Subdivision Plan Not Registered By Completion Date #301
By Gerry Neely
A decision made January 29, 1999 now gives us three decisions since 1983, each of which involved the sale of a lot to be created upon the registration of a plan of subdivision of a larger parcel. The issue in each case was whether a seller could force the completion of sale where an application to register a subdivision plan was filed prior to the closing date, but new Certificates of Title for the subdivided property were not issued in the name of the seller until after the closing date.
In the 1983 case, the seller’s obligation to register the subdivision plan was found in paragraph 2(b) of the printed form of the Contract of Purchase and Sale, which only required the seller to deliver the application for subdivision to the land title office in registerable form before the completion date. The buyers argued that the seller’s obligation was to have the new Certificates of Title issued by the closing date. This was rejected upon the reasoning that the titles, when registered, were deemed to have been retroactively registered as at the date and time the application for registration was received by the Registrar. (Land Title Act, Section 37)1
The second case, in 1993, which also concerned the paragraph 2(b) clause, was brought by a buyer against his solicitor, alleging negligence for advice that the buyer was not required to complete a purchase because title to the lot being subdivided was not registered in the name of the seller at the closing date. The result differed from the 1983 case because the judge relied upon Section 6 of the Property Law Act, which states that sellers must register their titles before properties can be conveyed to buyers.
The judge held that under the Torrens system of title registration, a seller does not possess a sufficient title to transfer it, until the seller’s name is recorded in the register as the owner of the property involved. The judge concluded that the 1983 decision was correct in ordinary contract law but not where the contract involves the sale of real property. The solicitor’s advice was therefore correct and the buyer’s action was dismissed.2
The 1999 case differed from the other two in that a clause had been added to the Contract of Purchase and Sale which imposed upon the seller the obligation to file the subdivision plan in a timely manner so that on the closing date, the larger parcel would consist of two legal lots. The application to register the two lots with separate legal descriptions and title numbers was still pending at the closing date. Since the seller was unable to deliver title upon the closing date, his breach of Contract enabled the buyer to obtain a return of a $50,000 deposit.
The results of the 1993 and 1999 decisions are a rejection of the conclusion reached in the 1983 case.3
A licensee seeking certainty and flexibility could choose to use the words in the 1999 case for certainty and, as is occasionally tried, to provide flexibility by giving the seller the right to extend the closing date for whatever fixed period of time the parties agree upon.
The contract may provide that the parties will agree upon a new closing date if the subdivision has not been registered by the contract date. If the completion date passes without registration a party wishing to complete the purchase may set a new, reasonable completion date. If the other party chooses to ignore that date, that party is in breach of the contract. For further details see Column #215.4
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