This series of presentations were presented at the FMC Fall Real Estate Seminar held on September 27, 2012, presenters include – Patrick Devine, Mark Piel, Julie Robbins, Sheldon Disenhouse, Karen Groulx, Andrew Salem, Allyson Roy, Jules Mikelberg and Michael Toshakovski. Presentation topics include: Section 37 Update: What the Cases Say and What the Practice Is; How Reasonable is Reasonable: Negotiating Effort Standards in Commercial Leases; Relocation Rights in Leases – Planning for the Future; Legal Fallout from Falling Glass; Small Changes, Big Impacts and Greater Toronto Area Condominium Update

1. FMC Fall Real Estate Seminar
September 27, 2012
1

2. Section 37 Update: What the Cases Say
and What the Practice Is
FMC Fall Real Estate Seminar, September 27, 2012
Presented by: Patrick Devine and Mark Piel
2

3. What Section 37 Says:
• “The council of a local municipality may, in a by‐law passed
under Section 34, authorize increases in the height and density
of development otherwise permitted by the by‐law that will be
permitted in return for the provision of such facilities, services
or matters as are set out in the by‐law”. (emphasis added)
• No mention of “community benefits” or “public benefits”
3

4. Two Views
Connection between the requested S.37 benefit and the
development (law)
Vs.
Let’s Make a Deal! (politics/economics)
4

5. The Law
5

6. Toronto (City) v. Minto BYG Inc.,
[2000] O.M.B.D. No. 1102 (OMB)
• a.k.a. The Beginnings of the Nexus/Connection Test
• Minto appealed its Official Plan Amendment, Zoning By‐law
Amendment and site plan applications to the OMB
• At issue was whether S.37 provisions should form a part of the
amendments and, if so, in what amount
6

7. Toronto (City) v. Minto BYG Inc. (cont’d)
• City’s position: test of “good planning” as established by the
Official Plan required Minto to provide S.37 benefits in
exchange for increases in height and density
• Minto’s position: the application of S.37 benefits should not
result in further amenities other than those which have been
proposed or which are valid conditions of approval
7

8. Toronto (City) v. Minto BYG Inc. (cont’d)
• Ruling: appeals were granted
• Reasons:
• Whether contributions should be authorized must be judged on the
beneficial effects of such contributions to the proposal
• It lies with the City to demonstrate the connection between the
proposal and the benefits
• Absent this demonstration, a developer is obligated to meet only the
requirements of the Official Plan policies regarding S.37 benefits
• S.37 benefits must be guided by established policy; a proponent is
entitled to some degree of certainty in ascertaining what public
benefits it will be required to provide pursuant to Section 37
8

9. Toronto (City) Official Plan Residential Building
Amendment (Re), [2003] O.M.B.D. No. 926 (OMB)
• a.k.a. The Board Plays “Let’s Make a Deal!”
• City’s position: S.37 contributions do not have to be “related or justified by
the project, but need simply to be a benefit to the public offered in
exchange for the permission to develop” increased heights and densities
beyond existing policies and by‐laws
• Appellant’s position: requested contributions unrelated to the
development are not justifiable
9

10. Toronto (City) Official Plan Residential
Amendment (Re) (cont’d)
• Ruling: appeal dismissed
• Reasons:
– Re Section 37 provisions: “It is the legal extension of an…age‐old
practice of securing some public benefit in return for a permission that
creates betterment or increases land value…. What is relevant is that
in return for additional development rights granted to the developer,
the exercise of which may have social costs to the public in the area,
the public receives some tangible benefit or amenity to offset the
cost.”
– S.37 benefits provided in return for permitted increases in height or
density are not required to be:
• Located on the development site; nor
• Related to the particular development
10

11. Toronto (City) Official Plan Redesignate Lands
Amendment (Re), [2005] O.M.B.D. No. 1 (OMB)
• a.k.a. The Nexus/Connection Test Returns
“There must be a real and demonstrable connection between
the Section 37 benefit being requested and the positive
features of the development proposal, as stated in the Official
Plan policy.”
11

