The Dirt: Get used to unfolding those condominium plans

It’s hard to predict which cases will develop buzz among the real estate bar. Sometimes, these cases turn out to be much ado about nothing; other times, they trigger seismic paradigm shifts in the way we practise the law.

Without exaggeration, the recent decision by Ontario Superior Court Justice Darla Wilson in Orr v. Metropolitan Toronto Condominium Corp. No. 1056 (also known as Rainville) may be such a case.

In Rainville, the plaintiff, Kelly Jean Rainville, purchased a built-out three-storey condominium townhouse unit. Unbeknownst to her, the boundary limits of her condominium extended only to the top of the second floor as the third floor was built above the unit into common element space.

It was unbeknownst to her, at least in part, because the solicitor she had retained to do the purchase didn’t review with her the vertical plans of the condominium. Had they done so, it was argued that the absence of a third floor would then have become evident.

The case has become quite notorious, most notably because, depending on how lawyers conduct their practice, it seems to elevate the standard of care by at least one notch.

As argued by the purchaser’s lawyer qua defendant in the negligence suit, the standard of care of a reasonably prudent solicitor conducting a condominium purchase is to study the horizontal plans and then only to ascertain the unit’s location and shape in relation to neighbouring units and common elements.

As such, it was thought to be beyond the call of duty to then go and examine vertical cross-section plans of the condominium. Furthermore, this was no fly-by-night solicitor representing the purchaser. She hails from a national firm and is one of the finest practitioners I know.

If this was the standard of care prior to Rainville, then the Rainville case certainly has changed it. Post-Rainville, it’s now incumbent upon solicitors doing condominium purchases to review with the client all of the available plans of the unit available at the land registry office.

So in the case of condominiums that have plans that show the vertical cross sections of the building, it’s necessary to show them to the purchasers with sufficient clarity so they can then identify whether the unit complies with all of them.

In the Rainville case, at least one of the vertical plans implied that the third floor of the townhouse wasn’t included in the unit. According to Wilson, had the purchaser seen that vertical plan, the problem would have been disclosed before closing.

The case isn’t limited just to vertical plans. The Rainville case is authority for the proposition that a solicitor must present and review with the purchaser client all of the available plans affecting the unit.

For some reason in the Rainville case, there were multiple horizontal plans for the condominium at the land titles office. The judge held that had the other horizontal plans been reviewed with the purchaser, she would have been aware of the illegality of the third floor.

Especially in the context of condominium townhouses, it’s rare to see more than one horizontal plan. But if there happen to be multiple horizontal plans, the Rainville case now makes it incumbent upon solicitors to review all of them with the purchaser client before closing.

As an indictment of the inefficiency of our court system, the events giving rise to the alleged negligence took place quite a long time ago as the facts in this case date back to 1997. That said, little turns on the timing of the circumstances.

The standard of care for a resale condominium purchase hasn’t changed that much since then, particularly in relation to the scope of plan review with the client. If it really was the practice to review only the horizontal plans in 1997, then it certainly still was the standard right up until the eve of Rainville.

Expert testimony on Rainville’s behalf on the standard of practice came from Ontario real estate maven Bob Aaron.

Aaron’s opinion, materially paraphrased, was that with facts like those in Rainville, it currently is and always was necessary to review with purchaser clients all of the condominium plans showing the unit they’re buying, including any relevant vertical plans.

Of course, it wasn’t Aaron’s expert opinion, nor is it a proper interpretation of the Rainville case, to suggest that a solicitor must now conduct any sort of onsite inspection of the condominium unit to ensure compliance with the available plans. Nobody is suggesting that.

All that the Rainville case does is expand the number of plans that the solicitor has to review with the client. It remains incumbent upon the purchaser client to then realize and alert the solicitor to any discrepancies or inconsistencies.

In most instances, this standard of care won’t be much of an additional burden at all. However, depending on the complexity of the building and the degree of plan review that was part of your practice before the Rainville decision, the time you must now spend with each individual purchaser may have increased significantly.

This comes at a time when it’s already difficult enough to eke out much profit from a condominium resale transaction.

As with many good cases that cause a buzz in the real estate bar, both sides are apparently appealing the Rainville decision. Of course, the trial decision remains authoritative until overturned and there’s no telling if or when the Court of Appeal will get to the matter.

In the meantime, real estate lawyers everywhere should come out to hear a discussion on the implications of this case at the upcoming Six-Minute Real Estate Lawyer conference in November. At the same time, they should get used to unfolding all of those condominium plans.

Jeffrey W. Lem is a partner in the real estate group at Miller Thomson LLP. His e-mail address is [email protected].

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