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Property descriptions in sale agreement not definitive

Sales agreements are never the final word when it comes to the subject matter of a property deal, says Toronto real estate lawyer Daniel Bernstein.

The CBC recently reported on the case of a Toronto man who thought he had bought a strip of land next to his townhouse, only to discover years later that it was still owned by the city.

According to the story, an agreement signed in 2009 described the property to be sold as three segments of the lot on which the man’s house stood. However, a land survey revealed only two were the vendor’s to sell, while the third portion, a thin slice between the townhouse complex and the sidewalk, actually belonged to the City of Toronto.

Bernstein, a founding partner with Weltman Bernstein, says the problem should have been discovered before the deal closed.

“The agreement of purchase and sale is really an offer to purchase or sell. It should be seen as a starting point,” he tells AdvocateDaily.com. “Buyers' lawyers need to carefully review the contents of the agreement of purchase and sale to ensure that they are consistent with the results of the survey, and their title and off-title searches.”

If the searches or survey reveal information inconsistent with the terms of the Agreement of Purchase and Sale, he says the parties may want to negotiate a price abatement or other terms, depending on what is discovered.

Bernstein says it’s not unusual to find differences between the property described in a sales agreement and records at the land registry office.

“Sometimes, I’ll see agreements of purchase and sale that omit parking spots or locker units in condos. I’ve also seen ones where easements and rights of way are left out, or the size of the frontage is misstated,” he says.

In the CBC story's case, the problem only came to light after the purchaser attempted to stop upgrading work by a telecommunications provider on a piece of its equipment, and the company produced a survey that showed the land belonged to the city. 

The man told the CBC he fears the revelation may have wiped $150,000 off the value of his property, representing one-third of its estimated value in 2016.  

"I was shocked," he said. “This equity just disappeared overnight."

He has been paying property tax based on an assessment that included the city-owned portion and has asked the municipality to simply hand over the extra land to him, but a local councillor told the CBC that’s an unlikely outcome. 

“He probably going to be reimbursed for the taxes he's paid on the city-owned strip of land, but that’s a pittance in comparison to the reduction in his property's value,” Bernstein says.

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