SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-13-00481981-0000
DATE: 20130621

RE: 1854822 Ontario Ltd., Applicant

AND:

The Estate of Manuel Martins, Respondent

BEFORE: Madam Justice Darla A. Wilson

COUNSEL:
Samuel S. Marr & D. Fogel, Counsel for the Applicant

Saul Jonas, Counsel for the Respondent

HEARD: June 20, 2013

ENDORSEMENT

[1] This Application was brought on an urgent basis for an order declaring that the requisition delivered by the Applicant is a valid objection to title on a premises located at 62 Lippincott Street, Toronto [“the property”] and an order that the Respondent has not shown good title in the premises.

Background

[2] On March 22, 2013 the parties executed an agreement of purchase and sale with the closing set for May 24, 2013. The Applicant’s counsel for the real estate purchase was advised by the City of Toronto that there was an active building permit regarding work proposed for the garage on the premises. Counsel then wrote to the solicitor for the Respondent requesting the permit be cleared by the Inspector prior to the closing. This request was denied and counsel advised that it was not a valid requisition. A Certificate of Appointment of Estate Trustee had not been secured. The closing date was extended to June 24, 2013.

[3] It is not disputed that the building permit remains open and that there is no title insurance available. Mr. Jonas advised at the outset of the hearing that he had recently secured a Certificate of Appointment of Estate Trustee and will request the removal or revocation of the building permit.

Positions of the Parties

[4] Briefly put, the Applicant argues that the open building permit is a cloud on title and constitutes a valid objection on title. It is submitted that the case law makes it clear that an open building permit exposes the purchaser to a significant risk of litigation and affects his use and enjoyment. Although the Applicant purchased the property in the shape that it was in, he was unaware of the existence of the building permit which enables the city inspector to attend and conduct an inspection of the premises, which they otherwise would not be entitled to do.

[5] The Respondent submits that the existence of the open building permit makes no difference because no work was ever undertaken. A building permit is not a work order or notice of violation. Counsel argued that the permit entitles the owner to do work but does not obligate him to. Mr. Jonas distinguishes the case at hand from Thomas v. Carreno[1] relied on by counsel for the Applicant because in that case, extensive renovation work had been carried out and there had been no inspections by the city. In the case at hand, it is submitted, although the permit exists, nothing has been done on it and therefore, it makes no difference. The purchaser was aware of the dilapidated state of the garage when it bought the premises so there is no surprise.

Analysis

[6] Counsel for the Respondent made a preliminary objection: that because there are disputed facts, the Application ought not to have been commenced under the Vendors and Purchasers Act. I do not agree. While there are areas of contention, the main disagreement between the parties is whether the existence of an open building permit constitutes a defect on title. In my view, in light of the impending closing date for the transaction and the absence of any effort of the Respondent to deal with the outstanding permit, the appropriate manner of proceeding was to issue the within application. The suggestion of the solicitor for the Respondent in the materials that the matter ought to proceed to a “proper trial” makes little sense in the circumstances.

[7] The issue that must be determined by the Court is whether the open building permit, which has not been acted upon or perhaps only to a very small extent, affects title.

[8] The Building Code Act 1992 S.O. 1992, Chapter 23, states that no-one shall construct or demolish a building unless a permit has been issued. Once obtained, the permit may be revoked by the chief building official under certain conditions. The relevant conditions to the case before me include: if, following six months from its issuance the construction or demolition has not been seriously commenced; if the construction or demolition is suspended or discontinued for more than a year; or if the holder requests in writing that it be revoked.

[9] While the solicitor for the Respondent argued that it was a straightforward process to close the permit, I do not accept this argument. Clearly, there is discretion in the building official as to whether or not the permit ought to be revoked; it is not automatic.

[10] It is trite law to say that a purchaser is entitled to obtain good title to the property that is being bought. If there is a defect on title, the purchaser is not forced to accept it.

[11] In the recent case Thomas v. Carreno, supra, Justice Lederman considered an agreement of purchase and sale where there was an open building permit for construction on the property. Although the facts were different in those before me in that construction had been undertaken and title insurance was available, Justice Lederman dealt with the issue of whether an open building permit constitutes a valid objection to title. He noted, “From the evidence it would appear that the building permit related to a fairly substantial renovation and, thus, the potential risk and exposure to the Applicant was significant. The City could have imposed extremely onerous work orders which certainly would affect the Applicant’s use and enjoyment of the property. The Applicant would be subject to the possibility of facing significant remedial construction and possible litigation. In the face of an open permit, the property remains subject to the possibility of a work order. ..”[2]

[12] While counsel for the Respondent argued that there was no evidence of any work order being issued by the City so the building permit was of no consequence, I reject this submission. The existence of an open building permit which enables the City to inspect premises and make work orders does make a difference to the purchaser. Although he was aware of the dilapidated condition of the garage prior to executing the purchase and sale agreement, he was not aware of the existing building permit referable to the garage. The evidence before me, which was not contested, is that the garage needs to be demolished and rebuilt at an approximate cost of $110,000.00. This is not an insignificant amount of work or cost associated with it.

[13] It is also clear that the City is not required to automatically close the permit upon request. There would have to be an inspection and it is unlikely in the circumstances that the City would allow the garage to remain as it currently is. There may be a work order which the Applicant would be obligated to comply with. Clearly, an inspector has the authority under the Building Code Act to make an order that certain work be undertaken immediately to bring the garage into compliance with the Code.

[14] I have carefully considered the evidence before me and the circumstances of this particular case. I am drawn to the inevitable conclusion that the open building permit creates potential risk and exposure to the Applicant: it is not clear that the permit can be closed quickly and easily; it is not clear what type of work needs to be done to satisfy the City that it is appropriate to close the permit; if demolition and construction is required, it is not clear what needs to be undertaken and its cost; and it is not clear whether the City will be satisfied by the work proposed or completed to make the changes or whether a work order will be issued.

[15] What is clear to me is that the existence of the open building permit does make a difference to the Applicant’s position. On the facts of this case, there is a risk of litigation down the road and the purchaser’s right to enjoyment of the property is by no means certain. In my opinion, the open building permit is not a minor defect; rather, it goes to the root of title and constitutes a valid objection to title. I do not find that the position taken by the Applicant is, to borrow the phrase from Justice Moldaver (as he then was) in Stefanovsky v. Kok[3], “capricious or arbitrary and contrived to avoid contractual obligations.”

Conclusion

[16] The Applicant’s requisition of the Respondent to close the open building permit is a valid objection to title on the property. The Respondent has not shown good title pursuant to the terms of the Agreement of Purchase and Sale.

[17] I see no reason why costs ought not to follow the event. It seems to me that if the Certificate of Estate Trustee had been obtained at an early date and a request made to close the permit, this application might have been avoided. The Applicant is entitled to its costs of the Application which I fix in the sum of $10,000.00 inclusive of fees, disbursements, and taxes payable forthwith.

D.A. Wilson J.

Date: June 21, 2013

[1] Thomas v. Carreno et al., 2013 ONSC 1495

[2] Thomas v. Carreno, supra

[3] Stefanovsky v. Kok (1990), 1990 6848 (ON SC), 73 O.R. (2d) 368 (Ont. H.C.)