Simply defined in the Blacks law dictionary, an easement is an interest in land owned by another person, consisting in the right to use or control the land or an area above or below it, for a specific limited purpose. Often, easements are registered on title thereby granting or assigning rights to use the subject lands for a specific limited purpose. A common easement registered on title grants access to utility companies and municipalities onto a subject property in order to service and maintain a specific utility or the lands, whether its cables for phones and internet or pipes for gas and water. An easement could potentially hinder the enjoyment and use of a property and therefore can become a contentious issue during the course of a real estate transaction.
The standard OREA agreement of purchase and sale (“Agreement”) contains a clause called “Title” and it states:
“Provided that the title to the property is good and free from all registered restrictions, charges, liens, and encumbrances except as otherwise specifically provided in the Agreement and save and except for…(c) any minor easements for the supply of domestic utility or telephone services to the property or adjacent property; (d) any easements for drainage, storm or sanitary sewers, public utility lines telephone lines, cable television lines or other services which do not materially affect the use of the property…”
It goes on further to state that should a vendor not be able to remedy the situation, insure over it in favour of the Buyer and if the Buyer is not willing to waive their rights, the Agreement is at an end and all deposit monies are to be returned. Also if the Buyer’s lawyer does not bring up the issue by the title search date, save and except any issues going to the root of title, the Buyer will be deemed to have accepted the Seller’s title to the property. This is why it’s imperative that a lawyer does their requisitions on time.
Two cases, Stefenovska v. Kok (1990 CarswellOnt 545, 12 R.P.R. (2d) 80) (“Stefenovska”) and Dennis v. Hockin(1993 CarswellOnt 617, 33 R.P.R. (2d) 57) (“Hockin”) will be discussed to shed some light on whether a Buyer can walk away from a real estate transaction upon the discovery of a certain easement and what the court defines as a minor easement vis-a-vis the Agreement. In both cases the Buyers wanted to walk away from their respective real estate transactions due to the issue of an easement registered on title.
In Stefenovska, the Buyer complained of a storm and sanitary sewer easement in favour of the municipality. The easement was one meter in width and ran the entire length of the property on its westerly boundary from front to rear and could it ran perpetually. The lawyer for the Buyer requisitioned that the easement be discharged, however. the Seller’s lawyer stated that it was a minor easement and the Buyer was therefore obligated to accept it under the Agreement. The Buyers refused to close; the Sellers tendered and brought an application under the Vendors and Purchaser’s Act (Ontario) for a declaration and order that the requisition was valid and that Sellers could not deliver good title and therefore the agreement was at an end and the deposit monies were to be returned.
The key issue in this case was whether that easement materially affected the use and enjoyment of the property and whether the easement was serious enough to allow the Buyer to claim that the property was not what they had bargained for and walk away from the transaction. The Buyers argued that in fact the easement would materially affect the enjoyment and use of the property because they would not be able to install the type of landscaping that they sought. The trial judge disagreed and held that the easement was minor in nature and that it did not affect the reasonable use and enjoyment of the property. This was determined because the easement only occupied a very small portion of the subject property. As a result the Buyers were obligated to close the transaction and accept title subject to the easement. Although the judge considered other evidence as to why the Buyers did not want to close the transaction, the crux of the case turned on the fact that the easement only affected a small portion (relative to the overall size of the lot which in this case was sizeable) of one side of the property and did not materially affect use and enjoyment.
In Hockin, a similar issue came up with respect to an easement and a requisition to release the said easement. However in this case the easement was quite substantial comprising 20 percent of the area of the backyard and 10 percent of the total lot area or the property, running right down the middles of the property. The Buyer intended to put a swimming pool in the backyard which he would not be able to do as a result of this easement, compromising the Buyers use and enjoyment. The trial judge held that the easement was major and interfered with the Buyers use and enjoyment and was also satisfied that the Buyer was always in a position to close transaction but for the easement. Ultimately the Buyer was not obligated to complete the transaction.
In rendering the decision, the trial judge acknowledged that the law with respect to these issues was settled in Stefenovska and clearly articulated the test for whether an easement was major or minor. The judge stated that the court must consider the following factors: (1) the location of the easement; (2) the size of the easement; (3) point of access – essentially for equipment; and (4) effect on the owner’s enjoyment of the property. In considering these factors, the judge stated that the test was primarily an objective one; meaning would the easement objectively harm the Buyers use and enjoyment of the property; complimented by a subjective one; is the Buyer acting reasonably and bona fide or capriciously.
Before purchasing your next home, make sure to speak to one of the experienced real estate lawyers at Levy Zavet in order to make sure your dream home becomes a reality and not a nightmare.