Summary of Facts
A real estate transaction was unable to close as the Seller needed the proceeds of sale to pay off a private mortgage.
The seller's lawyer had stubbornly refused to follow the usual guidelines of real estate transactions by having a three-party agreement, namely, the seller’s lawyer, the lender’s lawyer and the buyer’s lawyer agreed to simultaneously completed the transaction, the seller’s lawyer insisted on an undertaking to direct funds to pay off the mortgage upon closing.
The Law Society has clearly stated that there is grave danger of a private mortgage (as opposed to a bank’s mortgage) to be paid off through an undertaking of a lawyer. The danger being that the lawyer’s undertaking may not be materialized if the private lender played any trick.
The Law Society in fact guided lawyer’s not to give such undertaking, and therefore naturally the Buyer’s lawyer should not accept such an undertaking. The lack of knowledge coupled with the stubbornness of the lawyer resulted in a failure to close and hence litigation.
The Results
A certificate of pending litigation was registered against title and a claim of specific performance was made as the property was quite unique and cannot easily be replaced by a similar property.
The matter was finally settled favorably for the buyer, our client after a long fight with the attempt to remove the certificate of pending litigation.
Indeed, from time to time, we came across a lot of disputed real estate transactions, and the experience in real estate processing assisted the Real Estate Team in fully apprehending the importance of the procedural steps.
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