Executive Summary: Key Legal and Evidentiary Issues

• A commercial real estate purchase agreement collapsed after a decades-old Notice of Security Interest surfaced on the property's title.
   
• The purchaser's objection to that security interest arrived seven days after the requisition deadline set out in the agreement.
   
• Central to the dispute was whether the late objection qualified for either of two recognized exceptions to that deadline.
   
• Justice Charney concluded that neither exception applied because the vendor could not discharge the notice as a matter of right.
   
• Forfeiture of a $450,000 deposit turned on which party's conduct caused the transaction to fail.
   
• Proportionality between the deposit and the purchase price factored into whether relief from forfeiture was available.
   

Facts of the case

2225064 Ontario Ltd. (the Purchaser) and 55 Bradwick Limited (the Vendor) entered into an Agreement of Purchase and Sale (APS) on April 11, 2025, for a commercial property at 55 Bradwick Drive, Vaughan, Ontario, at a price of $9,750,000.00. The Purchaser paid deposits totalling $450,000.00, held in trust by the listing brokerage, Ren/Tex Realty Inc., which was named as a party solely to facilitate release of the deposit and took no position in the proceeding. Closing was originally set for October 1, 2025, and was later extended by agreement to October 3, 2025.

A Notice of Security Interest (NOSI) had been registered against the property's title in 1985 by a former tenant, Windsurfing International Canada Inc., in favour of International Mercantile Factors Ltd. The tenant vacated the premises in August 1987, and the Vendor did not learn of the NOSI's existence until 2024. Under paragraph 8 of the APS, the Purchaser had until September 12, 2025 to raise title objections; the Purchaser's solicitor delivered a requisition demanding discharge of the NOSI on September 19, 2025, seven days after that deadline. The Vendor's lawyer pursued an application under section 102 of the Land Titles Act to delete the NOSI and provided the Purchaser with a signed undertaking to discharge it after closing, but the Land Registry Office ultimately advised that a court order was required. That order, declaring the NOSI of no force and effect, was not obtained until November 24, 2025 — after the parties' dispute over closing had already arisen. The Purchaser demanded compensation for delay-related costs and, when the parties could not resolve the indemnity-insurance issue tied to deletion of the NOSI, purported to terminate the APS on October 6, 2025 and sought return of the deposit. The Vendor took the position that the Purchaser had breached the APS by failing to close and resold the property afterward for $250,000 more than the original APS price.

Policy and legislative provisions at issue

Paragraph 8 of the APS set the title-objection deadline, and paragraph 10 provided that any valid objection not raised by that deadline was waived unless it went to the "root of title," with the buyer otherwise "conclusively deemed to have accepted Seller's title." Schedule A to the APS (paragraphs 4 and 16) addressed the Vendor's covenant to convey the property free of encumbrances and included fixtures and chattels in the purchase price. The Notice of Security Interest itself was registered under section 54(1) of the Personal Property Security Act (PPSA), which allows registration where collateral includes fixtures. The court also considered sections 11, 34, and 4(1) of the PPSA, governing attachment and enforceability of security interests and confirming that the PPSA does not create an interest in real property. Section 102 of the Land Titles Act governed the Vendor's (unsuccessful) attempt to delete the NOSI administratively, and section 98 of the Courts of Justice Act was invoked by the Purchaser in seeking relief from forfeiture of the deposit.

Reasoning and analysis

Justice Charney found that the NOSI did not go to the "root of title" because it did not create a total failure of consideration: it warned only of a possible security interest in fixtures that may have belonged to a tenant who vacated the property nearly 40 years earlier, and the Vendor had already provided an undertaking to discharge it. The NOSI also failed to meet the PPSA's attachment requirements under section 11, since it was unsigned by the debtor and lacked an adequate description of the collateral. On whether the NOSI was a "matter of conveyance" — which could be requisitioned up to closing — the court held that it was not, because the Vendor was not a party to the underlying security agreement and could not discharge the NOSI as of right; deletion ultimately required a court order that the Vendor had to persuade a judge to grant, rather than something within the Vendor's unilateral power. Since the Purchaser's requisition fell outside both exceptions and was filed after the September 12, 2025 deadline, the Purchaser was deemed to have accepted the Vendor's title, making the Purchaser's refusal to close a breach of the APS.

On the deposit, the court applied the principle that an innocent party may retain a deposit on the other side's breach without proving damages. Turning to the Purchaser's request for relief from forfeiture, Justice Charney noted that the deposit represented approximately 4.6% of the purchase price — well within the range Ontario courts have found unobjectionable — and found no evidence of unequal bargaining power or unconscionability in what was a transaction between sophisticated commercial parties.

Ruling and overall outcome

The court dismissed the Purchaser's application and granted the Vendor's cross-application, declaring that the Purchaser breached the APS and ordering forfeiture of the $450,000 deposit to the Vendor. The Vendor had already indicated it would not pursue a separate damages trial given the property's resale at a $250,000 premium over the original price, so no further proceedings on damages were ordered. Costs were not fixed in this decision: the court set a schedule for costs submissions if the parties cannot agree, so the amount of any costs award is Not Specified.