12. Sterling Silver Development Corp. v.
Toronto (City), [2005] O.M.B.D. No. 1313 (OMB)
• The Board evaluates the existing decisions (Minto, 1430 Yonge,
Irber)
“The Planning Act is not a revenue statute” and “there must be a
nexus between the development and the Section 37 benefits,
demonstrating that the benefits pertain to the development
(whether on site or off), not to unrelated municipal projects
(no matter how meritorious).”
• Additional Section 37 benefits may be imposed beyond those
offered by the developer if there is a “real and demonstrable
connection” to the development proposal
12

13. English Lane Residential Developments
Ltd., Re, 2011 CarswellOnt 14127 (OMB)
• a.k.a. The Nexus Test is Entrenched
• City’s issue: increases in height and density (from an approved
8 storeys to a proposed 9 storeys) would create traffic
problems in the area
• Requested benefit: contribution to a neighbourhood splash
pad (think of the children!)
• The Board found: no reasonable planning relationship
between the proposed development, the alleged impact on
the community (increases in traffic) and a contribution to a
splash pad.
13

14. What the Practice Is
14

15. What the Practice Is
15

16. Evidence Before OMB of City’s Practice
• ADMNS Kelvingrove Investment Corp v. City of Toronto
• Board cites the City’s Implementation Guidelines for Section
37 re: not being a vehicle to generate general revenue and
that no City‐wide formula exists since that might not survive a
court challenge on the basis that it constitutes an illegal tax
• Board particularly concerned with evidence from City planner
that the City’s “internal practice” is to have the City’s
Supervisor of Appraisal Services estimate the capital gain
[emphasis added] expected from a rezoning
16

17. City’s Practice (continued)
• Then City uses the estimated “capital gain” as the basis for
negotiations
• Evidence of City planner that used 20% of the capital gain as
the “starting point”
• Board expressly cautioned that nothing in the decision should
be construed as endorsing such an approach, although no
need to decide matter as rezoning application refused
17

18. City’s Practice (continued)
• What OMB criticized in the Kelvingrove is precisely how it is
done
• City planner’s role: not “land use planning”
Rather, role is to get from City Real Estate Services the amount
of the “uplift” in value from the existing zoning to the
proposed new zoning
• Then, the Councillor figures out what to spend the money on
18

19. The Winners under the System
• Toronto Sun article
• The big winners:
‐ Councillor Adam Vaughan, Ward 20 ‐ $51.5 million
‐ Councillor John Filion, Ward 23 ‐ $49.4 million
‐ Councillor Kristyn Wong‐Tam, Ward 27 ‐ $48.5 million
19

20. Toronto Sun Article
20

21. An Example of City of Toronto Project
‐ 45 Charles Street East
• December, 2008 ‐ Approval of rezoning by‐law for a 33‐storey
building requiring $1.5 million in Section 37 benefits
• July, 2010 ‐ Committee of Adjustment approval of variance
for an additional 6 floors with Section 45(9) contribution
of $500,000.00
• 2011/2012 ‐ rezoning for an additional 8 floors,
the Councillor’s request: $5.6 million
• Final agreement: $1.6 million
21

22. City of Ottawa – New Guidelines and
Protocol for Implementation of Section 37
• Adopted by Ottawa City Council on March 28, 2012
• Excerpts from staff report:
‐ “Section 37 of the Planning Act provides municipalities the authority to
share in the increased value that may result from an increased height
and/or density of a development project” (emphasis added)
‐ Further, under the heading of Background: “Section 37 of the Planning
Act provides municipalities with the authority to share in the increased
economic uplift that may result from increased height and/or density of a
development project” (emphasis added)
22

23. City approves rules for sharing
wealth from rezonings
BY DAVID REEVELY, THE OTTAWA CITIZEN MARCH 28, 2012
© Copyright (c) The Ottawa Citizen
23

24. Conclusion
• As I have noted in many presentations on this topic:
“. . . . it must always be remembered that Section 37 is a
section of the Planning Act [emphasis added] and not part of
some mythical “Municipal Generation of Revenue Act”
• Given the OMB cases and the City of Toronto’s current practice
and the City of Ottawa’s proposed practice, what is needed is
another OMB ruling to reiterate the rules and the true purpose
of Section 37
24

25. Patrick Devine Mark Piel
patrick.devine@fmc-law.com mark.piel@fmc-law.com
416.863.4515 416.863.4744

26. How Reasonable is Reasonable: Negotiating
Effort Standards in Commercial Leases
FMC Fall Real Estate Seminar, September 27, 2012
Presented by: Julie Robbins
26

