Buyer must accept minor easements
December 11, 2009
Mark Weisleder
SPECIAL TO THE STAR
In the standard form real estate agreement, the buyer asks the seller to provide a clean title to the property, with no defects.
Yet the buyer does accept certain title defects – for example, minor easements for the supply of a public utility, such as telephone or cable.
These easements are typically found on the side, front or rear of your property and allow service providers such as Bell, hydro, and cable access so they can repair and maintain their equipment, usually wires, on your property or your neighbours' properties. The key word here is "minor."
Court decisions have said that so long as these easements make up fewer than 5 to 7 per cent of your property and are found on the side, front, or rear of the property, a buyer must accept them.
"Minor easements" do not include a mutual driveway, a laneway right-of-way on your property or a major utility easement. These are major easements, because they could materially impact your intended use of your land.
For example, an easement that runs right down the middle of your backyard could effectively prevent you from installing an in-ground pool after closing.
Buyers should always ask whether there are any easements on the property and the exact location, as even minor easements may interfere with your landscaping plans or prevent you from building a garden shed, building addition or in-ground pool after closing.
If you're a seller and you're not sure if any easements affect your property, the first place to look is the legal description in your deed. Also check your survey, if you have one.
And read the reporting letter you received from your lawyer when you bought the property. Your lawyer should have uncovered any registered easement on your property when conducting the title search.
The reporting letter should also discuss any other title defects that may have come up, for example, a dispute about fence lines. To be safe, disclose to your buyer all easements and any other title defects right in the agreement of purchase and sale.
The agreement also states what happens if a seller cannot correct a title defect that is found by the buyer's lawyer that was not disclosed in advance. The buyer has two choices: accept the defect and complete the transaction, or refuse to accept the defect and terminate the transaction.
In the case of Ridgely v. Nielsen, the buyer purchased an expensive property in central Toronto in 2007. On title to the 80-foot-wide property was a 20-foot-wide storm and drainage easement, which covered 25 per cent of the area of the backyard. This easement was not disclosed to the buyer. The buyer's lawyer discovered the easement, and the buyer refused to accept it. The seller couldn't remove the easement.
The judge agreed that the easement was not a minor easement and stated that the buyer did not have to accept it. The buyer terminated the transaction without penalty.
In another case, an easement bisected an owner's backyard down the middle and covered 10 per cent of the total area of the property.
The court determined that this was also a major easement, because it prevented the buyer from using the backyard for their intended purposes. The buyer again was permitted to terminate the transaction.
Why would a buyer ever accept a title defect? In the current market, when house prices are rising, buyers may choose to accept a title defect and close the transaction, because they know that it will now cost them more money to buy a similar property if they back out of the deal.
Sellers, remember to disclose all title defects to your buyers, in advance of signing your agreement.
Buyers, be informed of all title defects, especially when you want to make any changes to the property after closing.
Email: mark@markweisleder.com. Website: www.markweisleder.com
Mark Weisleder is a lawyer, author and public speaker for the real estate industry and a regular contributor to Real Estate News.
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Toronto Star