No Pools Allowed: Is Buyer Stuck?

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Question:

A Buyer purchases a home with no conditions with the intention of putting in a swimming pool only to find out that there are no pools allowed in the subdivision. The seller had signed an agreement with the builder when they first purchased the property agreeing to disclose this to future buyers and they didn’t make any such disclosure.

The Builder took steps to register a restrictive covenant on the title to all the properties in the subdivision. This lot falls within the area where pools are not permitted.

Here’s what the restrictive covenant says:

“3. The Transferees of Lots 44 to 66, both inclusive, agree that fence/gates and/or other means of access to the adjacent land area will not be permitted and that swimming pools are these lots are prohibited. The Transferees further agree to include this clause in any sale or lease/rental agreement concerning the Lots.”

Does the Buyer have to complete the purchase?

Answer:

It all depends. We have to look at the Title clause in the Agreement of Purchase and Sale.

“10. TITLE: Provided that the title to the property is good and free from all registered restrictions, charges, liens, and encumbrances except as otherwise specifically provided in this Agreement and save and except for (a) any registered restrictions or covenants that run with the land providing that such are complied with; (b) any registered municipal agreements and registered agreements with publicly regulated utilities providing such have been complied with, or security has been posted to ensure compliance and completion, as evidenced by a letter from the relevant municipality or regulated utility; (c) any minor easements for the supply of domestic utility or telecommunication services to the property or adjacent properties; and (d) any easements for drainage, storm or sanitary sewers, public utility lines, telecommunication lines, cable television lines or other services which do not materially affect the use of the property. If within the specified times referred to in paragraph 8 any valid objection to title or to any outstanding work order or deficiency notice, or to the fact the said present use may not lawfully be continued, or that the principal building may not be insured against risk of fire is made in writing to Seller and which Seller is unable or unwilling to remove, remedy or satisfy or obtain insurance save and except against risk of fire (Title Insurance) in favour of the Buyer and any mortgagee, (with all related costs at the expense of the Seller), and which Buyer will not waive, this Agreement notwithstanding any intermediate acts or negotiations in respect of such objections, shall be at an end and all monies paid shall be returned without interest or deduction and Seller, Listing Brokerage and Co-operating Brokerage shall not be liable for any costs or damages. Save as to any valid objection so made by such day and except for any objection going to the root of the title, Buyer shall be conclusively deemed to have accepted Seller’s title to the property.”

Have a closer look at the portions of the clause that were underlined.

Within the title search time, the Buyer will have to submit a requisition that the Restrictive Covenant is to be deleted or removed from title, or declared unenforceable by the Courts. The Seller will not be able to accomplish this. The restrictive covenant will stay in place.

The Buyer has to accept it, if the Seller was already in compliance. Let’s look at the clause, there were two parts:

  1. No pools, and
  2. Notify others.

If it just said “no pools”, then the existing Seller would be OK, because they don’t have a pool.

However, there is another provision. It indicates “notify”:

“The Transferees further agree to include this clause in any sale or lease/rental agreement concerning the Lots.”

The clause was not included. The Seller is in breach of the restrictive covenant and therefore the Buyer can bring the agreement to an end and have their deposit returned.

So, can this Buyer get out or not?

Yes, if the requisition was submitted in time.

No, if the requisition was late.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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