real estate

  • 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.

  • Peace Penzi

Court Decision Enforces Oral Agreement for Real Estate Sale
Court Decision Enforces Oral Agreement for Real Estate Sale 150 150 Peace Penzi

In Ontario, specific performance is an equitable remedy available in real estate transactions, compelling a party to execute their contractual obligations rather than simply paying damages for a breach. Unlike monetary compensation, specific performance is only granted when the subject property is unique and irreplaceable, making it particularly suitable for the intended use of the purchaser.

Oral agreements in real estate transactions can be enforced under certain conditions, despite the Statute of Frauds[1], which typically requires contracts for the sale of land to be in writing. For an oral agreement to be enforceable, there must be clear evidence of the essential terms of the contract and substantial acts of part performance that unequivocally point to the existence of the agreement. Courts will consider factors such as the property’s strategic value, proximity to other assets owned by the purchaser, and any specific attributes that cannot be easily duplicated.

In 2730453 Ontario Inc. v. 2380673 Ontario Inc., 2022 ONSC 6660[2], the Ontario Superior Court of Justice upheld these principles, reinforcing the enforceability of oral agreements supported by substantial actions.

Case Background

In this case, 2730453 Ontario Inc. (the “Purchaser”) sought to enforce an oral agreement to purchase a 32-acre property from 2380673 Ontario Inc. (the “Vendor”). The Purchaser intended to consolidate this property with an adjacent parcel it already owned, aiming to develop the combined land into a significant industrial project. Despite extensive negotiations and a clear verbal agreement, the Vendor attempted to back out of the deal, relying on the Statute of Frauds, which requires certain contracts, including those for the sale of land, to be in writing.

Key Facts and Court Findings

Uniqueness of the Property:

The Purchaser’s expert report highlighted several unique features of the property, such as its designation as Protected Future Employment Land, visibility from Highway 407, and proximity to major transit routes. The court agreed, emphasizing that the property’s unique attributes made it irreplaceable for the Purchaser’s development plans.

Part Performance:

The court found that both parties engaged in significant actions that demonstrated their commitment to the agreement:

Purchaser’s Actions:

The Purchaser conducted environmental assessments, obtained surveys and title searches, negotiated commission agreements, and prepared for closing by retaining legal counsel and tendering the purchase price.

Vendor’s Actions:

The Vendor retained legal counsel for the transaction, negotiated over property easements, reviewed and revised draft agreements, and prepared necessary closing documents. These actions constituted part performance, making the oral agreement enforceable despite the Statute of Frauds.

Case Analysis

In this case, the court granted specific performance due to the unique nature of the property and the inadequacy of financial compensation. For the Purchaser, acquiring the adjacent property was crucial for the planned development, making the land itself irreplaceable. This decision underscores the courts’ recognition that some properties possess unique qualities that render monetary damages insufficient.

Implications for Real Estate Investors

Oral Agreements Have Weight: This ruling demonstrates that oral agreements can be enforceable, particularly when both parties’ actions clearly indicate an intention to be bound by the terms. Documentation and clear communication remain essential to mitigate risks.

Due Diligence is Key: Thorough preparation and demonstrable commitment to the terms of an agreement can strengthen the enforceability of oral contracts. Investors should ensure all necessary steps, such as assessments and legal preparations, are meticulously documented.

Uniqueness Matters: The decision highlights the importance of unique property attributes in real estate transactions. Investors should consider the strategic value of properties and how their unique characteristics can impact negotiations and legal outcomes.

Conclusion

This case sets a precedent for the enforceability of oral agreements in real estate transactions and emphasizes the importance of clear, proactive actions in securing and validating such agreements. It serves as a valuable lesson for real estate investors about the potential power of verbal commitments backed by substantial performance.

Need expert litigation support for your real estate disputes? Contact us today to ensure your investments are protected and your rights are upheld.

