Real Estate Law In this Issue: Commentary on T.L. Willaert Realty Ltd. v. Fody Can a seller be liable for a brokerage commission without completing a deal? Commentary on Metropolitan Toronto Condominium Corp. No. 1352 v. Newport Beach Development Inc. Prior unsuccessful Tarion claims against a builder do not protect the builder against subsequent law suits. Big Deals Allied Properties REIT completes $115 Million Public Equity Offer on August 14, 2012. Allied Properties REIT completes $100 Million Public Equity Offering and $42 million acquisition of a portfolio of properties in Toronto. Sun Life acquires the remaining 50% of 6925 Century Avenue from its frequent development partner, First Gulf Corporation. Issues in Datacentre Development Commercial Condominium Units: Pitfalls in Leasing the Ground Floor Green leases: Are they still relevant? Sun Life provides first mortgage financing to Artis Real Estate Investment Trust, in connection with acquisition of industrial portfolio of 1.1 million square feet (17 light industrial buildings) in the GTA. Canadian Real Estate Investment Trust ( CREIT ) acquires and finances a 50% co-ownership interest in Calgary Place office complex for $156 million. A&B s Real Estate Central adds two more talented associates to the team: Michael Ventresca and Trevor Crowley. Allied Properties REIT leases 168,000 square feet at the Canadian Broadcast Centre in Toronto for 49 years. CREIT acquires a 50% managing interest in Altius Centre located in Calgary, Alberta for $89.9 million. PAGE 1
REAL ESTATE LAW Announcements Introducing the Newest Associates in the A&B Real Estate Group. Michael Ventresca We are pleased to announce that Michael Ventresca joined the firm as an associate in our Real Estate Group following his success as an articling and summer student. Michael is a graduate of Osgoode Hall Law School and recipient of the Silver Medal, the Irving Aaron, Q.C. Prize in Real Estate Law, and the Robert W. Macaulay Prize in Land Use Planning. While at Osgoode, Michael served as cochair of the Environmental Law Society, provided pro bono legal research for the Climate Change Lawyers Network, and participated in the Laskin Moot on constitutional and administrative law. Michael was an articling student at Aird & Berlis LLP in 2011, a summer student at the firm in 2010, and a summer student in the City of Toronto s Legal Services Division in 2009. Prior to law school, Michael earned Bachelor and Master of Science degrees from McMaster University. Trevor Crowley Trevor Crowley is an associate and member of the firm s Real Estate Group. He joins Andrew Webster on A&B s highly respected condominium development team. Trevor practises in the area of real estate law with a strong focus on condominium development. He has experience in all aspects of commercial real estate transactions, including negotiating and drafting complex lease arrangements, advising clients in the acquisition and divesture of commercial and industrial properties and providing advice on issues of real estate taxation. Trevor joins A&B from another major Canadian law firm. tcrowley@airdberlis.com 416.865.4640 mventresca@airdberlis.com 416.865.7755 Michael Brooks is now the Practice Group Leader of Aird & Berlis LLP s Real Estate Group. Michael has been a member of the firm since 1990, and has a varied practice which includes a wide variety of corporate and commercial activities and endeavours including corporate/commercial, real estate and university matters. Michael s commercial real estate experience includes acquisitions, divestitures, leasing, development, structured finance, environmental, construction, joint ventures, partnerships and related corporate/commercial and banking law matters. Michael has also been involved in government relations activities and has represented the Canadian real estate industry through the Real Property Association of Canada (REALpac) (1997-2012) in a wide variety of public policy matters including Competition Act reform, property and income tax matters, capital market regulation, green leases, development charges, sustainable development, corporate social responsibility, housing and other urban development issues, affordable housing, REIT reform and telecommunications. He has been involved in industry panels developing standardized real estate terminology, standard leases and agreements, telecommunications agreements, and has led education efforts in these areas and in other areas, including energy deregulation, real estate technology and structuring real estate transactions. mbrooks@airdberlis.com 416.865.3422 PAGE 2
