Specific Performance for Real Estate Investment Properties – Extremely Unlikely

Is Real Property unique? It was not so long ago that courts thought so. No two pieces of property were considered the same and consequentially damages (money) were considered an inadequate substitute. If a real estate transaction went bad and a person sued for the subject land, if successful, the person would be entitled to that property. For decades this was settled law.

But the law changed dramatically in 1996 with the Supreme Court of Canada’s decision in Semelhago v. Paramadevan^[1]. It is now presumed to be generic and replaceable unless proved otherwise. Specific Performance for real property is now only granted when 1) the subject property is unique and a substitute is not readily available, 2) the remedy for damages is comparatively inadequate to do justice; and 3) the plaintiff has established a fair, real and substantial justification for the claim of specific performance^[2].  These principals ultimate boil down to whether property is considered “Unique”.

Properties purchased for investment purposes, including land to be developed, rarely if ever meet this requirement. As financial investments their value can be reduced to a monetary value making damages an adequate remedy. While specific features of a property may make it a uniquely profitable investment, damages can adequately capture this.  A recent example that illustrates this is Southcott Estates Inc. v. Toronto Catholic District School Board^[3]. In this case the plaintiff corporation was in the business of developing residential homes that it would sell off. Justice Spiegel accepted the plaintiff’s submissions that property had a number of attractive and hard to replicate qualities, but said because the plaintiff intended to sell off the property after it was developed, these qualities related solely to the profitability of the investment with regards to the plaintiff, and as such, the property was not unique in that damages could adequately compensate the plaintiff (a finding upheld by the Supreme Court of Canada). 

But there are circumstances where specific performance may be ordered for investment property^[4]. Such as when damages are too difficult to calculate- to the point of pure conjecture. In Neighbourdhoods of Cornell Inc. v. 1440106 Ontario Inc. justice Spiegel found for the defendant on the terms of the contract but went on to consider whether an order for specific performance would be appropriate had he found for the plaintiff^[5]. The land in contention was a massive lot in Markham. The purchaser was in the business of building communities of between 1000-2000 houses. Justice Spiegel found specific performance to be an appropriate remedy here because “the complexity of the development made assessing damages too speculative, time consuming and likely to be inadequate or unfair to plaintiff or defendant”.  In contrast to this massive project, is the decision a few years later in Southcott mentioned above, also by Justice Spiegel. The plaintiff in Southcott intended to build 48 houses on the property in contention. Justice Spiegel found the project not so complex that damages could not adequately be assessed. Justice Spiegel cited his previous decision in Neighbourhoods of Cornell in making the Southcott decision.

In contrast to real estate purchased for investment purposes, claims for commercial and residential property are much more likely to satisfy the uniqueness test and obtain an award for specific performance. Look out for future articles on each.

Read more about Hummingbird’s real estate lawyer division.

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