Brian Madigan LL.B., Broker
BRMadigan@iSourceRealEstate.com

RE/MAX West Realty Inc.,
Brokerage
Independently owned and operated

96 Rexdale Blvd. 
Toronto, Ontario 


Phone: 416-745-2300
Toll Free: 1-888-507-0817

 

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Updating the Illegal Substances Clause

July 13, 2017 - Updated: July 13, 2017

Updating the Illegal Substances Clause
 

A recent case in Ontario Superior Court calls into question a familiar and frequently used clause in Agreements of Purchase and Sale:
 

“The Seller represents and warrants that during the time the Seller has owned the property, the use of the property and the buildings and structures thereon has not been for the growth or manufacture of any illegal substances, and that to the best of the Seller’s knowledge and belief, the use of the property and the buildings and structures thereon has never been for the growth or manufacture of illegal substances. This warranty shall survive and not merge on the completion of this transaction.”
 

This same clause was the subject of discussion and review in Beatty v. Wei released 5 June 2017.
 

The Judge, Mr. Justice P.J. Cavanagh stated as follows:
 

“In respect of the Illegal Substances Clause, the qualifying words mean that there is no contractual promise, or warranty, that the Property has never been used for the growth of illegal substances.
 

I accept the Sellers’ submission that, without clear language such as the words “on completion”, or “on closing”, to show that the parties intended that the content of the warranty could change with changing circumstances after the date of the APS when the warranty was given, the content of the warranty does not change. The warranty that survived completion of the transaction was the warranty that was given on the date of the APS.”
 

At issue was the effective date of the warranty which was:
 

1)    The date of the Agreement, or

2)    The date of the Closing.

 

The Judge concluded that it was the date of the Agreement.

 

Consequently, in order to improve the clause, the words “effective as of the date of completion” should be added.

 

The new illegal substances clause might read as follows:

 

The Seller represents and warrants that effective as of the date of completion, during the time the Seller has owned the property, the use of the property and the buildings and structures thereon has not been for the growth or manufacture of any illegal substances, and that to the best of the Seller’s knowledge and belief, the use of the property and the buildings and structures thereon has never been for the growth or manufacture of illegal substances. This warranty shall survive and not merge on the completion of this transaction.

 

Now, it will be clear that it is the closing date which is the critical date for the warranty.

 

Brian Madigan LL.B., Broker

www.iSourceRealEstate.com

 

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Tagged with: illegal substances clause update beatty v. wei. ontario law
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Brian Madigan LL.B. Broker

RE/MAX West Realty Inc. Brokerage

Independently owned and operated

96 Rexdale Blvd. , Toronto Ontario,

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