There is a procedure available in Ontario which is a very effective remedy. Oftentimes, the success of a lawsuit swings in the balance.
Let’s assume that there is an Agreement of Purchase and Sale in place. The Seller has a change of mind over issues in the contractual arrangement. This could be the amount of a vendor take back mortgage or the interest rate, or the amount of property to be sold, or an encroachment showing up on a current survey of the property. It doesn’t really matter, but if the transaction doesn’t close on the date scheduled, this is the Buyer’s remedy.
The Agreement of Purchase and Sale involves an “interest in land”. The Courts of Justice Act and the Rules of Civil Procedure provide a remedy to the Buyer to seek a Court Order to register a “Certificate of Pending Litigation” (“CPL”) against the title to the property.
The CPL restrains dealing with the property while the lawsuit is pending. Consequently, it is a very effective pre-trial remedy. In effect, it is security to preserve the property until the lawsuit is completed.
In the interim period, the Seller cannot mortgage or convey the property to others. Any interest of the mortgagee will follow the CPL.
Getting the CPL
An application for a CPL can be brought with or without notice to the parties in the lawsuit. Without notice, full disclosure of all material facts must be disclosed to the court.
The Seller seeking to set aside a CPL might be successful by reason of non-disclosure.
From the Buyer’s perspective, issuing the claim and applying to Court for a CPL often go hand in hand.
Getting Rid of the CPL
The Seller can apply to Court to have the CPL set aside. Some issues under consideration would be whether the Buyer has prosecuted the lawsuit diligently. That would mean preparing an Affidavit of Documents and holding Examinations for Discovery.
This is an extraordinary remedy and is only available to litigants who proceed in good faith. Another issue is whether money might be a suitable alternative remedy. Is the property unique? Is the CPL the appropriate remedy, or is it doing more harm than good?
Strategy
If you are the Buyer, this is an excellent remedy. Sue quickly, and seek a CPL without notice. If you are the Seller, be available, have your lawyer available, make sure you will receive notice of the application. If the CPL is already in place, then make an application to have it discharged as soon as possible.
If it just drags on, ultimately, the Buyer wins!
Brian Madigan LL.B. Broker
www.OntarioRealEstateSource.com
Comments 2
Am involved in one right now, a mother in USA wants sell cottage, dad died, son in USA says dads interest in cottage left to him. Title in Canada is joint so mum should be ok BUT son has Canuck lawyer who notified me he is registering a pending legal action on the title so mum can’t sell.
Author
It will likely take some time to resolve. Sell and close prior to the registration of the CPL.
Register a second mortgage and have that mortgagee sell under Power of Sale.