REAL ESTATE TRANSACTIONS

December 16th 2005 Adj. Professor M. Lamb

FINAL EXAMINATION

Open Book
Answer ALL Questions
READ ONLY: 15 minutes
WRITE EXAMINATION: 2 Hours.
ALL QUESTIONS ARE OF EQUAL VALUE.

QUESTION 1:

Your new client, Brittany, signed a contract 30 days ago to

purchase a 7 year old residential condominium. Closing is to
take place in about a week’s time and she telephoned you to
discuss some concerns which she has regarding the transaction.
Her first concern is that she has been unable to find out
anything about the corporation’s budget for the current year
and she wants to know how the monthly common expenses are
calculated. Further, she has been told that the condominium was
created before the current Condominium Act and therefore has
not had a reserve fund study conducted. She wonders how she can
predict the cost of future repairs which might be needed to
both the common elements and the interior of her unit.
Finally, someone gave her vague information that suggests she
has the legal right to terminate the contract of purchase if
she finds a material change in the information which has been
given to her by the realtor. Advise Brittany on these issues.

ANSWER:
 Ask if this is a new condo or resale
o Get a status certificate
 Budget included in this.
 All condo corporations must have a reserve fund today
o Check the status certificate see if they have a reserve fund
o If there isn’t one, and there isn’t a study, she could be buying herself into
a nightmare
 Ability to walk away only for brand new condos with disclosure statements /
material change occurs. This is a resale. There wont be material changes.
 What the realtor tells you – maybe you can get a remedy against them but
someone is confusing disclosure provisions with resale.
QUESTION 2:

Graham signed an agreement to sell his home to Melanie for

$185,000.00. Melanie was quite excited about the purchase
because the house was exactly what she wanted: a fenced yard
so that she could let the dog roam outside without a leash
and a new energy efficient furnace had recently been
installed. The home is only 3 kilometers from Melanie’s
employment and so she thought that although it was a typical
house on a subdivision it suited her needs. In any event, a
few days after signing the agreement Graham called her to
say that he had received another offer for $200,000.00 and
unless Melanie wanted to match that price he was going to
sell to the new purchaser to make the extra profit of
$15,000.00. Melanie is particularly concerned because Graham
told her that if she tried to obtain an Order for specific
performance she would fail because she could easily find a
replacement property and that he would argue that the
property was not unique. Melanie asks for your advice
regarding her predicament and what she should do.

ANSWER:
 Uniqueness (for specific performance)
o The house itself isn’t unique… but are her circumstances and will it
warrant that? She would be looking for specific performance of the
K
o Courts lenient in terms of accepting uniqueness
 But even she says it's a typical house
 Suggest to her to maybe start looking for another house (obligation to
mitigate)
o If prices are going up, don't want to be hanging hat on action for
specific performance (because if prices continue to go up… you
didn't mitigate)
 Could just pay the $15,000 and then sue to get it back.

QUESTION 3:

Barbara has a mortgage of $100,000.00 on a small 12 unit

apartment building. In fact she only gave the mortgage
because it was to a friend of a friend who owns a couple of
apartment buildings as well a prosperous car dealership. The
other reason for giving the mortgage was that her money was
only making 2% per year in interest in a bank account
whereas the mortgage attracts a very good interest rate of
12% per year. There is 4 years of a 5 year term left to run
before maturity. For the first year the mortgage payments
were made on time and Barbara had no concerns about the
security. However, the last 2 mortgage payments have not
been made and the mortgagor has ignored her requests for
confirmation of fire insurance and payment of realty taxes.
When driving past the property recently Barbara noticed that
there were at least 3 empty apartments, garbage strewn
around the parking lot and she noticed shingles missing on
the roof. Barbara is considering what action to take and
asks for your advice. Discuss the advantages or
disadvantages of each of the remedies available to Barbara
given the facts above and which remedy or remedies you would
recommend.

ANSWER:
 pick which remedies are available
o acceleration = good idea in order to keep the mortgage at 12% and
has 4 years left to go
 send a demand letter and get the money
 mortgagor could just pay up though
o could get judgment just for arrears
o possession
 if she takes possession, could fix the roof, get rid of garbage,
rent out other apartments
 BUT, if borrow not looking after the place, who knows what
other problems there are with the place.
o Forclosure
 Probably don't want to own it anyways
o Only remedy that really makes sense is to sue for arrears
o Make sure you look at what the mortgagees concern is
 Is the security adequate?
 Can you wait for positive cash flow again?

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