Private Restrictive Covenants and Rights-Of-Way #245

Oct 01, 1995

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By Gerry Neely
B.A., LL.B.

Three columns 1 have discussed cases where a seller's inability to clear the title of a private easement, allowed purchasers to repudiate contracts because of paragraph one of the Contract of Purchase and Sale. It allows restrictive covenants and rights-of-way that are in favour of only utilities and public authorities to remain on title.

The question of whether a buyer can successfully refuse to complete, even if the seller cannot remove a private right-of -way, is not the black and white question it appears to be. The answer to the assertion that the contract is void if a private right-of-way is not discharged, depends upon an examination of how it affects the property.

The test is whether the seller can transfer substantially what is required by the contract. If the encumbrance is merely minor and insubstantial, its existence would not justify a buyer's attempted repudiation of the contract. Putting it another way, would the restrictive covenant, or right-of-way, in any significant way affect the buyer's use or enjoyment of the property?

This was the question addressed in the BC Supreme Court in a case involving the sale of property using the Contract of Purchase and Sale, where a covenant restricted the size and locations of buildings on one property to protect the views of the adjoining property. In applying the test to this restrictive covenant, the judge looked at decisions in which the encumbrances in question were held to be either insufficient to interfere with a purchaser's enjoyment, or which seriously interfered with that enjoyment

Insufficient Interference

  • A five foot casement along the side of property and a sewer easement over the rear five feet of the property, both easements being within the municipal building setbacks.
  • A six metre wide easement covering approximately three per cent of a five acre commercial property worth $6,000,000, where the town by-laws required a six metre setback for landscaping.
  • A private driveway, a part of which was found to be slightly on the neighbour's property. By obtaining a Quit Claim and moving a curb, only 12.09 square feet of the driveway remained on the neighbour's property. The area was .16% of the total property, too small an amount to interfere with the buyer's use and enjoyment of the property.

Serious Interference

  • An easement in favour of an irrigation district, giving it the right to construct and maintain a pipeline on any part of the lot and which prevented building construction within ten feet on either side of the pipeline.
  • A building scheme requiring approval of plans and compelling each lot owner to become a member of the community club.
  • The right to lay down and maintain water pipelines over the whole of a lot.

In the BC Supreme Court case the judge decided that the restrictions concerning size and location of a building were neither minor nor insubstantial and would seriously affect the buyer's enjoyment. Since the seller could not remove the private restrictive covenant, the buyer was entitled to the return of the deposit.2

***

When an action for damages is brought against a real estate agent, the plaintiff's uncertainty about whether the evidence will support a particular claim, often results in a number of allegations being made, including fraudulent misrepresentation and breach of fiduciary duty, which are unsubstantiated. These are serious allegations suggesting as one judge said that they impute, "misconduct affecting the defendants and their trade as real estate agents and salespeople."

In a Victoria case a buyer sued a seller and the REALTORS acting for the seller for damages relating to a failed purchase. Allegations of fraudulent misrepresentation and breach of fiduciary duty were made against the REALTORS. The examinations for discovery of the real estate agent brought forth no evidence to support these allegations. Despite the lack of evidence the buyer persisted with the claims in the trial. The buyer's claim was unsuccessful and because the judge considered his conduct to be reprehensible the REALTORS were given an order to special costs. This allowed them to recover all of the legal costs incurred in the proceedings and penalized the buyer because normal costs would have been on a lesser scale.3

  1. Legally Speaking Columns #160, #188, #198.
  2. Ferreira v. Chen, S.C.B.C., New Westminster Registry #SOI5182, Reasons for judgment, March 15th, 1994.
  3. Gill v. Centuzy 21 Wedgewood Realty, S.C.B.C., Victoria Registry 90/1096, Reasons for judgment, July 7, 1995.

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