Mortgage Broker

CmB magazIne cmba-achc.ca spring 2018 | 43 legalease situations where it has been waived, time can again be made of the essence by one party giving the other reasonable notice. Where time is of the essence, a court may nevertheless decide not to enforce the requirement if it would be unjust or inequitable in the circumstances to do so. CASE In PoInT Gill v. Bal, 2017 BCSC 2015 demonstrates significant consequences that can flow from not abiding by a "time is of the essence" requirement. What Happened? e buyers agreed to purchase real estate from the sellers for $705,000, with the sale to be completed on April 25, 2016, or sooner. e contract said that the transfer documents were to be submitted for registration at the land title office by 4:00 p.m. e contract contained a "time is of the essence" clause. e buyers paid the required deposit of $10,000. ey later encountered a problem with their financing; the parties extended the completion date to April 26, 2016. e extension stated that all other terms of the contract remained the same. On April 26, the sellers provided the buyers' notary with signed transfer documents, leaving nothing further for them to do to complete the transfer. e letter accompanying the transfer documents, in capitals, said: "IF THIS TRANSACTION DOES NOT REGISTER ON OR BEFORE 4:00PM ON APRIL 26, 2016, YOU ARE TO RETURN THE SIGNED FORM A – TRANSFER TO OUR OFFICE IMMEDIATELY." e contract did not permit the buyers' notary to submit the transfer for registration until the buyer had: n made available for tender to the seller the portion of the purchase price not secured by the new mortgage; n fulfilled all the lender's conditions for funding except lodging the mortgage at the land title office for registration; and n made available the notary's undertaking to pay the purchase price upon the lodging of the transfer and the mortgage documents, and the advance by the lender of the mortgage proceeds. Shortly aer 4:00 p.m. on April 26, 2016, the sellers' notary sent a letter indicating the sellers had been ready, willing and able to complete the transaction; understood the buyers' notary had not yet received mortgage instructions and consequently would be unable to complete the purchase of the property that day; and required return of the signed transfer document. At 5:36 p.m. the buyers' notary wrote to the vendors' notary that "we are ready for registration" and asking that he be allowed to use the transfer documents. e request was refused. Not having the sale proceeds available to them, the sellers were put to the expense of obtaining alternative financing to complete their own purchase. On May 12, 2016, the seller agreed to sell the subject property to another buyer for $854,000. Ultimately, with the approval of the Court, that sale completed. Decision Generally, people are bound by agreements they have signed, whether they have read the contents or have chosen to leave them unread. (e buyers argued that the parties had used the standard-form contract for the few essential terms and that the other terms, including the "time is of the essence" clause, were not agreed upon). e signed agreement made time of the essence. e one-day extension retained time being of the essence by stating "all other terms of the contract remain the same." e "time is of the essence" clause was not waived. e failure of the defendants to complete by the stated deadline gave the sellers the right to terminate the contract and they did so. e sellers were entitled to recover the additional financing charges they incurred ($25,450.10) and court costs. Unanswered Questions e Court's decision indicates that the reason for the buyers not being able to complete was that their notary had not received mortgage instructions. It does not indicate the reason for the instructions not having arrived. e person responsible for the delay (such as the mortgage broker not forwarding documents to the lender in a timely manner, the lender not processing and funding the loan in a timely manner, or the notary not completing the preparation of registration documents in a timely manner) could be liable for the losses of the sellers the buyers were ordered to cover. e general rule for assessing damages in breach of contract cases is to put the wronged party in the financial position they would have been in had the contract completed. In this case, the sellers got damages even though they sold the property for more than they would have received had the original contract closed. e Court said it was allowing this because the buyers had not, except in a general way, argued against it. e result was a windfall for the sellers, one the Court had the ability to correct. e Court made no mention of taking the presumably forfeited deposit into account. e amount of deposit is generally deducted from the amount of losses the breaching party is to cover. It may be that this accounting was to be done informally between the parties. TAkEAWAyS Mortgage brokers and lenders should do their tasks in a timely manner so as to allow the borrower to meet applicable deadlines, particularly where time is of the essence. Mortgage brokers and lenders should ensure that their documentation with the borrower clearly states deadlines applicable to their transaction with the borrower. Brokers and lenders need to meet those deadlines. e documentation should also state that the broker/lender does not accept responsibility for meeting other deadlines, regardless of whether the borrower is bound by them. Regarding the documentation between the lender and the borrower: n if time is of the essence, it should be clearly stated as such; n if time is not of the essence, it should clearly state that it is not (this can minimize the risk of a court inferring that time was of the essence); n if time is of the essence and an extension is agreed upon, the extension should state whether time is of the essence with respect to the new date. If you intend to terminate an agreement based on a "time is of the essence" clause, be sure you were ready, willing and able to perform as required.

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