Bob Aaron bob@aaron.ca

March 10, 2007

Condo battle ends after 14 years

Can a buyer back out of the purchase of a condominium unit and get a refund of the deposit if there are municipal work orders against the building?

Last year, after an incredible 14 years of litigation, the Ontario Court of Appeal awarded two purchasers the return of their $5,000 deposit, adding the unusual footnote: “After 14 years, we trust that this case is finally at an end.”

It all began in May 1992, when Angelo and Luciana Boschetti entered into an agreement of purchase and sale for Rosa Sanzo’s condominium unit in North York.

The agreement contained this clause, which is in common use in Toronto but is jarringly ungrammatical: “Vendor warrants that there are no outstanding work orders registered against the property, and if so, will be complied with at his own expense, on or before closing.”

One of the printed standard clauses in the offer stated that if the purchaser submitted an objection to title or to an outstanding work order that the vendor could or would not remove, the agreement would come to an end and the deposit money would be returned.

A work order is an enforceable demand by a municipality or other authority requiring a property owner to comply with bylaws governing building standards, zoning, health, fire code and similar regulations.

Within the appropriate time limit, the purchaser’s lawyer, Patrick Di Monte, requested proof that there were no work orders outstanding, and the seller’s lawyer replied, “Please satisfy yourself.”

In fact, however, there were numerous work orders against the whole building. The condominium’s financial statements for the year ending Sept. 30, 1991, disclosed that there were a number of work orders requiring repairs to the garage, balconies and stairwells.

On May 12, 1992, five weeks before the scheduled closing, a municipal inspection of the building listed 32 defects.

With its reserve fund substantially in the red, the condominium corporation did not have enough money to pay for capital projects.

The board decided to move slowly with the necessary repairs, as funds became available, but did implement a special assessment to bring in some of the required money.

The seller rejected the buyers’ request to return the deposit and unwind the deal. In response, the buyers sued for return of the deposit and the seller sued for more than $20,000 in losses resulting from the aborted sale.

In December 2003, more than 11 years after the scheduled closing, the case finally came to trial before Justice Blenus Wright in Toronto.

In his ruling, he stated, “The plaintiffs contracted for a unit in a building in which the vendor represented that there were no outstanding work orders. Some work orders may have been excused but there were outstanding work orders from an inspection three years earlier in 1989. The plaintiffs would be buying a unit in a building in which the common elements were in a continuing state of disrepair.”

“In my view,” wrote the judge, “on the closing date the purchasers did not get what they bargained for and if they closed the transaction they would have been faced with an uncertain financial picture. As it was, the purchasers were denied mortgage financing from the TD Bank.”

As Di Monte stated in his letter of June 23, 1992, to (the seller’s lawyer) Capone, “In view of the substantial work orders, the financial institution, the Toronto-Dominion, will not advance a red nickel.”

Justice Wright said that the plaintiffs were within their rights to refuse to close. The agreement was void and the Boschettis were to get back their deposit and court costs.

The vendor appealed and the case was heard by three judges of the Court of Appeal last summer.

In dismissing the appeal, the court said that the decision of the trial judge was clearly supported by the evidence, and the purchasers were entitled to their $5,000 back, plus $4,000 in costs for the appeal.

No explanation is given in either court decision for the lengthy delay. After both sides paid legal fees for a trial and appeal over the course of 14 years, nobody really came out a winner financially.

Some worthwhile lessons emerge from the litigation: