CANADA Law and Practice Contributed by: Rachel V Hutton, Michael L Dyck, Mario Paura and Miguel Manzano, Stikeman Elliott LLP
requirements. Electronic registration of instruments is increasingly available in most jurisdictions. All regis - tered instruments in Quebec must be submitted in French only. Title Insurance Title insurance is commonly used in Canada, but somewhat less in provinces with a Torrens system (ie, with a statutory assurance of title). Many lenders require borrowers to obtain title insurance. Title insur - ance can also insure against matters otherwise typi - cally covered by diligence, such as when a legal sur - vey is not available, or when unusual title risks exist. 2.4 Real Estate Due Diligence Typically, a buyer and seller will enter into a conditional purchase agreement, following which due diligence is conducted. If the buyer is satisfied with its investi - gations, it will waive its due diligence condition and the transaction will become “firm”, provided any other conditions have also been satisfied. Real estate due diligence generally consists of: • examining title and zoning; • conducting inquiries with government authorities and utilities; • reviewing leases, property contracts and surveys; and • commissioning environmental and building condi - tion assessments. 2.5 Typical Representations and Warranties Typical contractual representations and warranties that a seller gives a buyer depend on market condi - tions and the relative bargaining power of the parties. Depending on market leverage, sellers typically seek to sell their real property on an “as is” basis, with lim - ited warranties as to factual matters that might be difficult for a buyer to verify independently, such as the fact that the seller: • has delivered all contracts, leases and reports in its possession or control; and • has not received notices of legal non-compliance, environmental contamination or expropriation.
In common-law jurisdictions, no general duty of dis - closure is imposed on a seller, and the principle of caveat emptor (“buyer beware”) applies to the pur - chaser. However, certain exceptions oblige the seller to disclose matters such as known environmental contamination or defects that render the property dangerous or uninhabitable. In Quebec, warranties as to ownership and the absence of latent defects apply, unless excluded or limited under the deed of sale. A professional seller may not exclude or limit these warranties in respect of undisclosed defects of which it is aware or should be aware. A non-professional seller, however, may exclude or limit these warranties based on the Que - bec caveat emptor equivalent. However, all sellers are bound to act in good faith under Quebec civil law, and failure to disclose a known defect would likely amount to fraud. Across Canada, caveat emptor does not apply to fraud. A seller is liable for latent defects where the failure to disclose them amounts to fraudulent mis - representation. In common-law jurisdictions, a seller may be liable to a buyer for innocent, negligent or fraudulent misrepresentation for which the remedies include rescission (the setting-aside of the contract) and/or damages, depending on the circumstances. Depending on the parties’ intent expressed in their contract, a seller’s representations and warranties may either expire or survive completion for agreed periods. Survival periods tend to be limited as the market or the relevant risks permit. Liability caps are not com - monly used unless the specified risks are known, but are sometimes found in larger transactions with insti - tutional parties (often subject to certain exceptions for such cap). A purchaser’s remedies for a breach of representation and warranty will be determined by what is in the contract, and may include an unsatisfied condition to closing or the ability to pursue a claim for such breach (or both). Typically, the buyer has no security for the enforce - ment of remedies. The buyer may consider obtaining security in the form of a letter of credit, hold-back, or set-off under a vendor take-back mortgage, or obtain - ing a guarantee or indemnity from a related vendor
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