27. Effort Standards Commonly Found in
Commercial Leases:
• Best Efforts
• Reasonable Efforts
• Commercially Reasonable Efforts
• Best Reasonable Efforts/Reasonable Best Efforts
• Commercially Reasonable Best Efforts
27

28. Best Efforts
• Higher standard than “reasonable efforts” and “commercially
reasonable efforts”
• Objective standard not subjective
• Summarized in Atmospheric Diving Systems Inc. v.
International Hard Suits Inc. 13 B.L.R. (2d) 243 (1993)
– “no stone unturned”
– do everything known to be usual, necessary and proper for success
– not boundless, to be considered in the context of the contract, the
parties and purpose of the contract
– not necessary to show party acted in bad faith
– “inevitable failure” relevant to causation of damage but not liability
– evidence that the party, had it acted diligently, it could have satisfied
best efforts is relevant
28

29. Limitations on Best Efforts
• Best efforts standard is not boundless
• Conflicting case law on economic considerations
– Best efforts obligation may give rise to reasonable consideration to a
party’s own economic interests
– Financial disadvantage does not excuse performance
• “I qualify that duty as not requiring the party to sacrifice itself
totally to the economic interests of the party to whom the
duty is owed, although the interests of the other party must
predominate.” (emphasis added)
Justice Ewaschuk in Eastwalsh Homes Ltd. v. Anatal Development Ltd. (1990) 72 O.R. (2d) 661 at para 43
29

30. Reasonable Efforts
• Implies something less than best efforts
• Highly contextual and fact specific
• “Reasonable implies sound judgment, a sensible view, a view
that is not absurd.” 365411 Ontario Ltd. V. Darena Holdings Ltd. (1998) 55 O.T.C. 13 at para. 59
• Objective standard not subjective
• What can be done should be done, in the context and purpose
of the contract
• Does not mean “all efforts” or efforts to the point of “undue
hardship”
30

31. Commercially Reasonable Efforts
• Involves a business judgment
• Must make a genuine effort
• Party obligated to perform cannot deliberately prevent the
occurrence or take advantage of its own wrongful act
• Does not obligate a party to exhaust all possible means of
satisfying the obligation or to take steps which are
commercially irresponsible
• Not clear if it is a higher or lower standard than “reasonable
efforts”
31

32. Best Reasonable Efforts/Reasonable Best
Efforts
Commercially Reasonable Best Efforts
32

33. General Tips for Drafting:
• Be clear about effort standard as best efforts could be implied
• Do not use different standards in the same agreement unless
you intend them to have different meanings
• Do not use terms if you do not know what they mean
• Specify the requirements of satisfying the obligation
33

34. Example:
Landlord shall obtain a non‐disturbance agreement in favour
of the Tenant from the existing mortgagee.
34

35. Proposed Revisions:
Landlord shall use reasonable efforts to obtain a non‐
disturbance agreement (“NDA”) in favour of the Tenant from
the existing mortgagee by requesting such NDA in writing
from the mortgagee within 10 days after execution of this
Offer to Lease and forwarding such NDA to the Tenant
forthwith upon receipt and promptly forwarding to the
mortgagee all of the Tenant’s reasonable comments. The
Landlord shall not be required to incur any expenses [in
excess of $1,500.00] in satisfying its obligations under this
section.
35

36. Performance of Effort Standard
If you owe the duty:
• Keep communication lines open and be honest and forthcoming
• Consult with the other party so that you are not guessing about what they
would be prepared to do or agree to in order to help satisfy the obligation
• Document steps taken to comply
If the duty is owed to you:
• Communicate concerns with steps being taken
• Track timing of steps and communicate concerns if there is not timely
performance of the steps required to comply with the obligation
• Do not wait until the last minute to raise a concern
36

37. Julie Robbins
julie.robbins@fmc-law.com
416.862.3418

38. Relocation Rights in Leases – Planning for
the Future
FMC Fall Real Estate Seminar, September 27, 2012
Presented by: Sheldon Disenhouse
38

39. Standard Lease Provisions
• “The Landlord may…relocate or rearrange the buildings, parking facilities
and other parts of the Project and [with the consent of the Tenant, which
consent will not be unreasonably withheld], relocate or rearrange the
Premises from that shown on Schedule “A”.
39

