ACTION IN PASSING OF TITLE

What does it mean an action in passing of title?

When a buyer pays for the immovable property, the seller transfers the ownership of the property to the buyer and thus there is a “passing of title”. However, what if the buyer decides not to buy the property or the seller refuses to transfer the title to the buyer?

With the sale of a property, it is not infrequent that a dispute will emerge between the parties.

The action in passing of title is available to anyone who is prejudiced whether it is the buyer or seller that, following the promise to purchase or signed agreement, refuses to conclude the transaction. Therefore, as soon as the conditions of an accepted promise to purchase are satisfied in valid form, the parties contractually bind themselves to sign the deed of sale and transfer the ownership of the property.

A real estate broker can also be impacted by his real estate commission in the event the transfer of title does not occur.

Knowing that a promise to purchase generates contractual obligations, the failure to respect these obligations, without a valid cause, corresponds to a refusal to execute the agreement.

It is then convenient to compel the person that is in default to execute its obligations and respect the promise to purchase, and thereby force the defaulting party to pass title.

As soon as a promisor-seller or promisor-buyer demonstrates his intention to not respect its promise, the beneficiary of this promise can begin its legal recourse.

EXAMPLE:

Legend :

A = Promisor-buyer

B = Promisor-seller

C = Third party

Situation:July 1st, 2016, A, looking to purchase a new residence, visits B’s property, which is for sale.

Amazed by what seems to be the house of his dreams,A jumps on this occasion and informs B that he is interested. On that same day, they fill in a promise to purchase form furnished by B’s real estate broker, and they respectively sign it. They then agree to meet at a recommended notary’s office on July 15th, 2016 to sign the deed of sale.

Satisfied that he has found his new residence, A undertakes the appropriate initiatives to sell his own property as soon as possible. He even manages to sign a deed of sale on July 10th, 2016!

However, the following day, on July 11th, 2016, B callsA and tells him that he has received a better offer from C. He wishes to negotiate the price with A, because the house remains in his name.

Unfortunately, B informs A that he has no intention of showing up to the notary’s office on the agreed date, July 15th, 2016, to sign the deed of sale.

Does Ahave a recourse against B?

Conclusion: YES! Even if B has not yet signed the final deed of sale, he agreed to do so in his promise to A.

REQUIRED FORMALITIES:

Many formalities are essential for passing the title of the property as may be described below:

  1. proof of the existence of a valid promise ;
  2. letter of demand ;
  3. deed of sale in conformity with the promise to purchase signed by the plaintiff ;
  4. tender as well as the deposit of the selling price ;

Let us briefly examine the above mentioned elements:

1) A valid promise:

Even if this condition may seem obvious, it is important to keep proof of the promise to purchase.

If you are contracting with the guidance of a real estate broker, he must use a mandatory form provided by the “Organisme d’autoréglementation du courtage immobilier du Québec” (OACIQ).

In order to protect yourself against an eventual breach of a promise to purchase, we recommend that you photocopy the signed documents, in order to easily prove its existence.

2) A letter of demand:

Despite the Courts’ flexibility with regard to the absolute necessity of a letter of demand, it is preferable to take a limited amount of risk. It is therefore recommended that a letter of demand be sent, even if the promisor clearly stated that he has no intention of signing the deed of sale.

A letter of demand allows you to formally ask the party in default to respect his obligations, therefore strengthening the plaintiff’s action.

3) A deed of sale in conformity with the promise:

In order to proceed with an action in passing of title, it is also necessary to ask for the service of a notary in order to prepare a deed of sale outlining all of the aspects of the promise to purchase.

The plaintiff must then sign the said deed of sale, in order to prove to the Court that the promisor is indeed in default, and that he refuses to sign the document.

4) Tender and deposit:

The buyer that wishes to succeed in his action in passing of title must demonstrate his capacity to pay the agreed price of the property. To do so, one must produce a certified check, a letter of credit or a proof of mortgage financing that matches the said purchase price.

CASE LAW  :

a) Cases where the action in passing of title was granted:

  • When the beneficiary of an option to buy stated in a lease decides to use this option, even long after the expiration of the said lease, if, of course, there is no prescribed delay[1];
  • When one of the conditions related to the mutual obligations of the sale, for example the deposit of the amount of the selling price, is made during the trial[2];
  • When the deed of sale contains a shortcoming that can be rectified[3];

 

b) Cases where the action in execution of title was rejected:

  • When the beneficiary of a promise to purchase shows no interest in this promise for a long enough period of time that disinterest is demonstrated[4];
  • When no letter of demand was sent before the beginning of the action in passing of title[5];
  • When the service of a deed of sale was not made with the originating application[6]
  • When the deed of sale does not represent the initial agreement between the parties[7];

CONSERVATORY MEASURES

A law firm can also help you exercise certain conservatory measures which can help you maintain a right to have the promise of purchase respected, such as the pre-inscription on the Land Register or the Register of Personal and Movable Real Rights.

The legal process of an action in passing of title demands many steps that may be complex and difficult to understand.

If you are looking for a law firm with reasonable rates, a quick and efficient turnaround time for your file and who provides personalized and effective follow-ups, call Schneider Attorneys at (514) 439-1322 ext. 112 or email us at info@schneideravocat.com

The above noted text should not be construed as providing legal advice or a statement of your claim. The process highlighted above are merely parameters and barometers and do not constitute any warranties and guaranties with regards to your file at hand. We strongly recommend that you seek legal advice with a licensed attorney from the Barreau du Quebec. Each case must be seen and analysed on its merits as the legal process may be complex and cumbersome

[1] Moisan c. Veliotis (C.A., 1987-02-03), SOQUIJ AZ-87011094

[2] Houlachi c. Bray (C.A., 1997-10-31), SOQUIJ AZ-97011868 et Fortier c. Forest, 2007 QCCS 35

[3] Lafantaisie c. Deslauriers, 2008 QCCA 2252

[4] Agropur, coopérative agro-alimentaire c. Anjou (Ville d’), (C.S., 2001-01-25), SOQUIJ AZ-01021215

[5] Ventura c. Courbot (C.S., 2009-07-20), 2009 QCCS 3800, SOQUIJ AZ-50572445

[6] Malouin c. Blondin, 2011 QCCS 2341

[7] Transport HGH inc. c. Nutrinor, coopérative agroalimentaire du Saguenay—Lac-St-Jean, 2011 QCCA 429 (CanLII)