agreement", and only matters of title can be decided under the section quoted. It is also useful to repeat what your Court of Appeal thought of a solicitor acting on both sides of a real estate transaction - "that does not give proper protection to either party". Another case of contract is Joydan Developments Ltd. v. Hilite Holdings Ltd., [1973, 1 O.R. 482. There was a Hydro right of way across the property being purchased. The judge stated - "it is my view that the purchaser could not have that which he contracted for". It was also held that there was a valid objection to title which was not properly answered and the requisition was not waived by the purchaser. Whether it is conveyancing or title does not make much difference if you are in time with your requisit.but if you are late then you hope your requisition will be accepted by a court as a matter of conveyancing or of contract, and not one of title as in the Petrofina case, supra. An interesting and confusing case in Ontario is Re Dai and Kaness Investments Ltd., (1979) 24 O.R. (2d) 51. It concerned the assumption of a mortgage "in terms differ( from the one which the purchaser by contract had agreed to assume". The judge said the annulment clause had no applic tion to requisitions on conveyance or matters of contract. Then referred to the above definition for matters of conveyancing, and as the vendor could not compel the mortgage* to amend the mortgage the registered mortgage constituted e defect in title. Having decided that it was a matter of title the judge further confused the matter by saying that "the purchaser may insist to the date of closing on compliance with the agreement". So to conclude this point there can be requisitic as to the contract, they can be made at any time right up to closing, and the annulment clause does not apply. But if in doubt that a court may interpret the requisition as one of title, then be sure to submit it in time. Obiections to Title To revert to the outset of this paper the differentiation between objections to title and requisitions was to point up the different categories of requisitions. Objections to title of course lead to requisitions. You may have requisitions on title after search of title, searches for taxes, various statutory liens, and also after examination of a survey. The offer to purchase usually provides a time limit to file with the vendor written objections to title, and a right of rescission for the vendor if unable or unwilling to clear up the defect. As has been stated S. 5 of the Nova Scotia Vendors and Purchasers Act provides for this if the contract is silent. A purchaser's solicitor should be sure that the rescission or annulment clause contains a right of waiver by the purchaser if the vendor is likely to resort to rescission. If the latter happens the purchaser's solicitor should immediately confer with the client and if the requisition is not too serious then in accordance with the client's instructions waive the requisition. Also both vendor and purchaser should note whether the clause refers to intermediate negotiations which shall not prejudice the rights of either in the making, answering or refusing to answer requisitions; or otherwise and perhaps as a matter of course when making or answering requisitions one should specifically reserve the client's rights notwithstanding attempts or discussion about remedying any deficiencies. Going to the root of title This may be easier to discuss first. Requisitions going to the root of title may be made at any time even right up to closing. Courtesy dictates that they be made promptly. When made late, carelessness on the part of the purchaser's solicitor is indicated which may show up in some other ways and affect the position which the purchaser wishes to take. What does it mean - going to the root of title it means simply a total failure of consideration and the purchaser would receive nothing at all - Howland, Law Society Lectures, supra, p. 229. As was stated in Jakmar Developments Ltd. v smith E1973] 1 O.R. (2d) 87 in which a requisition about an eases was submitted late - "In all the cases ... where an objection to title is made after the date for requisitions was permitted it was a case where the vendor could give no title at all and the defect could not be discovered as a result of the usual search of title". Some examples of defects in title which have bees held as going to the root of title are: - if the vendors were executors and had no power to sell - Re Tanqueray-Williamson a Landau, (1882), 20 Ch. D. 465 [1972] 1 O.R. 189 the headnote states that a vendor need not engage in extensive and expensive litigation in order to remove an objection to title. If the vendor would be unable to remedy the defect in title by the date of closing the vendor may rescind. In J. C. Bakker & Sons Ltd. v House, (1979) 8 R.P.R 24 the vendor would have had to apply to a municipal council to pass a by-law closing a road allowance. The court said it would have been a long process to obtain title, and that therefore the vendor acted reasonably