40. • “The Landlord shall have the right, in its sole discretion, from time to time,
to relocate the Premises to other premises within the Project having
approximately the same area as the Premises. The Landlord shall be
entitled to designate the location of the new premises and the date by
which the Tenant must relocate to the new premises.”
40

41. Landlord Rationale
• Desire to upgrade the Project/Flexibility
– Renovations
– Better/larger tenants
– Remerchandising
– Expansion room for adjacent/large tenants
41

42. Tenant Concerns
• What is “comparable space”
– Retail
• Size
• Frontage
• Tenant mix
• Proximity to entrances, exits, major tenants
• Availability of services
– Office
• Height in building (low floors/high floors)
• Views
• Availability of services
• Will there be down‐time?
• Timing (not during high season)
42

43. Who Pays What?
• Usually the move is at the Landlord cost
– Construction of new space
• Plans
• Base building
• Leasehold improvements
– Move existing fixtures/purchase new fixtures
– Actual move
• Timing
– Signage/announcements
– Stationery
– Indirect costs
– Unamortized costs
43

44. CASES
44

45. • 1. Can Landlord relocate Tenant to a neighboring Project?
– No – unless specifically provided for.
See: Millennium Veterinary Hospital Corp. v. SR & R Bay Bridges Ltd. 66
R.P.R. (4th) 174 (2008‐OCA)
45

46. 2. What does “in a location, size and finish similar to that of the Demised
Premises” mean?
Court → “…a proper interpretation … of the words “similar location” would
indicate compatibility with the business – attractive features of the
originally agreed location, which would include criteria of shopper traffic
flow, visibility and exposure.”
See: Stonegate Enterprises Ltd. V. West Oaks Mall Ltd. 1 R.P.R. (4th ) 113
(2002‐BCSC)
46

47. 3. Negotiate!
“The Landlord shall have the right…to change the location of the leased
premises…to another location of comparable size in the shopping mall…”
Court → “Although the existing area has both street and mall frontage, the
tenant by executing the lease and including this relocation clause put itself
in the position whereby it was at the mercy of the landlord with regard to
relocation. As was clear from the evidence some tenants negotiated this
clause out of their agreement…”
St. John’s Development Corp. v Eyeland Enterprises Inc. 1998 Carswell Nfld
264 (Nfld SC, Trial Division)
47

48. Sheldon Disenhouse
sheldon.disenhouse@fmc-law.com
416.863.4376

49. Legal Fallout from Falling Glass
FMC Fall Real Estate Seminar, September 27, 2012
Presented by: Karen Groulx
49

50. Legal Fallout from Falling Glass
• a reported 30 tempered glass
balconies from more than 10
buildings have shattered in
Toronto since last summer
• at the W hotel and residences in
Austin, several glass balcony
panels fell off the 37‐storey
building in two separate incidents
in June of 2011
50

51. The Cause and the Fix
• at the provincial library in Montreal,
decorative glass panels have been
falling off the facade since soon after
the building opened in 2005
• the cause is likely impurities in glass ‐‐
most common type is nickel sulfide
• responsible for about 90 per cent of
impurity‐related fractures
• an independent assessment of the
glass problem at the Bibliothèque et
Archives nationales du Québec in
Montreal found that 30 percent of the
panes on the building do not meet
Canadian standards for glass
The Bibliothèque et Archives nationales du
Québec has been shedding its frosted glass panels treatment
almost since it opened in 2005. (Paul
Chiasson/Canadian Press)
51

52. The Cause and the Fix (con’t.)
• shattering could occur due to a combination of
faulty treatment, fractures within the glass and too
tight mounting of the glass onto the façade which
does not allow for temperature‐related expansion
and contraction
• the building contractor, Pomerleau Inc., contested
the findings of the library's consultant
• the fix was to replace the 15 broken panes with the
same type of glass
• a permanent buffer zone was also installed around
the building made up of shrubs, bushes, plants and
1.8‐metre‐wide aluminum and galvanized‐steel
awnings.
52

53. The Cause and the Fix (con’t.)
"[The panes] don't fall; they shatter," said library spokesperson
Geneviève Dubuc. "They break into small pieces that aren't
really dangerous. The aim is to, if necessary, collect the debris
caused by the shattering. In the event that glass does shatter,
it falls into the bushes, not on people."
( “In Depth: Shattered Glass: What Causes Panes To Fall Off Buildings”, Kazi Stastna, CBC News,
August 4, 2011)
53

