The Obligation of Disclosure in Agreements of Purchase and Sale (APS) …and The Case Of Marijuana!


Beatty et al. v. Wei et al. is a Superior Court of Justice decision dated June 5, 2017. This case is significant because it speaks to representations and warranties made by a Seller in an Agreement of Purchase and Sale, specifically with respect to the relationship between representations and warranties made to the best of the Seller’s knowledge and belief and the ability to rescind an otherwise valid APS. The basic facts of this case are as follows: An APS was entered into between Buyer and Seller. In the Agreement, the Seller represented and warranted that to the best of their knowledge and belief, the property had not been used for the growth or manufacture of illegal substances. At the time this representation and warranty was provided, this was in fact true. Before closing, the Buyers discovered through their own investigation that the property had in fact been used to produce marijuana in 2004. This was confirmed by a letter by Toronto Police. The Buyers refused to close the transaction and demanded the return of their deposit. The Sellers refused to agree to the termination of the APS and brought an application for declarations that the APS was a firm and binding contract, the Buyer had breached the APS and that the deposit had been forfeited. The Buyer applied for declarations that they were not required to complete the transaction and for the return of their deposit.

The Court ultimately found in favor of the Buyer. The Buyer was able to rescind the APS and the deposit was returned. Why? The Judge reasoned that this representation and warranty given by the Sellers was relied upon by the Buyers and induced them to enter into the APS. If it were the case that the Sellers had discovered there once was production of marijuana at the property, the Seller would be obligated to notify the Buyer before closing because they would no longer be able to make that representation and warranty. This would be a material change to the contract and would be grounds for rescission. The Judge reasons that the Buyer’s rights are not affected merely because they were the ones who made the discovery, and thus the same principle must apply. This was a material change to the terms of the APS and the Seller could no longer sell the property on the same material terms and conditions agreed upon in the APS.

Real Estate Agents should be mindful of this decision because of the potential implications it could have when this representation and warranty is made in an APS. If your Seller represents and warrants that to the best of their knowledge and belief a particular circumstance about a property is either true or untrue, a Buyer may have a valid claim for termination of the APS if in reality the state of the property conflicts with what your Seller has represented and warranted. If acting for a Seller, be aware of the potential risks to the APS if a representation and warranty is made that is discovered to be a mistaken belief in reality. If acting for a Buyer, if your Client has been induced to enter into an APS based on a mistaken belief that is represented and warranted by a Seller, your Buyer may have a right to terminate the APS and to have the deposit returned.

Knowledge is Power, which results in more business!

If you have any questions or concerns, please feel free to contact us at your convenience.  If you have any suggestions for future topics please let us know.


Prepared by Bryan Mayes, Solicitor with Paquette Travers

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Watch for more Travers Tidbits to follow each month!

Oh Canada! What You Need to Know About Residency Status in Closing the Deal


The introduction of the Non-Resident Speculation Tax in April of this year has made it imperative that Real Estate Agents confirm the residency status/citizenship of their Buyers well in advance of the closing date. We have encountered issues days before closing wherein the Client, as it turns out, has not actually been granted Permanent Residency Status/Canadian Citizenship by the Government of Canada. If the closing date arrives and the Buyer is unable to provide our office with proof of either Permanent Residency or Canadian Citizenship (birth certificate, passport, permanent resident card, etc.) then two options become possible:

  1.  The Buyer pays the NRST which equals 15% of the purchase price and may be eligible for a rebate after closing;
  2.  Extend the closing date of the transaction until the Buyer can provide our office with proof of Permanent   Residency/Citizenship.

Neither of these options will result in a happy Buyer. To avoid this potentially disastrous circumstance from arising, we recommend that all Real Estate Agents confirm the residency status/citizenship of their Buyers (with proof!) well in advance of the closing date. We have found that sometimes clients think that they are Permanent Residents/Canadian Citizens but have never actually been legally granted this status by the Government of Canada. Determining if this will be a problem in advance of the closing date will give the Buyer time to apply to the Government to receive the appropriate documentation before the closing date.

Addressing this potential problem immediately is crucial to avoiding potential issues on closing and, ultimately to cause your Buyer to close their transaction happily and hassle free.

Author: Bryan M. Mayes, Lawyer

Paquette & Travers Professional Corporation

519-744-2281 x 302