[1] Statute of Frauds, R.S.O. 1990, c. S.19

[2] 2730453 Ont. Inc. v. 2380673 Ont. Inc., 2022 ONSC 6660 (CanLII), <https://canlii.ca/t/jtm4c>

  • Shaneka Shaw Taylor

Court orders builder to return deposit following “misleading conduct”
Court orders builder to return deposit following “misleading conduct” 600 400 Shaneka Shaw Taylor

Once a purchaser provides a deposit for an Agreement of Purchase and Sale (APS), there are very limited circumstances in which that purchaser can recover their deposit in cases where the purchaser refuses or is unable to close. 

The case of Naeem v. Bowmanville Lakebreeze West Village Ltd. illustrates the limited scenario can lead to the purchaser getting their deposit back. 

Facts

Shireen Naeem (the buyer) entered into an APS with new home builder, Bowmanville Lakebreeze West Village (the seller), to purchase a new home at 39 Larkin Lane in Bowmanville, Ont. The terms of the APS were as follows: 

(a) A purchase price of $629,900; 

(b) A deposit of $82,916.19 which included décor and structural upgrades; 

(c) A requirement that Lakebreeze comply with certain conditions if it sought to change closing dates; 

(d) A closing date of Sept. 14, 2017; and 

(e) An outside closing date of Jan. 14, 2019

A Tarion addendum was also included in the APS, which outlined how the closing date would be altered. 

 

The sequence of events

Lakebreeze requested to change the “firm” closing date of May 14, 2018, to a “delayed” closing date of Mar. 21, 2019 (which was beyond the “delayed” closing date stipulated in the APS). Lakebreeze provided notice of this change on May 2, 2018 (which was well beyond the required notice period). 

Shortly thereafter, a representative of Lakebreeze left a voicemail for the buyer on Aug. 27, 2018, to advise her that the dates were being moved. The representative then sent an email to the buyer requesting that she call them regarding the new closing date. 

The call was returned by the buyer’s son, who was advised — by the representative — that the buyer could send in a request for a preferred closing date. The son then asked whether or not the buyer could get her deposit back. The representative told him that someone would call back to provide a response, but, according to the buyer, no one ever did. 

The buyer emailed Lakebreeze on Aug. 28, 2018, asking for a closing date of either Apr. 30, 2019, or the first week of May 2019. Lakebreeze’s representative emailed the buyer back the following day advising her that the latest possible closing date was Apr. 23, 2019 because this was the latest date in order to “stay in the delayed compensation eligibility.” (This was a misstatement because, according to the APS, the buyer was already entitled to delayed compensation eligibility because the closing date was beyond the “firm” closing date). 

The representative followed up by sending an email to the buyer, attaching a draft amendment to the APS for her to sign. The buyer signed the amendment, and the closing date was delayed to Apr. 23, 2019. At the time she signed the amendment, the buyer was not aware — nor was she told — that she did not have to sign the amendment and that the APS was actually voidable at this juncture. The buyer did not seek legal advice before signing the amendment. 

On Apr. 12, 2019, the buyer asked Lakebreeze if the APS could be amended to add two new parties (her daughter-in-law and her son). Lakebreeze reminded the buyer that Apr. 23, 2019 –— the closing date —was approaching. On the closing date, the buyer responded, asking if she could add three new parties to the APS and delete herself from the agreement entirely. Lakebreeze refused and advised the buyer that they were terminating the APS. 

On May 16, 2019, the buyer attempted to reinstate the APS. Lakebreeze responded by advising her that the APS had been terminated and that the deposit was forfeited. 

The buyer’s Arguments

The buyer submitted that she was misled (deliberately) by Lakebreeze’s representative because the representative did not inform her that Lakebreeze had breached the APS by setting an improper “delayed” closing date and that the requested amendment would have had the effect of alleviating Lakebreeze of said breach. 

The buyer also submitted that she was not advised of the fact that signing the amendment was voluntary and that she could have either set a new closing date herself or accepted Lakebreeze’s repudiation of the APS and gotten her deposit returned. 

The buyer argued that the court should exercise its discretion to grant her relief from forfeiture of the deposit because the forfeiture was out of proportion to the damages suffered by Lakebreeze and because allowing Lakebreeze to keep the deposit would be unconscionable. 