54. The Fallout
• class actions have been commenced
against the architects,
manufacturer/installer of the glass
railings and the developers of two
projects
• Each lawsuit is claiming general
damages in the amount of
$15,000,000 and punitive damages in
the amount of $1,000,000 plus a
declaration that the builders were
negligent in the design, installation
and manufacturing of the glass panels
54

55. Municipal Regulations
• Property Standards section of Toronto
Municipal Code requires owner to repair,
maintain and keep the property clean in
accordance with the standards and to
take immediate action to eliminate any
unsafe condition
• City of Toronto ordered developer to
remove the balcony glass from the
building
• developer and/or the occupant should
report the incident of falling glass or
cladding to the Right of Way Department
at the City of Toronto
55

56. Glass Window Wall Systems
Industry experts claim that window walls:
• are thermally inefficient
• of questionable performance in terms of
durability, air and water leakage
• will require extensive retrofit or
replacement within 15 to 20 years
• expensive to repair ‐‐ an estimated 20
per cent of condominium owners’
reserve fund contributions could be
spent on window wall repairs
56

57. Tarion Warranties
One Year Warranty
• Constructed in a workmanlike manner and free from
defects in material;
• Constructed in accordance with the Ontario Building Code;
Two Year Warranty
• Water penetration through the basement or foundation
walls;
• Defects in work or materials, including windows, doors and
caulking, or defects in work that result in water penetration
into the building envelope;
• Defects in work or materials which result in the
detachment, displacement or deterioration of exterior
cladding (such as brickwork, aluminum or vinyl siding);
57

58. Tarion Warranties
• Violations of the Ontario Building Code affecting health and safety (including, but
not limited to, violations relating to fire safety and the structural adequacy of the
home); and
• Major structural defects
Seven Year Warranty
• A major structural defect is defined in the Ontario New Home Warranties Plan
Act as:
• any defect in work or materials that results in the failure of a load‐bearing part of
the home’s structure or materially and adversely affects its load‐bearing function;
or
• any defect in work or materials that materially and adversely affects the use of the
building as a home.
58

59. Maximum Tarion Warranty Coverage
• aggregate maximum warranty coverage for new
homes and condominium units is $300,000.
• The maximum coverage for condominium common
elements is $50,000 times the number of units, to a
maximum of $2.5 million
59

60. The Fallout
Developers will be the target for recovery of claims
60

61. General Case law regarding Developer’s
Liability
• Does a contractor/developer owe a duty of care to
subsequent purchasers?
• A finding of negligence would depend on the
existence of a duty of care, breach of that duty and
resulting damages
61

62. Legal Liability for Dangerous Defects
• In the seminal case of Winnipeg Condo Corp. No.
36 v. Bird Construction Co., Supreme Court of
Canada Justice LaForest stated:
“…contractors (as well as subcontractors,
architects and engineers) who take part in the
design and construction of a building will owe a
duty to subsequent purchasers of the building if
it can be shown that it was foreseeable that a
failure to take reasonable care in constructing
the building would create defects that pose a
substantial danger to the health and safety of
the occupants.” [Emphasis added]
62

63. Legal Liability for Dangerous Defects
• There is liability for dangerous defects
• Defective materials or shoddy but not dangerous defects do
not give rise to liability to third parties for pure economic loss
(such as the cost of repairs) unaccompanied by personal injury
or property damage: Condominium Plan No. 9223676 v.
McJane Developments Ltd.
63

64. Implied Warranty
• implied warranty in favour for purchaser of new residence
under construction that the residence will be completed in a
workmanlike manner and will be fit for habitation
64

65. Relevance of Building By‐laws and
building codes
• claim against the developer‐contractor for breach
of implied warranty that the building was to be
constructed in a good and workmanlike manner
was dismissed
• sale agreements between the developer and the
individual unit owners expressly stipulated that
the agreements excluded any warranties that
were not written in the contract.
• building by‐laws and building codes help to define
the standard of care
65

