Focus On

SALE OF LAND - Agreement of purchase and sale - Conditions and warranties

Friday, January 11, 2019 @ 8:35 AM  


Lexis Advance® Quicklaw®
Appeal by the purchaser from dismissal of its application for specific performance of an agreement of purchase and sale of a mixed commercial/residential use property. A mortgage assumption provision in the agreement of purchase and sale required the approval of the mortgagee to the assumption of the mortgage on terms acceptable to the buyer. Because the mortgage was closed, the parties wished to keep the mortgage in place and avoid the prepayment penalty. The mortgagee consented to the appellant’s assumption of the mortgage by letter on conditions that were altered slightly to the appellant’s satisfaction. The respondent, however, took the position that the agreement of purchase and sale was at an end because the appellant had not formally accepted the mortgagee’s terms approving the mortgage assumption by signing and returning the approval letter before the end of the assumption approval period, together with the various fees that the mortgagee demanded. The application judge described the mortgage assumption condition as a true condition precedent requiring the appellant to have accepted in a legal way to be bound by the terms and conditions proposed by the mortgagee which it did not do. She based this determination on the appellant’s failure to sign and return the mortgagee’s offer to approve the assumption.

HELD: Appeal allowed. The application judge erred in determining that the agreement of purchase and sale was null and void because the condition precedent in the mortgage assumption provision had not been satisfied. The only true condition precedent was the mortgagee’s approval of the appellant’s assumption of the mortgage. The condition precedent was satisfied when the mortgagee sent its approval letter that was then altered slightly to the appellant’s satisfaction. The application judge erred in concluding that the appellant was required to confirm its acceptance formally by signing and returning the assumption approval letter to the mortgagee to satisfy the condition precedent. The evidence in this case established that there were no suitable alternative commercial properties available in the area. The appellant demonstrated the legal prerequisites for an order for specific performance. If the mortgagee renewed its approval on terms substantially similar to those in its previous approval letter, then an order for specific performance of the agreement of purchase and sale should issue.

THMR Development Inc. v. 1440254 Ontario Ltd., [2018] O.J. No. 6285, Ontario Court of Appeal, P.D. Lauwers, C.W. Hourigan and G.I. Pardu JJ.A., November 28, 2018. Digest No. TLD-January72019010