Introduction
1. General Observations
This course relates to the sale and purchase of estates and interests in land. There is no comprehensive legislation governing this circumstance; we look primarily to common law and equitable principles, though some legislation will be referred to.
2. Why a course of real estate transactions?
A separate course in real estate (rather than inclusion in a general course on contracts) is important because real estate transactions are unlike other contracts of sale; they have particular formalities, etc that justify considering them independently.
3. Structure of the Material
A real estate transaction involves several stages, each of which raises pertinent issues:
· Stage 1: Pre-Contract Period à there are two main relationships involved with this stage. First, both vendors (V) and purchasers (P) often seek the services of real estate brokers (B) to act as their agent and facilitate the sale; the agreement wrt the vendor is generally called a “listing agreement,” while the agreement wrt the purchaser is generally called a “buyer agency agreement.” Second, in pursuit of their commission, the agent may seek to interest third parties (TP) in a real estate transaction (RET) with their client.
· Stage 2: Contract Formation (Marketing the Property) à once a B finds a TP, the principal (either the P or V) will commonly enter into an agreement (e.g. “agreement of purchase and sale”). Consider: the nature of the agreement (is it valid?), its enforceability, the nature and effect of the conditions precedent commonly inserted into such Ks.
· Stage 3: Post-Contract/Pre-Completion Period (Delay) à btwn the formation and execution of the K, numerous issues may arise and must be dealt with (e.g. discovery of defects, change in nature/value of the property, etc).
· Stage 4: Contract Completion (Execution) à the K refers to a future date when the V will convey legal title of the property and the P will transfer the funds. Consider: last-second defaulting in obligations.
· Stage 5: Post Contract Completion à the P has become the owner and the V has received consideration for the transfer. Consider: P discovers defects after the sale.
CHAPTER ONE: Real Estate Brokers, Vendors, Purchasers and Lawyers
1.1 Introduction
Vs or Ps seek the services of Bs b/c the latter are considered specialists in the transfer and acquisition of real estate. Most Bs are members of real estate boards, the primary advantage of which is that these boards offer multiple listing services (available only to board members) that are said to facilitate sale.
· Thus, this section deals with the relationship of Bs to their clients.
· Traditionally, only the V used an B, but now Ps do as well, the consequence of which is both parties are usually represented by an B. It is a relationship of agency.
o This allows for the problem of dual agency: the same B or brokerage firm may end up representing both the V and P. This is problematic b/c the same party cannot serve as a fiduciary for both sides of a transaction.
§ Note: when a V lists a property with a particular firm, their K is with the firm, not the specific individual B.
· This is Step One: the first part of the process is the marketing of the property and the relationship btwn the Bs, Ps and Vs.
1.2 Regulation of Real Estate Brokers
In relation to their clients (Vs and Ps, known as “principals”) and TPs, Bs are subject to the general principles of CML wrt rules of age
trying to market, transfer or to acquire real estate as well as any offer or attempt to list.
§ Criticism: it is so broad that where you see a “sale by owner” sign, the owner is trading in real estate.
· Prohibited Practices (s. 4): generally, one must be registered in order to trade in real estate (seems to disallow sale by owner), and one must not misrepresent one’s status or membership. However, under s. 5(h), a person may trade on the person’s own account in respect of the person’s own interest in real estate. There are other people or entities that are exempt, but only in so far that the trading relates to their work (e.g. a law firm handling the estate of a deceased, and as trustees they decide that the estate needs to be sold so they market it). Otherwise, the law prohibits everyone except for those registered under the Act.
· Effectively, then, this legislation grants a monopoly over the real estate business to registered As.
· Ontario Regulation 567/05: these were developed to detail various aspects set out in the Act above. The regulations are enforced and managed by the Real Estate Council of Ontario, the purpose of which is to protect consumers.
· Ontario Regulation 580/05 (a.k.a. CODE OF ETHICS): not just about conduct, rather it presents a detailed framework of the rights and obligations of the members.
