29 July 2020
Enforcing your right to close: The action in conveyance of title
By: Antoine Hammam
Offering to purchase or sell a property is a serious undertaking that should not be taken lightly. Once accepted by the other party, such an offer is transformed into a bilateral agreement of purchase and sale, which grants either party the right to its timely execution.
In a recent Superior court decision on a vendor’s action in conveyance of title, the purchaser of a property was harshly reminded of the serious consequences of refusing to close. Not only did the court order him to sign the deed of sale and pay the purchase price, but he was also condemned to compensate the vendor for the damages that the latter had suffered as a consequence of the delayed transfer of ownership.
An action in conveyance of title can be taken by either party to an agreement of purchase and sale and is subject to the following formalities which the Plaintiff must satisfy:
- The existence of a valid and binding agreement of purchase and sale, of which all conditions, if any, have been satisfied or waived;
- A demand letter sent to the other party, enjoining them to sign the deed of sale;
- Plaintiff must tender a signed deed of sale that is substantially consistent with the terms of the agreement of purchase and sale;
- If the plaintiff is the purchaser, he must deposit the purchase price, or formally undertake to make payment within the proceedings;
- Plaintiff’s action must be taken within a reasonable delay, which may vary depending on the particular circumstances and fact pattern surrounding the transaction.
Although the likelihood of success of an action in conveyance of title once depended on the strict compliance with each of the above formalities prior to instituting proceedings, the courts have since softened their stance. For instance, the lack of a demand letter is now forgivable, provided the Plaintiff respects the other formalities. It is also no longer fatal not to deposit the purchase price in advance. A formal undertaking to pay accompanied by a proof of funds, an irrevocable letter of guarantee, or a hypothecary commitment from a financial institution, are deemed to be sufficient in most cases. In certain situations, upon recognition of the Plaintiff’s right to obtain title, the courts have granted the Plaintiff a fixed and reasonable delay to deposit the purchase price into Court, after which the transfer of title takes effect.
When the Plaintiff succeeds in his action, he may also be entitled to claim financial compensation from the defendant for the damages resulting from the delayed transfer of ownership, such as:
- Notary and transactional fees;
- Banking fees, including penalties and loan interest incurred;
- Loss of profits;
- Lost opportunities that were foreseeable and directly attributed to defendant’s failure to close on time;
- Maintenance and ownership fees, including municipal and school taxes, insurance premiums, electricity and general maintenance;
- Fees relating to putting the property on the market, including brokerage fees, ads, troubles and inconvenience;
- In certain cases where the defendant’s refusal to close is considered abusive, lawyer fees may be claimed as well.
Accordingly, parties to a bilateral agreement of purchase and sale must tread carefully if they have a change of heart and wish to withdraw from their obligations.
A Plaintiff facing a noncompliant counterparty must also be cognizant that, unless an amicable resolution intervenes, a final judgment granting him title to the sought-after property may only be obtained several years later (2 to 3 years after instituting proceedings, on average). This is an important consideration, particularly in commercial contexts, where the timeliness of the transaction is key. When waiting is not an option, Plaintiff can choose to forego forcing the conveyance of title and opt for a stand-alone action in damages.
If you are faced with a situation of that nature, qualified legal advice is key to avoiding heavy and unnecessary consequences. Contact a member of the KRB team to learn more about your contractual obligations in the context of a real estate transaction.