66. Relevance of Building By‐laws and
building codes
• nothing dramatic had happened to the building and the block wall at issue
had been standing for 22 to 23 years when the repair work was undertaken
in Carleton Condominium Corp. No. 21 v. Minto Construction Ltd.
• significant deviations from building by‐law requirements gave rise to a
claim for breach of warranty and negligence and a finding of liability of $1.5
million to repair the construction of a block wall found to have created a
dangerous condition in Minto Construction
• many glass condominiums in Toronto arguably adhere to building by‐laws
and codes
66

67. Other Targets of Litigation – Directors and
Officers
• directors and officers may be the target of claims where there
are no assets or warranty coverage
• courts will consider piercing the corporate veil in situations
where the corporation is, “being used as a shield for
fraudulent or improper conduct”
67

68. Building Code Act
• building owners responsible under the Building
Code Act for keeping their building safe
• Building Code changes apply only to
developments approved after July 1, 2012
• heat‐strengthened laminated glass where glass
is installed beyond concrete balcony slab
• heat‐soaked tempered glass to be used when
glass is on a slab but close to the edge
• changes in design required ‐‐no contact
between glass and metal
68

69. Response from City of Toronto
• database of condos with glass balconies constructed within the
last five to seven years is being compiled by the City of Toronto
requesting voluntary inspections
• source of information to litigants or potential buyers through
Municipal Freedom of Information Act requests?
69

70. Managing Latent Defect Exposure (con’t.)
• be proactive – communicate steps being taken to address problem
• limit warranties provided to purchaser in sale documents
• seek expert advice regarding most cost‐effective and practical type of
cladding taking into account energy efficiency, Building Code requirements,
maintenance cost, lifespan, and building aesthetics
• consult insurance professionals
• consider having professionals conduct regular reviews of the cladding on all
existing large buildings to confirm safety and address any hazards
70

71. Karen Groulx
karen.groulx@fmc-law.com
416.863.4697

72. Small Changes, Big Impacts
How Seemingly Minor Provisions in Real Estate Agreements Can
Have Major Consequences for the Transaction
Presented by: Andrew Salem and Allyson Roy
72

73. Small Changes, Big Impacts
1. Standard Forms
2. Pre‐Printed Forms, Schedules and Handwritten changes
3. Boilerplate Clauses
4. Small Changes, Big Impacts: Some illustrations in the
Agreement of Purchase and Sale context
(a) Risk before closing
(b) Permitted encumbrances
(c) Planning Act consent
(d) Waiver and Notice clauses
73

74. Small Changes, Big Impacts
5. Some other examples
(a) Purchase Price
(b) Legal Descriptions
(c) Dates and Times
(d) Electronic Transfers
(e) Closing Documents
(f) Letters of Intent
74

75. 1. Standard Forms
75

76. Standard Forms (continued)
(a) OREA and TREB Agreements of Purchase and Sale
(b) Using your own Template Agreements
(c) Contra Preferentem
76

77. 2. Pre‐Printed Forms, Schedules and
Handwritten Changes
• McKee v. Montemarano (2009, Ontario C.A.)
• Associated Shopping Center Properties, Ltd. v. Hodge
(2011, Tennessee C.A.)
77

78. Pre‐Printed Forms, Schedules and
Handwritten Changes (continued)
“Mr. Hodge also argues that Attachment A should not be
considered part of the Lease. We find this argument without
merit. The main body of the lease states that “Any
Attachments to this Lease Agreement shall be a part of this
agreement.” Furthermore, the notation to “See Attachment A”
appears conspicuously in several different places in the main
body of the Lease, which Mr. Hodge signed.”
Associated Shopping Center Properties, Ltd. v. Hodge
78

79. 3. Boilerplate
Noun
1. Plating of iron or steel for making the
shells of boilers, covering the hulls of
ships, etc.
2. The detailed standard wording of a
contract, warranty, etc.
3. Informal phrases or units of text used
repeatedly, as in correspondence
produced by a word processing system.
4. Frozen, crusty, hard‐packed snow often
with icy patches.
79

80. 4. Small Changes, Big Impacts: Some
illustrations in the Agreement of
Purchase and Sale context
(a) Risk before closing
(b) Permitted encumbrances
(c) Planning Act consent
(d) Notice and Waiver
80

81. (a) Risk Prior to Closing
• At common law, if not stated expressly to the contrary in the
contract, risk of damage or loss is on the purchaser in its
capacity as beneficial owner
• Clause 14 of the OREA standard form of purchase agreement
reverses this position and expressly states that risk is on the
vendor until completion
• What can be done if your purchase agreement does not
expressly state that risk is on the vendor until completion?
– Take out insurance immediately
81