Lakebreeze’s Arguments

Lakebreeze claimed that it was not in breach of the APS by moving the closing date because the Tarion addendum functioned as a “guideline” rather than a binding agreement. The agreement was also voidable by the buyer, yet she chose to sign the amendment. 

Lakebreeze further submitted that the buyer should be barred from making any argument that she should be relieved of her obligation because she voluntarily signed the amendment and because she should have obtained legal advice (as was contemplated in the APS) before she signed the amendment. 

Lakebreeze also pointed out that the buyer made a last-minute request to add parties to the APS and to remove herself (which made it clear that she was unable to close the transaction because of her financial situation) and that the buyer did not attempt to reinstate the APS until well after she was advised that the APS was terminated. Additionally, the buyer offered no evidence that she was able to close the deal on any of the prior closing dates. 

Finally, Lakebreeze submitted that “(t)he delay of the closing date as agreed to in the amendment inured to the benefit of the Buyer due to her difficulty in financing.”

 

Court’s decision: Altering the closing date

The court determined that the Tarion addendum was a “guideline,” and therefore, the parties were not precluded from amending the dates set out. The court also noted that since section 4(a) of the addendum stated that “any amendment not in accordance with this section is voidable at the option of the Purchaser,” any amendment that was non-compliant and that altered a closing date was voidable (but not invalid). 

The court also held that:

1) The parties were able to alter the closing date by virtue of a mutually agreeable amendment (as was argued by Lakebreeze);

2) The buyer could have sought legal advice, and she could have better understood her rights with respect to voiding the APS and getting her deposit back;

3) At the time of the request to extend the closing date, the buyer agreed to extend it;

4) The buyer could not close the deal on the extended closing date of Apr. 23, 2019, as a result of her financial situation. 

 

Did Lakebreeze mislead the buyer?

The evidence before the court demonstrated that the buyer was misled by Lakebreeze’s representative because the buyer “was told that she had to agree to a closing date of no later than Apr. 23, 2019 or she would lose her eligibility for delayed compensation” (which was untrue) and because she “was not alerted to the fact that the notice period for a request by Lakebreeze to further delay the closing date had passed nor that the extension of the closing date rendered the contract voidable should she wish to do this.” 

The court acknowledged that Lakebreeze was not required to provide the buyer with legal advice. Ultimately, however, Lakebreeze’s conduct went beyond merely making a request of the buyer without explaining the options available to her. 

In response to the buyer’s request for a closing date later than Apr. 30, 2019, Lakebreeze’s representative should have told her that she was entitled to a later date — instead, the representative chose to deliberately mislead the buyer. At this point, the buyer was actually entitled to void the APS and get her deposit returned. 

Another reason why the court held that Lakebreeze misled the buyer had to do with “the failure to answer the Buyer’s son’s question about the possibility of getting the deposit back.” 

 

Forfeiture of the buyer’s deposit: The law 

Lakebreeze sought to hold the buyer to the strict terms of the agreement despite the fact that it deliberately misled her about the terms of the agreement. The court found that Lakebreeze’s conduct did not necessarily amount to a breach of the APS, but it did factor strongly into the court’s analysis with respect to whether or not the buyer would be relieved from forfeiting her deposit.

The court pointed out that section 98 of the Courts of Justice Act, which allows a court to “grant relief against penalties and forfeitures, on such terms as to compensation or otherwise as are considered just” — was to be given a fair, large and liberal interpretation. 

The court also held that granting relief from forfeiture is a “power is predicated on the existence of circumstances in which enforcing a contractual right of forfeiture, although consistent with the terms of the contract, visits an inequitable consequence on the party that breached the contract.” 

Furthermore, since courts grant relief from forfeiture of a deposit (in the context of agreements of purchase and sale) “where the deposit constitutes a penalty,” the court found it important to determine whether the deposit was out of proportion to the damages suffered and whether retention of the deposit would be unconscionable. The court also clarified that a finding of unconscionability “must be exceptional and strongly compelled on the facts of the case.” 

