Standard Utility Easements Unremoved: Buyers in Breach for Failure to Close

Can a buyer refuse to close because of unremoved standard utility easements? That was the issue in Joo v. Tran, where the sellers and buyers had struck an agreement for the $2.13 million sale of a residential property. A signed amendment to the agreement included a schedule containing a building location survey.

Prior to the last day for submitting requisitions, the buyers discovered four easements that had been registered on title in 2002, but which had been undisclosed by the sellers. These were standard utility easements in favour of the municipality, Bell Canada, a cable TV company, and a hydro company and were intended to accommodate water mains, storm sewers, and telecommunication facilities and services. They ran along the front of the property, with a smaller easement running along the back, and appeared to service the property as well as the adjacent lots. The easements' location did not impinge on the use of the backyard, nor allow for public entry onto the defined easement area.

Importantly, all four easements were well-illustrated on the parcel identification page, and were marked on a survey attached to the parties' agreement.

Prior to closing, the buyers nonetheless submitted a written requisition to have the easements removed, claiming they were an undisclosed material fact that – had they known in advance – would have precluded them from entering into the deal in the first place. They correctly pointed out that the easements took up 27 percent of the lot they had agreed to buy.

The sellers took the position that there was no valid objection to title, and refused to take steps to remove the easements in accord with the buyers' requisition. The buyers subsequently refused to close.

The sellers re-listed the property soon after, and sold it for $1.7 million. They sued the buyers for the shortfall and brought a motion for summary judgment.

The court granted the sellers' motion. This was a standard-form agreement of purchase and sale, stating that title to the property would be "good and free from all registered restrictions and encumbrances" except for "minor easements … for domestic utilities, telephone services, drainage and sewers, utility lines, telephone lines, and cable lines". In other words, the agreement expressly carved out a clear exclusion for certain standard municipal and utility easements.

In the court's view, the four contentious easements fell squarely within the wording of that exclusion clause. The agreement also included a clearly-marked survey as an attachment – which the parties had initialed – showing the easements' locations. The court added that while the agreement was signed in May 2017, the buyers did not raise the easements issue until several months later, in August of 2017.

As for the buyers' complaint over the easements' relative size, the court said:

Although these easements take up a significant percentage of the lot, I am satisfied that this has to be reviewed in context and in view of the actual location of the dwelling, the location of the easements, and the stated purpose of these easements. … these are the types of utility easements that any purchaser might expect in a residential subdivision.

Since the standard utility easements fell within the clearly-worded exclusion, the buyers had not raised valid unanswered requisitions to title which gave them the right to terminate the transaction. They were in breach for failing to close.

On the issue of damages, the court found no evidence to show that the sellers had acted imprudently in ultimately re-selling the property for $1.7 million on the open market. They were accordingly entitled to damages in the amount of $430,000, being the difference between the price obtained and the price originally agreed-to by the buyers. See: Joo v. Tran, 2020 ONSC 806.