82. (b) Permitted Encumbrances
Standard Form ‐ Title must be good and free from
encumbrances save and except for:
(a) registered restrictions or covenants that run with the
land providing that such are complied with;
(b) any registered municipal agreements and registered
agreements with publicly regulated utilities providing
such have been complied with, or security has been
posted to ensure compliance and completion, as
evidenced by a letter from the relevant municipality or
regulated utility;
(c) any minor easements for the supply of domestic utility or
telephone services to the property or adjacent
properties;
82

83. Permitted Encumbrances (continued)
(d) any easements for drainage, storm or sanitary sewers,
public utility lines, telephone lines, cable television lines or
other services which do not materially affect the use of the
property; and
(e) any encumbrances specifically provided for in the
agreement
83

84. Permitted Encumbrances (continued)
Best practices:
As vendor:
•Include a list of specific title encumbrances in
your agreement
As purchaser:
•Do not accept title qualifications without
investigating
84

85. (c) Planning Act Consent
THE STANDARD FORM CLAUSE:
“This Agreement shall be effective to create an interest in the
property only if Seller complies with the subdivision control
provisions of the Planning Act by completion and Seller
covenants to proceed diligently at his expense to obtain any
necessary consent by completion.”
85

86. Planning Act Consent (continued)
WHAT IF….
1 …it appears that the consent application is unlikely to
succeed? (Hogg v. Wilken, 1977)
2 …unreasonable/onerous/expensive/time‐consuming
conditions of approval are imposed? (John E. Dodge Holdings
Ltd. v. 805062 Ontario Ltd., 2003)
3 …the approval process takes too long? (Southcott Estates v.
Toronto Catholic School Board, 2010)
86

87. Planning Act Consent (continued)
Some considerations for the Planning Act clause:
1. Do you have the ability to stop the process (or will you be
forever “proceeding diligently”)?
2. To what extent is the Purchaser required to assist with the
consent application?
3. How will difficult conditions and OMB appeals be addressed?
87

88. (d) Waiver and Notice Clauses
1. Carefully consider your verbs and delivery methods
2. Lawyer as agents
3. What happens if nothing happens?
4. The letter of clarification
5. Dates and times
6. An illustration: McKee v. Montemarano (2009, Ont. C.A.)
88

89. 5. Small Changes, Big Impacts:
Some Other Examples
(a) Purchase Price
(b) Legal Descriptions
(c) Electronic Registrations
(d) Closing Documents
(e) Letters of Intent
89

90. Andrew Salem Allyson Roy
andrew.salem@fmc-law.com allyson.roy@fmc-law.com
416.863.4728 416.863.4386

91. Greater Toronto Area Condominium Update
FMC Fall Real Estate Seminar, September 27, 2012
Presented by: Jules Mikelberg and Michael Toshakovski
91

92. 1. GTA Condo Update
2. Status of Condominium Act Review Process
3. Changes to City of Toronto Draft Condo
Approval Process
4. Tarion Update
92

93. GTA Condo Update
• Has the bubble burst? Or is it business as usual?
• Toronto – an island of tranquility in a turbulent sea
• 4,800 Unit sales in April – June 2012
• 13,000 new condo sales 2012 to date
• Prediction of 2,000 to 7,000 over last quarter – 15,000
to 20,000 units
• Similar to 2010, sustainable market
• Cannot sustain all time high of 28,000 in 2011
• 185,000 GTA units in approval process (99,000 in City)
93

94. GTA Condo Update …continued
• 1.3% increase in price, 7.4% (2011)
• Median price of $300,000 vs. $500,000 for single
family houses
• 340 active projects of 87,000 units of which 18,000
unsold
• 20 to 30% end users
• 450 to 900 sq. ft. units
94

95. GTA Condo Update …continued
• Media hype of the summer vs. recent bank forecasts
• RBC Report – Canadian housing market in good shape
• TD Report – tighter mortgage rules effective July 2012
may reduce prices by average of 3% in second half of
2012 and early 2013 and possible decrease of 10%
over next 3 years
95

