Lessons from Recent Real Estate Case from Ontario Court

In November and December 2022, the real estate litigators at Walker Law argued a seven-day trial to sort out who of two parties was the true owner of a residential property.

On February 24, 2023, the Judge issued his decision in favour of Walker Law’s client. The Judge warned that the case was a “cautionary tale” about what happens when individuals don’t use lawyers to help put complicated transactions down on paper – especially when those transactions involve real estate.

Below are two lessons to take away from the case, Latchmiah v Durocher.[1]

Always Put Real Estate Transactions in Writing

Parties to complex transactions should try to write their understanding on paper and sign it. This is especially true for agreements where real estate is involved, such as sales and leases of real property.

Section 1 of Ontario’s Statute of Frauds[2] states that any “interest” (property right) that is created with respect to real property (such as land or a house) must be made in writing and signed by all parties that created the interest. The consequence of not putting a property right in writing? The property right will be deemed to have no “force or effect.” In other words, it is useless.

Another consequence of failing to document a transaction is that when the parties later disagree about what the terms of the arrangement actually were, there is no written record of what was agreed upon to refer to.

This is what happened in the case that Walker Law argued, which is called Latchmiah v Durocher. In this case, the Defendant owned a house but missed several mortgage payments, and his mortgage company decided to evict him from the house and sell it. The Defendant entered into a “handshake” agreement with the Plaintiff through an agent, in which the Defendant would pay the Plaintiff to take the title to the house and assume responsibility of the mortgage in one year. This would allow the Defendant to rebuild his credit and take out another mortgage. However, a disagreement arose about what the terms of the agreement were after that one year expired, and neither party, including the agent, could consult a written record of what the original agreement was. The parties ended up in Court which resulted in the Court deciding what the agreement between them was.

In Latchmiah v Durocher, the Defendant attempted to assert that the Plaintiff held the house “in trust” for him. This means that even though the Plaintiff bought the house and financed it with a mortgage, the Defendant believed that she held the title for the benefit of the Defendant. The Court considered this argument, noted that there was no documentation of this arrangement, and decided that there was no “trust” relationship.

Latchmiah v Durocher sends a warning message to individuals who are thinking about entering into a contract – and especially a contract involving land. If you verbally make an agreement but do not write down the agreement on paper, it is very possible that you will need to hire real estate litigators to help resolve your dispute down the road.

If You Hold Yourself Out to be a Professional, You Will be Held to the Standards of One

Another lesson from Latchmiah v Durocher is that if an individual accepts money for providing a service, even if they don’t have the necessary qualifications to provide that service, they will be expected to perform that service with a reasonable amount of competence needed to perform their work.

In Latchmiah v Durocher, an individual who held himself out to be a real estate agent brokered the agreement between the Plaintiff and Defendant.[3] Both parties relied on him to guide them throughout the complicated transaction, but the individual failed to recommend that the parties put the agreement down in writing, or obtain legal advice to understand the consequences of the transaction.[4]

The Court decided that whether the individual could be characterized as an (unlicensed) agent, expert advisor, or simply a “fixer,” he had a “basic duty” to make sure the parties put their arrangement in writing, so they wouldn’t be vulnerable to uncertainty and expose themselves to negative legal consequences.[5] The Court ultimately decided that this individual was responsible for among other things, the Defendant’s losses of $20,000, even though he was only paid a small fee of $1,500 for his services.[6]

Latchmiah v Durocher also stands for the proposition that individuals should be careful when they accept money for their services or expertise, because they could be held to strict standards of professionalism or competency. If you or someone you know is facing any issues with professional negligence or real estate transactions, please contact the commercial litigation team at Walker Law.

[1] Latchmiah v Durocher, 2023 ONSC 1096 (CanLII) (“Latchmiah v Durocher”).

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

[3] Latchmiah v Durocher, at para 177.

[4] Latchmiah v Durocher, at para 178.

[5] Latchmiah v Durocher, at para 183.

[6] Latchmiah v Durocher, at para 183.

Related Posts

Consultation

Contact us now!

    Call Now Button