Area, Mistake Discovered After Closing #157
CATEGORY: Legally Speaking
TAGS: Damages Date of Completion Measurements Misrepresentation Strata Properties Warranty
By Gerry Neely
A vendor innocently misrepresents the area of his lot as 10 acres when it is only six acres. If the purchaser relied upon this misrepresentation and discovered the mistake BEFORE completing his purchase, the probability of the purchaser being able to repudiate the contract is high. That probability may be reduced to zero if the discovery is made AFTER the sale is completed.
The following cases have these facts in common - each vendor had received the proceeds of sale, and title had been transferred to the purchaser before the discovery that the area misrepresented was less than the actual area.
- A vendor innocently misrepresented the area of a parcel of farmland in Saskatchewan as 9.5 acres when it was only 5.2 acres. The purchaser walked over the property several times, knew where the boundaries were, and that a plan of survey existed which he did not examine.1
- Property in Nova Scotia was innocently misrepresented in an advertisement and in its legal description as 200 acres approximately, when its actual area was 110 acres. The boundaries of the property the purchaser examined consisted of a road on the west, line fences on the north and east, and a grove of trees on the south.2
- A vendor innocently misrepresented a parcel of land as having 14 acres when it only had 9 acres. The purchaser told the vendor that he was buying the land because he needed 14 acres to carry on his business.3
- A real estate broker in Toronto who had sold a three-storey home, examined the floor plans of a condominium under construction. The area misrepresented was 2,669 square feet which was the minimum area the broker felt would accommodate his family and furniture. The floor plan was irregular and difficult to measure. When they moved in and the furniture wouldn't fit in rooms where the plan showed sufficient space, a measurement revealed the actual area to be only 2251 square feet.4
While each purchaser sued for damages or rescission and proved the misrepresentations, only the last two purchasers were successful. The mixed results reveal the difficulty of seeking damages or rescissions for a deficiency in the area purchased after title has been transferred. The reason for this is that once monies and property have changed hands, the law prefers certainty and finality so that the parties are free to use or dispose of the money or property received.
This principle was applied in the first two cases where the judges decided that the purchasers bought on the basis of what they saw, rather than upon what they were told. The second two cases illustrate some of the limited exceptions to this general rule, including fraud, negligent misrepresentation, a warranty or an error in substance.
The purchaser in case 3 relied upon the last exception to seek rescission of his contract. An error in substance does not mean merely that if there is a substantial difference between the actual area and the area misrepresented, the Court will grant a purchaser damages or rescission. If it meant that, then the purchaser in case 2 should have been awarded damages. What it does mean is that if the difference leaves the actual area purchased valueless for the purpose for which it was to be used, then the Court will provide a remedy. Since the actual area was too small for his business, the purchaser obtained rescission.
The real estate broker relied upon another exception to the general rule, namely a negligent misrepresentation by the vendor. The broker was able to prove that the vendor had been told that the area of the condominium under construction was inaccurate, but did nothing to correct this. The broker obtained damages measured by the market value per square foot as determined by expert evidence, times the number of the missing square feet. He proved that as a knowledgeable and experienced broker and investor, he had purchased the condominium only after analyzing its fair market value per square foot, when compared to comparable units.
A legal description may not easily describe the property to be transferred - a metes and bounds description is an example. In that case, where the area is important to the purchaser, but the purchaser does not want to pay for the costs of a survey, then a warranty given by the vendor will give the purchaser a remedy in damages after completion. The vendor must be very certain of his facts before he agrees to give such a warranty. Having agreed to do so however, the clause to be added to the contract of purchase could be as simple as, "the vendor represents and warrants that the area of the property is no less than . . . "
|Sisson v. Pak, 45 RPR 319.
|Amos v. Helmke, 1981 45 N.S.R. (2) 69.
|Freear v. Gilders, 1921, 64 D.L.R. 274.
|Chapman v H.L.S. York Development Ltd. 64 OR (2d) 498.
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