96. Recent headline – Average New Condo Prices
Falling Drastically
•Average prices down 6.4% from 2009 – 2011
•Price per square foot up from $300’s to $550
•Size of units down from 920 sq. ft. to 795 sq. ft.
•However, “Summer of Incentives”
96

97. Fundamentals Still in Place
• Historic low interest rates (1% BOC since Sept. 2010)
• 100,000 new immigrants into Toronto annually
• GTA forecasted to increase population from 6.3M to
8M by 2031
• Places to grow/greenbelt – vertical intensification
• New “suburban downtowns” – Vaughan (Jane & 7),
Markham, Mississauga, Richmond Hill
97

98. Fundamentals Still in Place …continued
• Lack of purpose built rental buildings
• Different investor from early 1990’s (renting vs. flipping)
• Condos now 65% of new housing market, differential between
single family housing and Condo’s are growing
• 40,000 to 45,000 new home sales reasonably consistent – more
condo’s
• Smaller condos more affordable
• Smaller buildings – easier to finance
• Lack of construction financing (self‐regulating the market)
98

99. Condominium Act Review
•Current Act – S.O. 1998 proclaimed in 2001
•1,300,000 Ontarians live in 6,700
condominiums containing more than 500,000
units
•June 2012 – Ministry of Consumer Services
announced review through public consultation
with stakeholders
99

100. Issues
•Consumer protection for buyers
•Condominium finances and reserve fund
management
•Condominium board governance
•Expertise/accreditation of condominium
managers
•Dispute resolution (condo boards/owners)
100

101. Stage 1
• Lottery of 10,000 condo residents to respond by October 5 to sit on panel
• Provide advice on improvements to Act by early 2013
Stage 2
• Experts to review and expand on Stage 1 findings and recommend
amendments
• Report expected for public comment by end of summer 2013
Stage 3
• Residents panel to review expert’s recommendations and create action plan
• Stakeholders to review action plan by Fall 2013
• Action plan to be reviewed by Ministry
101

102. Service Delivery Improvements to Condo Approvals
(City of Toronto)
• Site Plan and Condo process no longer linked
• Site Plan condition in draft plan approval deleted
• Developers must still satisfy site plan, section 37 and
other conditions but earlier in process i.e. occupancies
• City staff will no longer inspect Solid Waste Facilities
• City will accept certification of Sold Waste Facilities
(similar to site servicing, storm water management)
102

103. 2012 Tarion Update
1. Changes to Tarion Addendum for
Condominium Projects
2. Performance Based Pricing and Reduced
Enrolment Fees
3. Changes to the “Major Structural Defect”
Definition
103

104. Changes to Tarion Addendum for
Condominium Projects
1. Addition of Schedule “B”
• All adjustments to purchase price that are to be paid by the purchaser must
be disclosed in Schedule “B”
• Part 1: “Stipulated Amounts/Adjustments”
• Part 2: “All Other Adjustments – to be determined in accordance with the
purchase agreement”
2. Easier to change Critical Dates by mutual consent
The new Addendum is mandatory for all condominium
projects where one arm’s length Agreement of
Purchase and Sale is signed on or after October 1, 2012
104

105. Performance Based Pricing (“PBP”) and
Reduced Enrolment Fees
• Current Regime: Tarion enrolment fees are calculated based
on the sale price of home
• Proposed PBP Regime: Builders are rated on a 100 point scale
and will have their enrolment fees reduced or increased based
on their rating. Tarion projects that PBP will be fully
implemented by Q3 of 2015.
• In the meantime, enrolment fees have been decreased by
$150.00 per home for homes enrolled on or after July 1, 2012
105

106. Changes to the “Major Structural Defect”
(“MSD”) Definition
1. Vendor/Builder accountability for MSD is extended
throughout the full seven year warranty period
2. Expended definition of MSD
• Application to Houses: where Agreement of Purchase and
Sale has been signed on or after July 1, 2012
• Application to Condos: where first arm’s length Agreement
of Purchase and Sale was signed on or after July 1, 2012
106

107. Jules Mikelberg Michael Toshakovski
jules.mikelberg@fmc-law.com michael.toshakovski@fmc-law.com
416.863.4380 416.863.4364

108. All of the preceding presentations contain examples of the
kinds of issues companies dealing with Real Estate matters.
If you are faced with one of these issues, please retain
professional assistance as each situation is unique.