REAL ESTATE CENTRAL REAL ESTATE LAW Upcoming December Seminar: Selling/Buying Real Estate by Selling/Buying Shares or GP/LP Units in the Ownership Entity Stay tuned for more details! Datacentre Development For users of datacentre services there are multiple options including managed services, co-location facilities, owneroperated purpose built facilities and, more recently, third parties that will provide design-build-operate solutions for owners. There are myriad resources available to businesses seeking to review the available options. Derek McCallum As highlighted at the recent Bisnow Data Centre Summit moderated by the author, demand for datacentre space continues to outstrip supply even with a relative wealth of new projects coming online in Toronto in the coming years. The major limitation on the ability to develop sufficient datacentre space to meet the increasing demand is the availability of sufficient electricity, preferably from two independent (redundant) supplies. At the summit we learned that the major cost of datacentre development is neither the cost of acquiring the land nor the cost of constructing a technology intensive structure, but rather the cost of the electricity itself which accounts for more than half of datacentre costs over the long term. In the event a business is seeking to construct a datacentre in an owned or leased facility there are a number of unique considerations that must be reviewed and considered. In the context of the preliminary site selection process, considerations must include access to sufficient reliable power, access to data communication services, infrastructure to provide cooling services and proximity to potential hazards. If a party is considering leasing a facility, it is an absolute necessity that the lease address the unique requirements of such a facility which may include tenant self help remedies; multiple renewal options; and strong protections against the actions of lenders to the freehold owner. We would be very happy to assist you in this process. dmccallum@airdberlis.com 416.865.7728 PAGE 3
REAL ESTATE LAW REAL ESTATE CENTRAL Commercial Condominium Units: Pitfalls in Leasing the Ground Floor Michael Brooks The June 2012 Ontario Court of Appeal decision in TSCC 1633 v. Baghai Development Limited ( Baghai ) and Rabba Fine Foods ( Rabba ) highlights the importance of condominium commercial unit owners and, indeed, tenants of condominium commercial units understanding and complying with the declaration and by-laws of the condominium corporation. In this particular case, Rabba was a ground floor tenant of commercial space in a residential apartment complex under a lease from Baghai, the owner of those units (apparently the original developer). Rabba was ultimately not permitted to display merchandise on carts on the sidewalk in front of its store as it was held to be in violation of the condominium corporation s declaration and rules prohibiting the use of common elements. Baghai had objected to the enforcement of the condominium s by-laws on the basis that Rabba was permitted to use the sidewalk under the terms of its lease, but the court held that the lease did not bind the condominium corporation, wasn t barred by the Limitations Act, and the temporary failure to enforce its rules did not constitute a waiver by the condominium corporation of its by-laws. Those entering into a lease of commercial premises in a condominium must carefully review the bylaws and declaration of the condominium corporation to make sure that the commercial tenancy conforms to the condominium s by-laws. mbrooks@airdberlis.com 416.865.3422 Case Comment: Metropolitan Toronto Condominium Corp. No. 1352 v. Newport Beach Development Inc., 2011 CarswellOnt 13401; Ont. S.C.J. 143 FACTS Trevor Crowley The Plaintiff condominium corporation brought a civil action against the defendant developer for two separate construction deficiencies (i) a defect in the sanitary sewer system that caused toilets to overflow and flood townhouses with sewage and (ii) the systematic failure of the uninterrupted exterior cladding on the townhouses, which caused pervasive leaking. The developer sought to have the action dismissed as an abuse of process because the condominium corporation had previously made unsuccessful claims to Tarion for breaches of warranty pursuant to the Ontario New Home Warranties Plan Act ( ONHWPA ) and the appeal process provided in the Act had not been exhausted. DECISION Justice Corrick of the Ontario Superior Court of Justice denied the developer s motion to strike the condominium corporation s claims on the basis of abuse of process. She found that Tarion s concilitation process, undertaken for the purpose of determining whether a defect is PAGE 4
