CANADA Law and Practice Contributed by: Rachel V Hutton, Michael L Dyck, Mario Paura and Miguel Manzano, Stikeman Elliott LLP
Title Insurance Title insurance is commonly used in Canada, but somewhat less in provinces with a Torrens sys - tem (ie, with a statutory assurance of title). Many lenders require borrowers to obtain title insur - ance. Title insurance can also insure against matters otherwise typically covered by diligence, such as when a legal survey 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 investigations, 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 authori - ties and utilities; • reviewing leases, property contracts and surveys; and • commissioning environmental and building condition assessments. 2.5 Typical Representations and Warranties Typical contractual representations and warran - ties that a seller gives a buyer depend on market conditions and the relative bargaining power of the parties. Depending on market leverage, sell - ers typically seek to sell their real property on an “as is” basis, with limited warranties as to factual matters that might be difficult for a buyer to veri - fy 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-compli - ance, environmental contamination or expro - priation. In common-law jurisdictions, no general duty of disclosure is imposed on a seller, and the prin - ciple of caveat emptor ( “buyer beware” ) applies to the purchaser. However, certain exceptions oblige the seller to disclose matters such as known environmental contamination or defects that render the property dangerous or uninhabit - able. 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 war - ranties based on the Quebec 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 fraudu - lent misrepresentation. In common-law jurisdic - tions, a seller may be liable to a buyer for inno- cent, 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 war - ranties 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 commonly used unless the
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