Boundary dispute dissolves a purchase deal

When homebuyers discover before closing that the sellers are involved in boundary litigation with their neighbours, are they obliged to close the deal? And when buyers discover that the land being purchased is smaller on paper than it appears on the ground, do they still have to close the deal?

Those were the issues in a case that went to Ontario’s Court of Appeal concerning the home Sharifa Himidan agreed to sell to Emma Farquharson and Sheehan Burns for $1,905,000.

The property is an L-shaped lot, with access to the garage at the rear and a driveway leading from Cornish Road around the corner. On paper, the driveway is seven feet wide, but appeared to be nine feet wide on the ground. Attached to the purchase and sale agreement was a 1987 survey showing a private driveway just seven feet wide. The agreement provided that “the driveway functions as a private driveway.”

Between the signing of the agreement of purchase and sale and the deal’s closing date, neighbours who owned the corner property on Cornish Road claimed that Himidan did not own all of what visually appeared to be the rear driveway to the garage. They fenced off a two-foot-wide strip of the driveway, which they claimed encroached on their property.

Himidan sued the neighbours over rights to the driveway, but that litigation was not resolved before closing and is still awaiting resolution.

Farquharson and Burns heard about the litigation and refused to close the purchase on the basis that Himidan could not convey clear title to the driveway. The seller sued the buyers for damages for failure to close. The buyers counterclaimed for return of their deposit.

A motion judge found in favour of the buyers, ruling that Himidan represented that she owned all of what was visually apparent as the functioning private driveway when the agreement was signed. The judge ruled that there was a defect in the seller’s title, due to the dispute over whether the driveway was seven feet wide (on paper) or nine feet wide (visually).

The Court of Appeal agreed with the motion judge. Writing for the Court of Appeal in the Himidan case, Justice Benjamin Zarnett held that the motion judge was entitled to find that any reasonable person would assume that the driveway referred to in the agreement would include what appeared to the eye to be the driveway, which was “not seven feet wide but nine.”

The lesson? A home purchaser is not obliged to assume a seller’s litigation with the neighbours over a boundary dispute.

And when buyers discover before closing that title to the land being purchased is smaller on paper than it appears on the ground, they are not required to close the transaction.

Before the deal died, the Cornish Road neighbours demanded $200,000 for the two-foot strip of land. Himidan sold the property for $145,000 less than what Farquharson and Burns agreed to pay. And everybody had to pay their lawyers.

In cases like this, there is no winner.

Bob Aaron is a Toronto real estate lawyer and a contributing columnist for the Star. He can be reached at bob@aaron.ca or on Twitter: @bobaaron2