Real Estate Disputes

Real estate litigation can be unique, however, buyers generally commence lawsuits for three reasons: 

1. Deposits 

If a transaction does not go through on the closing date, the seller may refuse to return the buyer’s deposit. In certain circumstances, a buyer can commence a lawsuit for the release of their deposit.  

2. Defects 

Buyers will also typically commence a lawsuit against sellers for defects associated with their new home. There are two key types of defects to a property – patent defects and latent defects. Patent defects are visible to at least the trained eye, whereas latent defects cannot be seen as easily. Real estate disputes are common when a seller fails to disclose or misrepresents the existence of a defect. 

3. Fixtures and Chattels 

Chattels are items that usually stay with the house, such as stoves, refrigerators, blinds and window coverings, etc. Chattels are not permanently attached to the property but are so integral that they’re not commonly moved. Traditionally, a seller will list on an Agreement of Purchase and Sale which chattels are staying with the property. Similarly, buyers may insist on certain chattels being included with the purchase of the property, such as décor items and furniture.  

Fixtures are items that are integral to the property and would be damaging to move, like the furnace, baseboards or hot water tank. Fixtures are quite literally affixed to the property and stay with a property in a sale.

In the Agreement of Purchase and Sale, sellers typically represent and warrant to buyers that any fixtures and chattels included in the sale of the property are in good working order, or if not, will be properly repaired before the closing date. As such, a common form of lawsuit buyers commence against sellers is when chattels or fixtures are removed from the property, or not in good condition as warranted. 

If there is a real estate dispute over a property, a certificate of pending litigation (“CPL”) can protect a party’s interests in the property until the dispute is resolved. In short, a CPL is a notice that is registered on the title of a property that informs the public that the interest to the property is subject to a lawsuit. A CPL is critical in some cases as it can stop a party from selling or encumbering a property until the dispute is resolved. For example, if a seller and a prospective buyer are in a dispute over a property, and the buyer is concerned that the seller might try to sell it out from under them, the CPL may be the way to go.

In some cases, it may be necessary to obtain a CPL on an ex parte basis (meaning without notice to the other side). This is especially true when a CPL is required on an urgent basis. 

Given that the materials required to obtain a CPL can take some time to prepare, in the interim, a party may consider registering a Caution on the property, which has the same practical effect as a CPL. However, unlike a CPL, a Caution is only a temporary solution, as it will expire after 60 days. 

In legal terms, a hidden defect is referred to as a latent defect. Latent defects are defects with a property that are not apparent to a buyer despite a reasonable inspection. Generally, these are defects that are not visible to the naked eye and typically require further investigation. Examples of latent defects include faulty foundations, mold, water damage, leaks, termites, etc.   

Buyers typically discover latent defects after the transaction closes and will want to commence a lawsuit because the seller did not tell them about the latent defects and/or misrepresented the condition of the property. In these cases, it is important to have a litigation lawyer who is well-versed in real estate review the Agreement of Purchase and Sale and to determine what recourses may be available to the Buyer. At Kamalie Law, our lawyers have years of experience in litigating latent defects and can leverage their knowledge to provide efficient and tactful advice.  

If a seller aborts a transaction, then the buyer is officially left in limbo, especially if they have already sold their previous property or agreed to end their lease. 

If a seller aborts the transaction, the buyer will likely commence a lawsuit. The buyer can sue for either damages, which is money they have lost or costs they have incurred as a result of the failed transaction, or the buyer may sue for specific performance, where the court will effectively force the sellers to close on the transaction. What a buyer chooses to sue for will depend on the facts of the case. At Kamalie Law, our lawyers can assist in determining which remedy will be the most appropriate. Our lawyers will also assist you defend a lawsuit if one has been commenced against you. 

If the buyer cannot complete the transaction, the seller may have several legal remedies available to them. In most cases, a seller will be able to keep the buyer’s deposit. In addition, the seller can sue the buyer for the difference in the purchase price once the seller resells the Property. For example, if a buyer purchases a property for $500,000 but does not close, and the seller sells the same property to another individual for $450,000, then the seller can sue the buyer for $50,000 plus all costs associated with re-listing the property.  

There are three common scenarios where a sale of a property can be compelled. 

The first is when one or more joint owners of a property wish to sell the land, while the other joint owner(s) refuse to sell. In the case of such deadlock, the Partition Act gives joint owners the right to force a sale of the property. This right is enforced by bringing an Application to the court and having a judge order that the property be sold upon certain conditions. 

The second is if a seller fails to close the sale of a property, the buyer may commence an action for specific performance. If the Court grants specific performance, the seller will be required to complete the sale of the property. 

The third is when a mortgagee forces a sale on a property where the owners have failed to make mortgage payments and have fallen into arrears. This is typically a step of last resort, as mortgagees often provide borrowers with a grace period to make good on their payments.