No Pools Allowed: Should the Buyer’s Agent Search Title?

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 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.”

Does the Buyer have to complete the purchase?

Answer:

Let’s 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:

“….. swimming pools are these lots are prohibited”

The Seller is not in breach of the restrictive covenant because the Seller doesn’t have a pool. It’s the Buyer who wants one.

The Buyer is stuck with the deal unless:

  1. The right to have a pool was a condition, or
  2. The right to have a pool was a term,

in the contract.

So, the Buyer cannot back out. They have to purchase this property anyways.

This begs the question: should the Buyer’s agent have searched the title before submitting the Offer.

If they did, then, they would have seen the restrictive covenant and the prohibition against pools.

Right now, that’s not expected. Years ago, it would have been far too complex.

However, the registration system has been turned over to Teranet and they manage the GeoWarehouse website, which has a searchable database. It’s open and available to agents who are part of organized real estate, that is, a member of a real estate Board, OREA and CREA.

Agents are encouraged to double check the names of the Owners before drafting an Offer.

Would this simple examination of the restrictive covenant be too challenging or too difficult? It’s certainly something that many agents do now.

My expectation is that in 10 years this will be a clear duty and obligation. The question in the meantime is when will this change?

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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