Dealing with Land? Write it Down
In British Columbia s. 59 of the Law and Equity Act, R.S.B.C. 1996, c. 253 (the “Act”) essentially requires that contracts dealing with the “disposition” of land be proven to be enforceable. The simplest way to do so is by putting the contract in writing. Failing to do so may result in a contract that is not enforceable.
S. 59 requires a little bit of unpacking to understand. “Disposition” is not defined in the Act, but is defined in Black’s Law Dictionary, 7th ed. as “The act of transferring something to another’s care or possession…” This includes the sale, assignment or lease of lands. S. 59 does not capture certain land transactions including those related to trusts, disposition further to a will, leases or 3 years or less or a guarantee or indemnity arising be operation of law or imposed by statute.
Subject to these exceptions, for a contract concerning land to be enforceable a party must establish any of the following 3 things:
- that the contract is in writing, is signed by the party to be charged with the contract, indicates that a contract has been made and provides a reasonable indication of the subject matter of the contract;
- generally, the subject matter includes two of the “3 Ps” of real estate transactions: price and property description with the third P, the parties, evidenced by the execution of the agreement;
- “not inconsistent” is not the same thing as “consistent” as it is not sufficient for a party merely to act as though the contract was made, their conduct must not act in a manner which suggests they disagree with the contract in order to establish an enforceable contract
Allout Salvage & Auto Wreckers Ltd. v. Nanaimo Auto-Save Sales & Service Ltd., 2015 BCSC 2057 (CanLII) is an interesting recent decision in which the plaintiff attempted to establish the existence of an enforceable land contract in order to seek specific performance of that contract (later, the plaintiff sought only damages).
In the case, the plaintiff alleged that it had reached an oral agreement with the defendant to lease a property for 5 years. The defendants alleged that the only agreement reached was for a month to month lease. The issues between the parties arose as a result of the defendants providing the plaintiff with a 1 month notice to end the plaintiff’s tenancy. If the lease was for 5 years, the notice given by the defendants would have been improper.
In order to obtain any relief, it was the obligation of the plaintiff to prove that there was a 5 year lease. Since the lease alleged by the plaintiff was for 5 years s. 59 of the Act was triggered and the plaintiff was required to prove there was an enforceable lease in accordance with s. 59.
After finding setting aside issues concerning the alleged lease being entered into prior to the incorporation of the plaintiff and issues with conflicting evidence, the Court summarized the pith and substance of the case at para. 20: “Either there was an agreement to lease on a month-to-month basis or for a renewable five year term.”
The Court held that there was sufficient evidence to establish what was being leased and that the documentary evidence indicated that there was an oral, month-to-month contract. Speaking more specifically to s. 59 of the Act, the Court found that there was no document in writing that could establish the lease, there was no indication that the plaintiff had done any acts which were would indicate the existence of a 5 year lease rather than a month to month lease and the plaintiff’s nominal efforts to improve the lease property were not sufficient to establish it had materially changed its position in reliance on the existence of a 5 year lease. The Court dismissed the claim accordingly.
The moral of Allout Salvage & Auto Wreckers Ltd., supra, is that it is far simpler for a party to prove an enforceable contract concerning land where the contract is in writing and signed. Attempting to prove a contract per s. 59 of the Act on any other permissible basis is an uncertain exercise and will likely be difficult, costly and time consuming. There are very few scenarios in which a party is better served by not committing a contract to writing with the assistance of competent legal counsel.