The court then referred to paragraph 30 of the Redstone Enterprises Ltd. v. Simple Technology Inc. decision, which outlined factors to be considered in determining whether forfeiture should be considered unconscionable. Some of these factors include: 

a) The relative bargaining powers of the parties

b) The relative sophistication of the parties; 

c) The existence of bona fide negotiations; d) The nature of the relationship between the parties; 

e) The gravity of the breach; and 

f) The conduct of the parties.

 

Forfeiture of the buyer’s deposit: Application of the law to the facts 

Lakebreeze was a builder and vendor of residential homes who was in the business of negotiating agreements of purchase and sale with prospective homebuyers. The buyer was a widow who worked two jobs whilst undergoing cancer treatment in order to save enough money to put down a deposit on a home for her family. 

Negotiations between Lakebreeze and the buyer (regarding the extension of the closing date) involved Lakebreeze failing to answer the buyer’s question (regarding the return of her deposit), misstating the facts (with respect to the period of eligibility for delayed compensation), and going ahead with producing an amendment with a closing date that was contrary to what the buyer requested. Lakebreeze also engaged in such conduct whilst knowing that the APS was voidable at the request of the buyer without any penalty. 

Lakebreeze suffered no loss as a result of the failure to close the transaction yet wished to hold the buyer to the amendment. The court found that it would be unconscionable to do so.  

Lakebreeze was to return the deposit of $82,916.19 as well as pre-judgement interest to the buyer.

 

Summary

When a purchaser and a builder and vendor of residential homes (in the business of negotiating agreements of purchase and sale with prospective homebuyers) enter into an APS, there may be issues with the agreed-upon closing date. 

Negotiations regarding amendment of a closing date will be found to be misleading if: 

1) One of the parties misstates the facts to the other party with respect to agreeing to a certain date and then forges ahead with producing an amendment with a closing date contrary to what was requested by the other party;

2) One of the parties fails to answer the other party’s question regarding the return of a deposit and/or 

3) One of the parties was not alerted to the fact that the notice period for a request by the other party to delay the closing date has passed (thereby rendering the contract voidable). 

Such misleading conduct will not necessarily amount to a breach of the APS, but it will factor into a court’s analysis of whether or not a requesting party should be relieved from forfeiting his/her deposit. 

  • Shaneka Shaw Taylor

Joint Ventures: Reasonable Expectation of Partners May not survive an Application under the Partition Act
Joint Ventures: Reasonable Expectation of Partners May not survive an Application under the Partition Act 150 150 Shaneka Shaw Taylor

When parties co-own a property, either as joint tenant or tenants in common, they retain the prima facie right to compel either a partition or sale of the property. However, a co-owner can be deprived of the right to compel a sale in circumstances of malice, oppression, or vexatious intent. Specifically, the Court has recognized that in order to prevent a partition or sale, there must be conduct that undermines the reasonable expectations of the parties. In Green et al. v. Gardeazabal, 2023 ONSC 2683, the Court clarified what constitutes “reasonable expectations” in this regard.

Facts

In mid-2021, the Applicants, Ms. Green and Mr. Dutra, and the Respondent, Ms. Gardeazabal, contemplated purchasing an investment property together. Prior to their purchase, the parties had discussed achieving a return on investment within two years of owning the property. Green and Dutra had also inquired with a mortgage broker and real estate agent about the possibility of a return on investment within one to two years. The parties then purchased a property in Severn, Ontario in April 2022, and each held a 50% share as tenants in common, with Green and Dutra holding their 50% share as joint tenants. There were no written contracts or agreements among the parties governing their joint venture. Shortly after the purchase, Green and Dutra told Gardeazabal that they wished to sell the property. Green and Dutra gave Gardeazabal a number of options, including a potential buy-out of their interests. Instead of doing so or presenting a counteroffer, Gardeazabal indicated she would simply allow the mortgage to renew automatically to prevent Green and Dutra from getting out of it.  Green and Dutra then brought an application for the sale of the Property. Gardeazabal sought a dismissal of the application and an interim injunction preventing the sale until the end of April 2024.

