Electronic Documents for Real Estate in Ontario "on hold"

 

The real estate industry in Ontario is going to be stuck with paper documents for another few months.

The Ontario Real Estate Association (OREA) had petitioned to have the Electronic Commerce Act amended.

Presently, Agreements of Purchase and Sale are excluded under the Act.

The Act says the following:

“31. (1) This Act does not apply to the following documents:
1. Wills and codicils.
2. Trusts created by wills or codicils.
3. Powers of attorney, to the extent that they are in respect of an individual’s financial affairs or personal care.
4. Documents, including agreements of purchase and sale, that create or transfer interests in land and require registration to be effective against third parties.”

The peculiar wording is in respect to the agreement of purchase and sale.

Agreements do in fact create or transfer interests in land. However, they do not require registration to be effective against third parties.

It is possible to register an agreement by way of a Document General, but it is already effective as against third parties. The problem is that notice has not been given to third parties, so to the extent that the principle of “priority of registration prevails” is important, notice could take place.

In law, third parties do have official notice of public records.

A Transfer/Deed to the extent that it is indeed an agreement of purchase and sale and requires registration would obviously be caught by the provisions of the Electronic Commerce Act. If that were intended by the Legislature, then they could easily have inserted the words “Transfer/Deed and Charge/Mortgage. They did not.

This leaves us with the peculiar reference to the Agreement of Purchase and Sale that requires registration. There is no such document. There will never be a document so described that will ever meet this requirement. A principle of statutory interpretation requires the courts to give meaning to the intention of the Legislature. The courts will conclude: “they must have intended something? What did they mean?”

And, here lies the uncertainty!

The Electronic Commerce Act either refers to:

1)     simple agreements, or

2)     registered Transfers and Charges.

Since the passage of the Act, this has been the difficulty in terms of interpretation among lawyers. So far, there are no Ontario cases on point.

A number of years ago, the Ontario Court of Appeal confirmed and approved the use of faxes in the negotiating process.

One might think that the same Court would favour electronic negotiating. But, the Court is obligated to consider and interpret the wording in the Electronic Commerce Act, which it did not have to do in the fax case decision.

OREA secured the co-operation of Progressive Conservative MPP Todd Smith (Prince Edward-Hastings) and Liberal MPP Yasir Naqvi (Ottawa Centre), who agreed to sponsor  a Private Member’s Bill that would facilitate the use of electronic agreements of purchase and sale of real estate by eliminating item 4, section 31(1)) of the Electronic Commerce Act.

However, the problem is that this Bill was never passed and the Legislature has now been prorogued (or suspended).

 

In all likelihood, a new Session of the Legislature will not take place until April 2013. Usually, it takes several months for a Bill to pass, particularly a Private Member’s Bill . So, even with a good deal of co-operation, we are not likely to see an amendment to the Act until the late Summer or early Fall.

 

So much for electronic commerce in real estate until then! The industry will just have to stick to the old paperwork!

 

Brian Madigan LL.B., Broker is a Manager at  RE/MAX West Realty Inc., Brokerage 416-745-2300.
www.OntarioRealEstateSource.com

 


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