case summary

  • Peace Penzi

Relief from Forfeiture in Real Estate Deals – A Rare Exception
Relief from Forfeiture in Real Estate Deals – A Rare Exception 150 150 Peace Penzi

Relief from forfeiture isn’t something Ontario courts grant often. Especially when it comes to real estate deals, the law tends to take a strict view: if a buyer fails to close, the deposit is gone – end of story. Courts routinely enforce this outcome, even when it feels harsh. That’s why the recent decision in Naeem v. Bowmanville Lakebreeze West Village Ltd., 2024 ONCA 383, stands out. It’s a rare exception and a helpful reminder that while equity may be available, the threshold remains high.

In 2016, Shireen Naeem signed an agreement to purchase a new home for just under $630,000. The builder, Bowmanville Lakebreeze West Village Ltd., postponed the closing several times – delays that were allowed under the agreement but left the buyer in limbo for years. Eventually, a new closing date was set for April 23, 2019. When the transaction didn’t close on that day, the builder claimed Naeem had breached the agreement and forfeited her deposit of over $82,000.

Naeem sued. She initially sought specific performance but later narrowed her claim to the return of her deposit, with interest. The motion proceeded by way of summary judgment, and the judge sided with Naeem – granting her relief from forfeiture. The builder appealed.

At the heart of the appeal was whether the motion judge applied the proper legal test, given that Naeem admittedly failed to close. The builder argued that if the buyer was fully to blame for the breach, there should be no room for relief. Their position was simple: a buyer who misses the closing date can’t ask the court for a refund.

The Court of Appeal didn’t agree. It confirmed that the governing framework remains the test set out in Redstone Enterprises Ltd. v. Simple Technology Inc. 2017 ONCA 282. That decision requires judges to ask two key questions: is the forfeited amount out of all proportion to the vendor’s actual loss, and would it be unconscionable for the vendor to keep it? A buyer’s conduct is relevant to the analysis, but it isn’t the end of the discussion. Relief from forfeiture remains a fact-driven, discretionary remedy that depends on the totality of the circumstances.

In this case, the motion judge found that Naeem was not a commercial buyer but a widow who had worked two jobs – while undergoing cancer treatment – to save enough for the deposit on a family home. More importantly, the judge found that the builder hadn’t suffered any real financial loss from the failed closing. But what ultimately tipped the scales was the builder’s own conduct. After exercising its contractual right to extend the closing date twice, the builder attempted a further extension with inadequate notice. When Naeem requested a short additional extension, she was pressured into signing an amendment – without being told that she didn’t have to. The court found that she had been misled into believing she had no other option.

The motion judge concluded that it would be unconscionable to allow the builder to retain the deposit in those circumstances. The Court of Appeal upheld that finding and dismissed the appeal.

It is worth emphasizing how unusual this outcome is. Ontario courts have consistently affirmed the importance of upholding deposits in real estate transactions. They are not just symbolic; they are treated as serious security for performance. In most cases, if a buyer walks away – or fails to close, even by a day – the deposit is forfeited.

Naeem doesn’t change that general rule. What it does is illustrate just how exceptional the facts have to be for a court to step in. The equities in this case were particularly compelling: a vulnerable buyer, no real loss to the seller, and misleading conduct during a critical moment in the transaction. It was an uncommon set of circumstances that, taken together, persuaded the court that fairness demanded a different outcome.

For buyers, the decision is a reminder to get advice early – especially when closing dates start shifting. It’s not always clear what your rights are, and in many cases, you may have more flexibility than you’re told. For builders and developers, Naeem is a cautionary tale. Overreaching on a technical breach, especially if there’s been a history of delay or poor communication, can backfire.

Relief from forfeiture in Ontario real estate law is still the exception – not the rule. But in the right case, with the right facts, courts can – and will – intervene.

  • Shaneka Shaw Taylor

Fighting over parking: A case of commercial easements
Fighting over parking: A case of commercial easements 150 150 Shaneka Shaw Taylor

What recourse do you have when your commercial neighbour decides to unilaterally remove parking that you both share? This issue was addressed by the Ontario Superior Court of Justice in York Region Condominium Corporation No. 890 v. Market Village Markham Inc.

