Is There New Hope For Developers Seeking Specific Performance?

In the past, I have published a number of posts commenting on the difficulty in obtaining specific performance in the case of a developer attempting to complete a commercial transaction with an unwilling vendor.

Plaintiffs seeking such relief typically register and attempt to maintain certificates of pending litigation on the properties in question so that they are secured in the event that specific performance is ultimately ordered. In order to do so, it is accepted jurisprudence that the purchaser must satisfy the court that the property is unique. Unfortunately, that has proven to be a difficult task in the context of commercial acquisitions.

Nevertheless, the recent case of Northfield (Waterloo) Development Inc. v. North American Acquisition Corporation may signal a somewhat different view of the issue.

In this case, Northfield owned a parcel of vacant land at the intersection of two regional roads in Waterloo, Ontario. North American, an experienced developer, entered into an agreement with Northfield to purchase the land for development as a shopping centre. The agreement was conditional on North American obtaining the necessary rezoning and other municipal approvals.

Over the course of the next few years, North American spent over $500,000 in fees, costs and expenses and ultimately succeeded in obtaining rezoning. During that time, it became apparent that the value of the property had increased substantially, both as a result of the investment by North American in obtaining the rezoning and simply as a result of normal increases in real estate values over time.

When the closing date approached, Northfield refused to close. Litigation ensued. In the course of the litigation, North American registered a certificate of pending litigation on the title to the property to prevent Northfield from selling it to anyone else. Northfield brought a motion to remove the certificate on the grounds that, among other things, the land was in no way unique and if the court ultimately ruled in North American’s favour at trial, damages would be an adequate remedy.

In support of its position of the motion to remove the certificate, Northfield referred to a variety of cases in which the court had made it clear that where land is purchased for investment, the land will not be considered unique and the certificate will not be allowed to stand.

In this case, however, the court took a different approach. The court observed that according to the City of Waterloo Planning Department’s own file, the intersection was considered an important intersection in the City. North American had invested a great deal of time and money in the development, arranging for it to be rezoned and thereby giving it a very different character and value than had been the case at the time that the Agreement of Purchase and Sale was signed. Perhaps most importantly, the court accepted that North American’s intention was to build a shopping centre and then retain it on a long-term basis. In other words, this was not a situation in which the property was to be treated as some type of inventory to be sold at the next opportune moment. Nor was it to be looked at merely as an investment in the sense of an acquisition strictly for the purpose of profiting from its anticipated income stream.

In the result, the court was satisfied that even though this was a commercial transaction, the property could be considered unique. The certificate was allowed to stand.

In my view, this was an eminently sensible solution. As has already been observed in earlier cases, uniqueness in this context is not synonymous with singularity. The property does not have to be a one-of-a-kind property in order to be considered unique. Uniqueness can also be measured by factors such as the precise location of the lands, the pre-closing investment made in the property by the prospective purchaser, and the purchaser’s intentions following acquisition.

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