Selling a Home With a Subdivision or Development Agreement on Title: Why the Buyer’s Lawyer Asks for Proof of Municipal Compliance

The request in the requisition letter comes straight from clause 10(b) of the standard Ontario resale agreement. Here is where it comes from, what a proper answer looks like, and what the contract says if you cannot give one.

I’m Arthur Zhao, a Toronto real estate Broker. Picture the week after your sale goes firm. Your lawyer forwards a letter from the buyer’s lawyer: the requisition letter, a list of questions and demands about your title that have to be answered before closing. You read down the items, and one of them reads: “Provide evidence that all registered municipal agreements have been complied with.”

Your first thought may be that you never signed an agreement with the city. You may well be right. The agreement could have been signed by the builder who created your street, or by an owner before you who added onto the house. But it is registered on your title, and the buyer’s lawyer is asking because the contract you signed tells them to. Below I go through that one requisition the way you would answer it: where it comes from, why the agreement binds you, what a good answer looks like, and what the contract does if you cannot give one.

Where the requisition comes from: clause 10(b)

Clause 10 of OREA Form 100 starts with a promise that title will be good and free from all registered restrictions, charges, liens, and encumbrances, and then lists four exceptions the buyer agrees to take title subject to. Exception (b) covers registered municipal agreements and registered agreements with publicly regulated utilities, but only “providing such have been complied with, or security has been posted to ensure compliance and completion, as evidenced by a letter from the relevant municipality or regulated utility.”

Read the sentence slowly and the requisition stops looking like a favour the buyer’s lawyer is asking for. The exception is conditional. The buyer accepts a registered agreement on title when there is a letter showing it was complied with, or that security is in place. When a buyer’s lawyer asks for that letter, they are asking you to show that the agreement fits inside the exception you both signed.

Two details in that wording shape what you need to look for. First, the clause names two kinds of counterparty: municipalities and publicly regulated utilities. Second, it says the letter comes from the relevant municipality or utility, which ties each letter to the party on the other side of that particular agreement.

Why an agreement someone else signed binds you

These agreements are created at the planning approval stage, and the Planning Act is what lets them outlive the person who signed.

• Subdivisions. Under s. 51(25)(d), the approval authority can make it a condition of approving a plan of subdivision that the owner enter into one or more agreements with the municipality, including for the provision of municipal or other services. Section 51(26) says those agreements may be registered against the land, and the municipality or approval authority can enforce them against the owner and, subject to the Registry Act and the Land Titles Act, against any and all subsequent owners.
• Site plan control. Under s. 41(7)(c) and (c.1), a municipality can require agreements covering facilities and works on the site, and that development proceeds in accordance with the approved plans. Clause (7)(b) can also require the owner to maintain certain of those facilities at the owner’s sole risk and expense. Section 41(10) lets agreements under (7)(c), (7)(c.1) and (8)(b), the last being agreements with an upper-tier municipality, be registered and enforced against subsequent owners in the same way.
• Minor variances with conditions. When a committee of adjustment attaches terms and conditions to a minor variance, s. 45(9.1) allows it to require the owner to enter into an agreement with the municipality about them, and s. 45(9.2) lets that agreement be registered and enforced against any and all subsequent owners.

One geographic point matters here. Section 41(16) of the Planning Act reads: “This section does not apply to the City of Toronto.” The current wording carries the legislative note 2017, c. 23, Sched. 3, s. 13 (3). If your home is in the City of Toronto, the current s. 41(10) is not the rule behind a site plan agreement on your title; which statute a particular Toronto agreement was made under, especially an older one, is a question for your lawyer. The subdivision rule in s. 51 has no Toronto carve-out, and clause 10(b) of the resale agreement speaks of registered municipal agreements generally, so the requisition itself applies in Toronto just as it does elsewhere.

What counts as an answer

Clause 10(b) gives you two ways to fit inside the exception, and one way to prove either of them.

• The agreement has been complied with. The obligations in it have been carried out.
• Security has been posted to ensure compliance and completion. The clause treats this as an alternative to compliance, so work that is not finished can still fit inside the exception if security covering it is in place.

Either way, the clause names the evidence: a letter from the relevant municipality or regulated utility. Your own statement that the work was done, or a contractor’s invoice, is not what the clause describes.

Which department issues these letters, whether there is a fee, and how long it takes are not set out in the Planning Act or in Form 100, and I have not checked them for any particular municipality. The practical step is to ask the municipality where the property is located how it handles compliance letters for registered agreements, and to ask the same question of any utility named in an agreement on your title.

If no letter can be produced: what clause 10 says happens

Clause 10 sets out the mechanism in one long sentence. If, within the times set in paragraph 8 (the Requisition Date you filled in when the offer was written), the buyer makes a valid objection to title in writing, and the seller is unable or unwilling to remove, remedy or satisfy it, or to obtain title insurance in favour of the buyer and any mortgagee, and the buyer will not waive it, then the agreement is at an end.

The clause does not say in so many words that a registered agreement without a compliance letter is a valid objection. The logic is what the text implies: if no letter shows compliance or security, the agreement may not fit inside exception (b), and an encumbrance outside the exceptions is the kind of thing the opening promise of clean title covers. Whether a specific objection is valid is a legal question for the two lawyers.

The same clause also limits the buyer. Apart from a valid objection made by the requisition deadline, and except for any objection going to the root of the title, the buyer is conclusively deemed to have accepted the seller’s title.

Possible ways forward when the letter will not arrive in time

When an agreement turns out to have outstanding work, or a letter cannot be obtained before closing, what happens next is not written into the standard form. Depending on the facts, the lawyers may discuss a seller’s undertaking, a holdback from the sale proceeds, or money held in trust until the letter is issued. None of these is set out in clause 10; each is a matter the two sides would have to agree on, and whether any of them is acceptable to the buyer and the buyer’s lender is something only those parties can say.

Title insurance is the one option clause 10 names directly, and the alert below explains where it sits. A seller who already knows about an unsatisfied agreement could also ask for a term in the agreement of purchase and sale that deals with it. What such a term should say depends on the agreement and the property, so it is a question for your real estate lawyer, not a template.

Before your next sale

If this requisition caught you off guard, a few things can be gathered ahead of a future sale: the list of agreements registered on your title, any committee of adjustment decision that came with a condition, and any compliance or security letter already issued for the property. The checklist below sorts them into documents and questions.

Responding to the compliance requisition

Two lists: what to put in front of your lawyer, and what to ask them.