York Region Condominium Corporation No. 890 (Pacific Mall) and Market Village Markham (Market Village) owned two commercial buildings and the land around their respective buildings. In order to facilitate easy parking and access for their customers, Pacific Mall and Market Village entered into reciprocal agreements in 1994, granting each other certain rights.

Before delving into the case, it’s helpful to get a handle on all the legalese. As the court clarified, these types of agreements are called easements. Unlike a contract or a license, an easement is a right in the land, much like a form of land ownership. So, when a purchaser takes over a parcel of land, they inherit any easements registered against the title to that land.

The court reaffirmed that easements are also a right that may be exercised over land that belongs to someone else. The landowner who grants the easement is referred to as the servient owner, because their land is now “servient to” the easement right. The party receiving the easement right may be a neighbour, a municipality, a utility or a condominium corporation. And they are referred to as the dominant owner. They now have a right that is capable of being asserted against the landowner and can consequently restrict the landowner’s use of their own land.

How that right can be asserted against a landowner was exactly at issue in this case.

Market Village sought to further develop its own land. In order to do so, it sought to move surface level parking on its servient land to underground parking. Pacific Mall objected to this proposed development. It complained that the development substantially interfered with Pacific Mall’s easement. Market Village, in turn, argued that it could move these parking spots because of a Relocation Clause included in the 1994 easement agreement.

The court began its analysis by determining the nature and extent of the rights granted by the easement. It noted that these rights can be understood through an interpretive exercise. Courts must give the words used in their agreement their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties of the time of formation of the contract. And courts must use a common-sense approach, by achieving a contract interpretation that has a fair and sensible commercial result. Of course, how the parties act after the fact can also be instructive in figuring out what they understood to be the agreement.

Here, the court found the reciprocal easement granted both, Pacific Mall and Market Village, with the right to park and the right to access their respective easements. Referring to the Easement Purposes Clause included in the 1994 agreement, the court held that the purpose of the right to park and the right to access, was to allow customers and employees to pass freely to and from the respective lands and buildings, for the purpose of carrying on normal shopping, commercial and retail activities.

Having identified the easement rights, the court turned to Market Village’s argument that the Relocation Clause gave it the right to remove parking spots and to develop new ones. The court completely disagreed.

The Relocation Clause did give Market Village the right to relocate the parking spots on the easement land, at any time, and from time to time. However, the court found that the clause was quite limited.

First, the clause only allowed Market Village to move the spots on the easement land and to change their configuration. In other words, Market Village could not move the parking spots under the easement land, because doing so would change the nature and character of the parking. It would transform the parking from surface parking to underground parking. Therefore, removing the parking spots and moving them underground was tantamount to eliminating the parking spots altogether. And that was a violation of Pacific Mall’s easement right to park.

The court also found that Market Village’s proposed development substantially interfered with Pacific Mall’s easement rights. The legal test is whether there is substantial interference with a reasonable use of the servient land for its granted purpose. Here, the purpose of the land was to permit shopping, commercial and retail activities. The court held that the elimination of 948 parking spots amounted to the removal of 70 per cent of the available parking spaces used by Pacific Mall and its customers. The additional curbing and landscaping required by the development would make it all the more difficult for Pacific Mall customers to access the mall itself. Thus, the court held that Pacific Mall’s easement was substantially interfered with.

Lastly, the court noted that the proposed development would also overburden the easement. Overburdening occurs when an easement is used excessively, or significantly beyond the rights conveyed by the easement. It’s a balancing act. Increase in the use of an easement is not enough to constitute overburdening. Unfortunately for Market Village, the development project did amount to an overburden. It would increase demand for the remaining surface parking on Pacific Mall’s servient land, well beyond what was intended in 1994.

In wrapping up, it’s important to remember that easements are interests in the land. When purchasing commercial real estate be sure to note what easements are registered, how they’ve been handled previously, and the impact they might have on future development. Once an easement is registered, you cannot act unilaterally with respect to your land. The dominant owner has rights that can be enforced against you, and may throw a wrench in potential development, and future growth of your business.

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