in repudiating the contract. In Ungerman v Maroni, 11956] O.W.N. 650 the purchaser requisitioned a discharge of a mortgage which had apparently been paid off. The vendor replied that he tried but could not locate the mortgagee. It was held that the vendor acted in good faith and did not have to apply under the Mortgages Act for an order which proceedings would have involved no inconsequential expense. In Devereaux and Robinson v Saunders, (1979) 26 N.S.R. (2d) the vendor was unwilling to send a statutory declaration to someone in Florida for completion and this unwillingness was not accepted as a justifiable reason for the vendor to rescind. To sum up many times defects in title can be cleared up by the efforts of the purchaser's solicitor and should be. But if you are looking to the vendor's solicitor to do so, give that solicitor plenty of time to remedy the problem. I If the objection to title is serious discuss it with your client early on, and make an entry of the discussion and instruction. Well-handled real estate conveyancing is our objective. Can a Vendor force a purchaser to receive property with a defect in title or which is not in strict conformity with the terms of the offer to purchase. If it is a defect in title properly requisitioned in time the annulment clause applies and the purchaser can rescind if the requisition is valid and is not properly answered. Likewise the vendor can rescind if the purchaser will not waive the requisition. If there is a defect in title and it is trivial even though it goes to the root of title the vendor may be successful in an action for specific performance with or without an abatement. In Martin v Kellogg [1932] O.R. 274 there was an encroachment of the eaves over the street line. It was held that so far as that part of the building was concerned the encroachment went to the root of title, but was so trivial that specific performance with a modest abatement was granted. However there is the underlying principle expressed in Re Dai and Kansas Investment Ltd., supra, that "performance of the contract of purchase and sale must be precise and exact and that the vendor (purchaser) is entitled to insist strictly upon the transaction described in the agreement". The courts have lessened the rigour of that statement a bit. A full discussion of the application of the equitable principles is found in Bowes v Vaux, (1918) 43 O.L.R. 521 quoting from Rutherford v Acton-Adams, [19151 A.C. 866 - "If a vendor sues and is in a position to convey substantially what the purchaser has contracted to get the Court will decree specific performance with compensation for any small and immaterial deficiency". A sensible relaxation of the principle that performance of a contract must be precise and exact was in Rexhill Holdings Ltd. v Maybird Investments Ltd, [1973] 1 O.R. 285. One of the grounds which the purchaser sought to rely on to avoid the purchase was that the two mortgages to be assumed were each for more than stipulated for in the offer to purchase - but they were both open mortgages. The judge reviewed a number of texts and cases stating the principle in various ways, such as "the parties should be held strictly to the thing agreed upon". However the judge held that as the mortgages were fully open "the fact that they had not been reduced to the sums stipulated by the agreement does not present any great problem" and in the headnote "the purchaser could have reduced the amounts owing thereunder to the amounts contemplated by the agreement by deducting the difference from the balance due on closing andpaying the same to the mortgagees". Another case concerning the terms of a mortgage, Stubbs v Downey, [195 O.W.N. 330 held that the difference between $57.11 monthly including interest at 6% as stated in the offer to purchase and the mortgage in fact providing for payments of $75.00 quarterly plus interest at 6% was, although negligible, not the same as specified and the purchaser did not have to complete the purchase. In a more recent Ontario case, Re Stieglitz and Prestolite Battery Division, (1981) 31 O.R. (2d) 655 the court held that an undisclosed easement materially affected the land, and that the requisition was valid and i I not remedied. Part of the headnote in the latter case stated: In determining whether a purchaser should take subject to a defect, it is not helpful to classify the defect as latent or patent. The correct test to apply is whether the purchaser, if required to accept the title, would be purchasing property which is materially different froze that which he bargained for . .. the defects were not trivial so as to entitle the vendor to specific performance with an abatement". In conclusion then there are or can be requisitions as to conveyance, contract and title - to be dealt with separately in correspondence. The date for submitting requisitions on title should be the date by which all requisitions are in the hands of the vendor's solicitor. That's the best way to keep you, your client and your insurer happy. Thank you. Donald H. L. Lamont, Q.C.