Legalviews Personal

A long-standing mystery for solicitors and barristers has largely disappeared, thanks to a recent Court of Appeal decision.

In the 1930s, Alberta started the fashion of thwarting enforcement of contracts by creditors. The Legislature extended Chancery’s traditional protection of land mortgagors, to purchasers under “agreements for sale.” The legislation also often bars a personal judgment for the money owing. That is now s. 40 of the Law of Property Act.

That legislation stops a vendor from quickly enforcing an “agreement for sale” whose purchaser does not pay on time. Obviously that legislation applies where the agreement gives possession now but lets the purchaser pay in monthly or annual instalments extending over some years. That is an “agreement for sale”. It is usually a well-known formal multi-page contract with traditional terms. As the Court of Appeal says, it is a financing arrangement.

But how about a case where the balance of the purchase price is to be paid on a closing date about three weeks after the written purchase agreement? Or where the parties agree to postpone the closing date a few weeks or months, with a temporary lease in the meantime? Does the Law of Property Act require a foreclosure suit, redemption period, and public sale of the land, for any ordinary realtor’s interim agreement for sale of a house, if it does not close on the closing date? Does giving any purchaser possession before he or she pays the last dollar, require months or years of foreclosure proceedings?

Most solicitors would answer “probably not”; but no one was sure.

Now the Court of Appeal holds that not every purchase agreement is an “agreement for sale”. An agreement with one big payment and transfer, intended to close soon, is not an “agreement for sale”, so the unpaid vendor can use any contractual rights to terminate it or have it declared terminated.

Since a foreclosure suit is not then needed, when is it needed? What is the definition or borderline of an “agreement for sale”? It is still not spelled out expressly, but the facts of the recent decision are instructive. There the Court of Appeal points out that its initial sale agreement never was replaced by any formal new agreement for payment over time (¶ 27). And the trial judge in that case says that the vendor was merely patiently accommodating the purchaser’s delays and assurances and promises about closing, and the vendor never waived the initial “time is of the essence” clause (¶’s 38 ff., 52).0

See Kathryn Farms v. 1572548 Alta. 2022 ABCA 21, Calg 2101 0093 AC (Jan 20) (¶’s 21 ff), affg 2021 ABQB 245.

P.S. Sonny Mirth has pointed out that two other earlier decisions on this topic should also be noted: Luscombe v. Mashinter (DC Jan 24) 1978 CanLii Alta 640 (Edm 209947); Greschuk v. Bizon (CA) [1977] 2 WWR 262, 1 Alta LR(2d) 163.

– Hon. J.E. Côté

ENFORCING LAND SALES BECOMES EASIER