Buying real estate from a receiver: Introduction
Buying real estate from a receiver is a little different from a normal real estate transaction. In this Brandon’s Blog I describe a recent Court of Appeal Decision that shows it can even be tricky for the receiver.
Buying real estate from a receiver: Court appointed receiver+real estate
K was the court-appointed receiver (the “Receiver”) of the assets, properties and undertaking of a lakeside hotel in British Columbia, Carmel Cove Resort & Spa Inc. On October 25, 2013, the Receiver went into a contract in writing to sell the real property owned by the company in receivership to the participant, B.C. Ltd. (the “Purchaser”). The Contract of Purchase and Sale (the “Contract”) was in the form of the standard agreement of the British Columbia Real Estate Association and the Canadian Bar Association (B.C. Branch).
Buying real estate from a receiver: Contract fine print example
One of the conditions in the Contract was that the deal was subject to approval by the Supreme Court of British Columbia (the “Court”). It had to be obtained within twenty-one (21) days of acceptance of the Contract by both parties. Clause 3 in the Contract (“Clause 3”) stated that unless each condition was either waived or satisfied by written notice provided by the benefiting party to the other party on or before the date specified for every condition, the Contract would end.
On November 14, 2013, the twenty-first day after the Receiver’s approval of the deal, an application for court authorization was heard and approved. Five days later, on November 19, 2013, the Receiver gave the Purchaser written notice of the Receiver’s fulfillment of the condition for court approval.
Buying real estate from a receiver: Fine print matters
The Purchaser chose not to finish the transaction. The Purchaser refused to do so. The Purchaser claimed it was partly because it thought the Contract was terminated due to the Receiver’s failing to offer written notification on time. The Receiver ultimately sold the asset to another purchaser. It sold the property for $925,000 less than it would have obtained if the Receiver completed the sale to the Purchaser.
The Receiver expended $312,150.96 to run the resort and administer the receivership in between the collapse of the sale to the Purchaser and the sale to the succeeding buyer closing. Therefore, the Receiver began an action, suing the Purchaser for $1,237,150.96. It applied to Court for a summary trial.
Buying real estate from a receiver: Fine print can’t lie
At the trial, both sides set out their disagreements and arguments on the condition precedent issue:
- the Purchaser recognized that the Receiver met the need for court authorization by the twenty-first day adhering to the Receiver’s acceptance of the agreement.
- The Purchaser pointed out, nonetheless, that the Receiver did not conform with Clause 3 by offering the Purchaser written notice of satisfaction of the condition on or before the day specified for the condition; i.e.: on the twenty-first day.
- The Receiver’s position was that Purchaser knew the outcome of the court application on the day that it was heard.
- The Receiver stated therefore written notice was superfluous, unnecessary, and duplicative.
Buying real estate from a receiver: Here comes the judge
The Court kept in mind that the trouble with the Receiver’s position right here was that it was, truly, an invitation to the court to reword the terms of the contract. The notification stipulation in Clause 3 was quickly parsed by any type of literate individual. It was not unclear. The clause did not need interpretation. There was no need to refer to evidence to figure out what it suggested.
By its clear language, the notification arrangement in Clause 3 needed the party benefiting from the condition– in this situation the Receiver– to give written notification– e.g.:
- a letter.
- an e-mail.
- a written note in crayon on the back of an envelope.
The notification that the condition– court authorization–was obtained on or before the day defined for the condition– i.e.: not greater than twenty-one days’ after the Receiver’s acceptance.
Did the Receiver do just what Clause 3 required? It did not. Rather, it offered the Purchaser written notification 4 days later which was also 4 days too late.
The trial judge held that the failure to give written notice of fulfillment of the condition as specifically stated in Clause 3 ended the Contract. For that reason, the Court rejected the Receiver’s claim.
Buying real estate from a receiver: The appeal
The Receiver appealed the decision. The appellate court dismissed the Receiver’s application. The Court of Appeal noted that it is necessary to give effect to notice arrangements included in commercial agreements to offer assurance between the participants who contract with each other.
Buying real estate from a receiver: What if you have too much debt?
Do you or your company have too much debt due to a contract gone wrong, losing in litigation or for any other reason? If you’re trying to find a way to restructure your debt, contact Ira Smith Trustee & Receiver Inc.
Our philosophy for every person is to develop an outcome where Starting Over, Starting Now happens, beginning the minute you come in the door. You’re just one call away from taking the essential action steps to get back to leading a healthy and balanced stress and anxiety free life.
You may read the entire Court of Appeal decision by clicking here KPMG Inc. v. 0747825 B.C. Ltd., 2017 BCCA 277 (CanLII)