REAL ESTATE CENTRAL REAL ESTATE LAW covered under the ONHWPA, was more investigative than adjudicative, and that in its role, Tarion was not a tribunal or administrative authority exercising an adjudicative function. As a result, the issue of whether the ONHWPA warranty covered one or both defects was found not to have been previously determined by judicial decision, and it was therefore properly before the Court. Justice Corrick further determined that there was nothing in the legislation requiring the condominium corporation to exhaust the appeal process under the ONHWPA before commencing a civil action, though she suggested that a decision by the appeal tribunal might amount to a judicial decision and prevent a claimant from pursuing a civil action. IMPLICATIONS Purchasers with defect claims (including condominium corporations as deemed owners of common elements under the ONHWPA) are not restricted to the recourse mechanism provided in the ONHWPA. Warranty claims can be initiated, denied and appealed under the ONHWPA process and still be the proper subject of a civil action, though there is some indication from the Court that a decision of the appeal tribunal established by the ONHWPA would prevent further litigation. tcrowley@airdberlis.com 416.865.4640 Case Comment: T.L. Willaert Realty Ltd. v. Fody FACTS Pursuant to a standard form listing agreement, the plaintiff realtor listed the defendant landowner s land. The agreement provided for a commission rate of 4.5% for any valid offer to purchase the Property from any source whatsoever obtained during the Listing Period... The realtor obtained an offer at the listing price but the sale was not consummated because the landowner refused to accept the offer. The realtor brought an action for judgment regarding the payment of commission. DECISION Sandra Dos Santos* Justice Searle of the Ontario Superior Court held that the landowner was liable to pay the commission. The Court held that the word sale price in the commission term was a reference to sale price in the offer and did not require the sale to be consummated. The Court held that although the offer contained conditions that were not part of the listing agreement, they were of little or no importance to the landowner: the offer was valid. The Court rejected the landowner s argument that the realtor forfeited its right to commission because it breached its fiduciary duty to the landowner by allegedly representing the buyer s interests instead of the landowner s. The Court found that the offer was properly presented to the landowner but the landowner became inaccessible once he decided not to sell unless he was able to purchase a farm. IMPLICATIONS A commission term may be triggered by a qualifying offer to purchase and may not require acceptance by the seller. In order to avoid this situation, sellers should strike any wording in the OREA standard form listing agreement that suggests that the commission will be paid on any valid offer received and should insert an acknowledgement that the commission will only be paid if the realtor obtains an accepted agreement of purchase and sale for the property. * The author thanks Stephanie Brown for her assistance in writing this article. sdossantos@airdberlis.com 416.865.3084 PAGE 5
REAL ESTATE LAW Real Estate Central Lawyers: If you have questions regarding any aspect of real estate law, please contact any member of the Real Estate Group: S. Michael Brooks 416.865.3422 mbrooks@airdberlis.com Lloyd F. Cornett 416.865.7757 lcornett@airdberlis.com Trevor Crowley 416.865.4640 tcrowley@airdberlis.com Sandra Dos Santos 416.865.3084 sdossantos@airdberlis.com Randy T. Hooke 416.865.7784 rhooke@airdberlis.com Norman I. Kahn 416.865.3420 nkahn@airdberlis.com Derek J. McCallum 416.865.7728 dmccallum@airdberlis.com Christie McNeill 416.865.7772 cmcneill@airdberlis.com Brookfield Place 181 Bay Street, Suite 1800 Toronto, Ontario, Canada M5J 2T9 T 416.863.1500 F 416.863.1515 www.airdberlis.com Newsletter Editor: Derek J. McCallum Steven Pavlides 416.865.3065 spavlides@airdberlis.com Michael D. Smith 416.865.7731 msmith@airdberlis.com Hayden Solomons 416.865.3960 hsolomons@airdberlis.com Michael Ventresca 416.865.7755 mventresca@airdberlis.com Andrew Webster 416.865.7777 awebster@airdberlis.com This Real Estate Law Bulletin offers general comments on legal developments of concern to municipalities, businesses, organizations and individuals, and is not intended to provide legal opinions. Readers should seek professional legal advice on the particular issues that concern them. 2012. Real Estate Law may be reproduced with acknowledgment. PAGE 6