In most agreements of purchase and sale in use across Canada, the words “more or less” are included when describing the property dimensions. There is often confusion as to what these words mean and the legal impact that these words may have on the rights of buyers and sellers.
Because of the way that properties were measured originally when the provinces were laid out, many legal descriptions were vague, and referred to posts, monuments and streams that are no longer in existence. Some of this confusion was corrected with the introduction of the Land Titles System in parts of Canada, as properties were each individually surveyed and approved prior to registration in the system itself.
In order to deal with the inaccuracies, real estate lawyers and professionals started using the words “more or less” in agreements to allow for minor deficiencies in the property description. In general, if a property description is within five to seven per cent of the actual total area, the courts have generally not permitted a buyer to walk away from the deal, especially if there is a building already constructed on the property. It is also less likely that the courts will allow a buyer to amend or leave a real estate transaction if the buyer was given the opportunity to walk and observe the boundary lines of the property. In such cases, even if there is a minor difference in the area of the land, the buyer is deemed to have received what was expected. As a buyer, you should always consider buying a 100-foot tape measure from a hardware store and take the time to conduct your own measurement of a property prior to finalizing any offer to satisfy yourself in a preliminary way that the boundaries as noted in the agreement and by the position of the fences is correct.
An exact measurement would be much more important if the investment property is vacant land and was being considered for development. In such cases, a difference of even one foot could have a serious impact on the value of the land. For example, a zoning bylaw may require 25 feet frontage for all new dwellings. Thus, a 50-foot lot would give a developer the opportunity to build two homes. If there was a one-foot error resulting in only a 49-foot lot, the developer would be unable to build the two homes. They would require an application to the city for a minor variance application, which is not guaranteed and which can be opposed by the neighbours. Buyers need to insert specific conditions in offers to protect themselves when lot dimensions are critical to their planned use of the property.
Normally, when errors are made in excess of 10 per cent of the area, the buyer cancels the transaction. In some cases, however, the courts have permitted some buyers to actually claim a reduction in the purchase price from the seller and complete the transaction. This can be a disastrous result for a seller, in that they must complete their sale at a price that they were not expecting.
In the case of 3999581 Canada Inc. and 1394734 Ontario Inc., decided by the Ontario Court of Appeal on Jan. 19, 2007, the buyer put in an offer for $680,000 for vacant land containing approximately 98,590 square feet. The seller had made an error in describing the property and it turned out that it only contained 86,745 square feet, a difference of about 12 per cent. The seller knew that the buyer was going to develop townhouses on the land, and that the buyer had planned to build 62 units on the site. As a result of the reduction in the land, the buyer could only build 54 units. The seller tried to terminate the deal but the buyer still wanted to close, with a reduction in the purchase price. The court decided that the buyer was correct and that they were entitled to a $103,875 reduction in the price.
Accordingly, sellers also cannot and should not rely on the words “more or less” to carelessly review and prepare the information relating to lot descriptions. You must carefully review all deeds and surveys prior to making this information available to any buyer.
When anything is not clear, and you know that the buyer will be relying on the accuracy of the information, sellers should include some form of disclaimer clause, to put the buyer on notice that they may want to have the transaction made conditional on their being satisfied with an up-to-date survey to be prepared for the property. An example of a disclaimer clause is as follows;
“The square footage or lot dimensions have been calculated using the standards developed by the provincial real estate association, which in some instances may differ from measurement guidelines used by other sources. The measurement figure is believed to be accurate (but not guaranteed) within a discrepancy of five per cent. If the buyer is relying on the calculation of square footage or lot dimensions, they should attend to their own verification, with either an up-to-date survey or further inspection”
Legal decisions have for the most part protected sellers when they have included these kinds of disclaimer clauses.
If you are buying a property and you notice that the seller has included a disclaimer clause and the area of the property is important to you, then insert a condition that if you are not satisfied with the results of an up-to-date survey or your further inspection then you can cancel the agreement.
If the purchase price in the agreement is, in fact, based on the square footage or the amount of acres purchased then say so in the agreement, so that if it turns out that the area is more or less, then the price will be adjusted accordingly.
This all demonstrates why buyers should always try to obtain an up-to-date survey of a property prior to closing. Up-to-date surveys will immediately:
- clarify any dispute regarding lot dimensions and square footage;
- identify any potential zoning set-back violations;
- provide a guide to the buyer for any future addition that they plan to construct, to ensure that any structure does not encroach onto any neighbouring property or right of way.
It is important that in completing the measurements of rooms you follow the accepted guidelines of your provincial real estate association or the Building Owners and Managers Association (BOMA) of Canada standards for how the measurements are to be calculated. For residential properties these typically provide that you measure from the exterior wall to the edge of the interior room. However, for commercial properties it is much more complex, with different rules applying, depending on the floor of the building, stairways, columns, enclosing walls, and exterior walls. The most recent standard is a building-wide method to ensure that measurement is applied on a consistent floor-by-floor basis and sets out procedures to measure the gross building area, common areas, as well as rentable, and useable areas.
Buyers should ask sellers how they have calculated the square footage in any building that is advertised for sale so that there is no misunderstanding.
There continues to be debate as to whether a buyer will be protected from these types of errors if they have purchased title insurance. I recommend title insurance for every buyer of real estate. This will provide protection against certain title defects, problems with zoning setbacks, unpaid property taxes and perhaps most important, complete protection in the event someone tries to steal a property through a fraudulent conveyance.
However, there continues to be a mistaken belief that title insurance will fix every problem, including errors in legal descriptions or lot areas. In fact, this is not the case. For example, if you think you are supposed to receive a 50-foot lot and a later survey reveals a 48-foot lot, you will only be protected to the extent of what was registered on title to begin with. In addition, if you had the opportunity to walk the property and it is determined that the value of the property has not decreased due to the 48-foot frontage, then nothing further will be paid by the title insurance policy. If there is a deficiency which is paid by the title insurance company, then the title insurer is within their rights to sue the seller for making a false representation in the agreement itself.
There is no substitute for being very careful in reviewing all documentation and getting it right the first time.
Buyers should always remember the following in preparing offers when it comes to legal descriptions and square footage:
- The words more or less will generally permit errors up to five to seven per cent of the area of your property; this means that you have to accept a reduced amount of land or building space than what you thought you were originally buying.
- If lot area or building square footage is important to you, make the deal conditional on your being satisfied with the results of an up-to-date survey for the property.
- If you are basing your offer on the amount of acres or square footage that you expect to receive, then say so in the agreement and provide for a reduction in the purchase price if you do not receive the amount of land that you are expecting.
- Ask your seller for details as to what guidelines they have used in calculating the square footage inside any building.
- Be extra careful when you see that the seller has included a disclaimer clause.
Mark Weisleder is a real estate lawyer, author and public speaker. Visit him on-line at www.markweisleder.com
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