Gardeazabal’s Position

Gardeazabal opposed the sale of the property on the basis that Green and Dutra’ conduct and representations before the purchase, created a reasonable expectation that the parties would hold the property for at least 2 years. She had formed a company with Green and Dutra to handle property management and rentals and had rented the property for the summers of 2022 and 2023. She stated that she relied on the reasonable expectations to secure her portion of the down payment, which amounted to her life savings, and that after the parties purchased the property, Green and Dutra wanted to purchase other properties but could not finance these projects while they owned the subject property. She submitted that as a result, Green and Dutra’ conduct was coercive and abusive, and unfairly disregarded her interests.

Green and Dutra’s Position

Green and Dutra submitted that the evidence did not support Gardeazabal’s reasonable expectation claims, as there was no formal agreement as to how long the parties would own the, property. They argued that any references to this timeline in their discussions were projections subject to the ordinary considerations of real estate investment. Further, any communication done prior to purchasing the property was done for the purposes of planning or for due diligence.  Finally, Green and Dutra argued that neither of them acted in a coercive/abusive/unfair manner, and they no longer trusted Gardeazabal as they were concerned she did not account for all the funds she received from vacation renters.

Rights Under the Partition Act

Justice Harper first canvassed the legal considerations governing the partition and sale of land pursuant to the Partition Act. Per sections 2 and 3 of the Act, all tenants in common have a prima facie statutory right to compel a partition or sale. The presumption is in favour of partition, although a sale will be ordered if found to be more advantageous to the parties, or if the land is not suitable for partition. The Court has the discretion to refuse either a partition or sale; however, the party resisting the request has the onus of demonstrating the other party’s malice, oppression, or vexatious intent, such that the remedy sought would cause them hardship. In exercising this discretion, the Court should account for any agreements between the parties about the land in question.

Oppressive Conduct and Reasonable Expectations

Justice Harper then reviewed the legal concepts surrounding oppressive/coercive conduct and reasonable expectations within the context of the Partition Act. The oppression remedy, as it appears in corporate law, contains two elements: 1) conduct that undermines the reasonable expectations of the parties; and 2) conduct that is coercive/abusive/unfairly disregards a party’s interests. A claimant’s reasonable expectations to be treated a certain way will depend on the facts of the case, the relationship at issue, and the entire context of the matter. A party’s oppressive conduct is also usually merged or tied up with conduct that may defeat the reasonable expectations of the parties. The Court found this contextual approach should be considered when deciding whether or not to grant a remedy under the Partition Act, as a determination of oppressive conduct requires an examination of the relationship between the parties, their reasonable expectations, the nature of the conduct, and the impact on the person seeking to avoid a sale.

Application of the Law to the Facts

Justice Harper found that while the parties embarked on an investment venture, there was never any agreement among them on the terms of this venture, and any conversations, planning, or due diligence leading up to the purchase of the property did not amount to establishing a reasonable expectation to hold the Property for at least two years. While he noted that Gardeazabal did have an expectation of the length of time the Property was to be held, this expectation was subjective, as setting a minimum time to hold an investment is not a reasonable expectation, given the nature of investing in real estate.

Justice Harper then went on to find that Green and Dutra did not act in a manner that was oppressive or in bad faith. They no longer saw the Property as profitable, it did not suit their needs, and they had lost confidence in Gardeazabal’s ability to manage it. He further noted that when Green and Dutra communicated this to Gardeazabal, she did not consider any of the options Green and Dutra had given her to retain the property. In the end, Justice Harper ordered a sale of the property,

Summary

Parties who wish to purchase an investment property together should document their expectations and intentions in writing and have such documentation reviewed by a lawyer prior to execution. Even with such documentation governing the relationship between parties, a court will take a contextual approach when assessing whether or not one party has behaved in an oppressive manner outside of another party’s reasonable expectations. This context will include the nature of the real estate market, which means that any expectations the parties may have about a minimum amount of time to hold a real estate property will likely not be considered valid by the court.

  • 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.

Enter your
text here