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Real Property - Breached APS (3). EPRF Holdings Limited v. Fergus Bloor Inc.
In EPRF Holdings Limited v. Fergus Bloor Inc. (Ont CA, 2024) the Ontario Court of Appeal dismissed a breached commercial APS deposit appeal, here grounded on a failure to satisfy a requisition to remove an open building permit:[22] The appellant contends that the test to determine whether a seller can deliver good and marketable title is objective, and little or no weight should be given to a purchaser’s subjective views. The appellant submits that the motion judge accordingly erred in principle in relying on the respondents’ evidence about their concerns about the open work permit because the purchaser was “acting in a capricious or arbitrary manner in order to avoid its own contractual duties.”
[23] This argument mischaracterizes the test to be applied. As held in Stefanovska v. Kok (1990), 1990 CanLII 6848 (ON SC), 73 O.R. (2d) 368 (H.C.), at p. 378, “all of the surrounding circumstances must be considered to determine if the alleged impediment to title would, in any significant way, affect the purchasers' use or enjoyment of the property”. The materiality of a deficiency should accordingly be assessed with regard to how, objectively speaking, the defect could impede the peaceful enjoyment of property. But, if a buyer has a legitimate and specific intended use for the property, their subjective expectations and concerns may also be relevant.
[24] The motion judge considered the argument that the respondents’ termination of the APS was capricious and arbitrary. She found that the respondents fully intended to proceed with the purchase of the Property right up to the evening of March 31, 2020, when they discovered that the second work permit had not been removed and that insurance remained unavailable. She rejected the appellant’s allegation that Fergus had acted in bad faith either by assigning its rights under the APS to Storekey or by invoking the open permit as a basis to terminate. It is not this court’s role to revisit the motion judge’s findings on this point.
[25] The existence of the open permit gave rise to three legitimate and non-trivial concerns for the respondents. First, they could not obtain title insurance. Second, they intended to sell or lease the Property, and an open work permit could impede this. Third, if the City did not voluntarily remove the work permit – as it had failed to do, despite EPRF’s repeated requests – the respondents would have to bring a court application, something they wished to avoid. On this evidence, it was open to the motion judge to find that EPRF could not deliver peaceful possession of the Property.
[26] As the appellant concedes, an open building permit may give rise to a valid objection. In both Thomas v. Carreno, 2013 ONSC 1495, 31 R.P.R. (5th) 311, aff’d 2013 ONCA 566, 35 R.P.R. (5th) 5, and 1854822 Ontario Ltd. v. Estate of Manual Martins, 2013 ONSC 4310, courts found that an open permit could expose a property owner to work orders, expensive remedial work, and potential litigation. Where “the purchaser’s right to enjoyment of the property is by no means certain”, the open building permit is not a “minor defect” but rather goes to the root of title: 1854822 Ontario Ltd., at para. 15.
[27] The appellant contends that these cases are distinguishable because they concerned building permits for possible remedial work that had to be completed on the properties. Here, by contrast, the building permit that remained outstanding at the closing date did not, on its face, relate to any deficiency on the Property. As held by the motion judge, however, the outstanding work permit still exposed the respondents to risk, given the inability of EPRF to obtain its deletion by the City immediately on request. As held by this court in Holmes v. Graham (1979), 1978 CanLII 1438 (ON CA), 21 O.R. (2d) 289 (C.A.), at p. 292, a purchaser cannot be “compelled to take a title which would expose him to litigation or hazard”; a good and marketable title is “free from litigation, palpable defects and grave doubts and couples a certainty of peaceful possession with a certainty that no flaw will appear to disturb its market value.”
[28] The motion judge’s finding about litigation risk was not speculative. She was entitled to infer that litigation was a real possibility on the evidence before her, notably EPRF’s failure to obtain the removal of the open permit weeks after it had raised the issue with the City.
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