While purchasing a home may be a very exciting prospect, it can also be stressful and worrisome. This is particularly so when the real estate sale includes additional, non-standard terms such as a leaseback. In circumstances where the parties to a property sale decide that the purchaser will lease the purchased property back to the seller, it is imperative that the agreement of purchase and sale accurately reflects the terms of the deal. This is, of course, true of any commercial transaction, but to avoid a business dispute or a circumstance wherein one party refuses to close the transaction, it must be emphasized that the terms of any real estate transaction must be clearly and unambiguously stated in the agreement of purchase and sale.

Woman Agrees to Sell Her Property to Friends

The recent decision of the British Columbia Court of Appeal in Deissner v Boorsma is a case that perfectly encapsulates the issues associated with a real estate leaseback purchase. The respondent, Wypkje Boorsma (“Boorsma”), purchased the property at issue in the early 1990s. Although Boorsma lived in Holland, she travelled back and forth to her property in Canada four or five times per year in the ensuing years until 2020. By that time, Boorsma was experiencing difficulty with travel, a situation only exacerbated by the COVID-19 pandemic restrictions that had been instituted. Although Boorsma determined that she wanted to sell her Canadian property, she still wanted to visit her property for a few more years. On that basis, she listed her property for sale on the condition that it would be leased back to her for two years.

Boorsma received two offers for the property and decided to accept the offer of the appellants, the Deissners, because they were her friends, and their mother lived in the property next door to Boorsma’s property. It is worth noting that the Deissners’ offer was the lower of the two offers Boorsma had received. The parties signed an Agreement of Purchase and Sale that included a provision with respect to the leaseback of the property. Under the leaseback provision, Boorsma would pay Deissner $1,000 monthly for 24 months, from December 16, 2020, until December 16, 2022. The completion date of the contract was December 15, 2020, and the possession date was December 18, 2020. The agreement further dictated that, while Boorsma would be responsible for payment of hydro, natural gas and internet service for the property for the duration of the lease, the Deissners would be responsible for payment of municipal property taxes and utilities for that same period. 

Old Friends Have Falling Out Over Property Purchase

After the Agreement of Purchase and Sale was signed, tensions began to develop between the parties. The dispute began when the Deissners retained a lawyer to prepare an addendum to the lease agreement, which included, amongst other things, a five per cent increase in the amount of rent, a clause limiting the Deissners’ liability in the event of damage or injury to Boorsma or any of her guests while on the property, and a clause restricting Boorsma’s use of the property’s driveway, to allow the Deissners to park their RV in the space. Boorsma’s lawyer believed that the amendments drafted by the Deissners’ lawyer amounted to a counter-offer rather than an amendment of the original purchase and sale agreement terms. Following some back-and-forth between the parties’ respective counsels, Boorsma’s counsel advised the Deissners that Boorsma had elected to cancel the agreement of purchase and sale, given that the Deissners had “chosen to unilaterally alter the contract by imposing material terms which are unacceptable to” Boorsma. The Deissners took the position that the leaseback clause of the agreement of purchase and sale was not a condition of the contract and was unenforceable because it was merely an “agreement to agree” rather than an actual contract. They further asserted that they were entitled to purchase the property without signing any lease with Boorsma. To that end, the Deissners sued Boorsma for breach of contract and specific performance, which, if granted, would require Boorsma to complete the sale to the Deissners in accordance with the agreement of purchase and sale. 

Property Purchaser Loses at Trial and Appeals

At trial, the judge considered the argument of the Deissners that the parties had not entered into a binding agreement with respect to the leaseback provision of the agreement of purchase and sale. The judge concluded that since the parties had different expectations, intentions and understandings of the leaseback provisions, there had been no “meeting of the minds” with respect to the terms of the leaseback. As such, no binding agreement had been reached between the parties with respect to the leaseback of the property. However, the judge also concluded that the leaseback provisions of the contract were inextricably linked to the terms of the sale overall and, since the leaseback clause went “to the heart of Ms. Boorsma’s choice to sell the Property,” thus the leaseback clause could not be severed from the rest of the contract. This meant that since the leaseback provision was unenforceable and could not be severed from the rest of the agreement, the entire agreement was unenforceable. The claim for specific performance was dismissed, and the property remained in Boorsma’s possession. 

The Court of Appeal dismissed the Deissners’ appeal of the case and upheld the lower court’s judgment.

Trustworthy Vancouver Commercial Litigation Lawyers Advising On Real Estate Disputes

If you are involved in commercial litigation of any kind, whether related to a business dispute, a real estate transaction gone awry, a disagreement with respect to construction, or insurance litigation, you need knowledgeable legal assistance. Fortunately, the commercial litigation lawyers at Meridian Law Group are here to help. From our offices in downtown Vancouver, British Columbia, Meridian Law Group is proud to provide British Columbians from all over the province with competent, capable, helpful assistance for their commercial litigation matters. Contact Meridian Law Group online or by telephone at (604) 687-2277 to schedule a confidential consultation.