Those of you who are in any way connected with land development are probably familiar with one foot or 0.3 metre reserve. This is a thin strip of land which is typically given to the municipality to control access. Usually if a developer is making a development proposal which includes a block of land which is not ready to be developed, the municipality will request a strip of land along the street frontage of the undeveloped land to ensure that the developer doesn’t jump the gun. Why bother with this going to court business to stop a scofflaw developer when the municipality can put up a fence on this one foot strip it owns?
The one foot reserve is so ubiquitous that lawyers and clients are lulled into accepting their existence without much thought. But I think this practice will change after a recent Ontario Court of Appeal decision in which a buyer successfully sued their lawyer for not looking into the details of a one foot reserve.
A company retained their lawyer to act for it on the purchase of a block of land. The title search showed that access to the adjoining city road was restricted by a 0.3 metre reserve. The lawyer assumed that like most such reserves, it will be lifted as part of the development approval process and the deal closed. The client received a shock when it applied for approval for its project. The city sent them a bill for $433,000 as the client’s contribution to the cost of the construction of the road before it can gain access. Writs started flying. The buyer sued their lawyer and the seller when it turned out that the seller had not disclosed that it had signed an agreement with the city agreeing to these terms. Oops! The seller had disclosed to the buyer that the city would have to be paid development costs and fees to lift the reserve but the buyer’s lawyer assumed that would mean the usual development charges, not the cost of building the road itself.
The Court did not have not much sympathy for the lawyer. The Court ruled that had the right question been asked of the city during due diligence, the real cost would have been ascertained. Yes it would have been nice if the city had actually registered the obligation on title or the seller had been more open, but nice isn’t an obligation.
The lesson to be learnt is that each deal has its own peculiarities and all parties have to be alert for the outliers.
© Morrison Brown Sosnovitch LLP, 2013. All rights reserved.