Canada: What Happens When A Party To A Contract Involving Real Estate Dies?

What happens when an individual buyer or seller dies prior to the completion of a transaction involving real estate? This blog post discusses the complications that can arise in real estate transactions where there is a piece of land under contract and the individual seller or buyer dies prior to the completion of the transaction.

At common law, a contract may be discharged or set aside on the ground of frustration where an unforeseen event renders the contract physically or commercially impossible to fulfill.¹ Courts have considered whether the death of a party to a contract for a real estate transaction amounts to frustration of the contract, but have held that the contract will only be frustrated if there is some personal aspect of the deceased that was central to the contract. In a 1996 case called Butterfield v Todd Estate, the deceased had entered into an agreement with the plaintiff to jointly purchase a property and share the mortgage and maintenance payments. The executor of the deceased's estate refused to fulfil the deceased's obligations under the contract. The British Columbia Court of Appeal held that the estate was obligated to pay the deceased's share of the purchase price of the property and to share mortgage and maintenance payments. These were financial obligations of the deceased that were not something that only he was capable of performing personally.²

Given the above, in most cases, if a seller or buyer dies prior to the completion of a real estate transaction, then the obligation to complete the transaction on behalf of the deceased falls to their executor and is not extinguished by reason of such death. There may be a delay to the completion of the transaction while an executor or administrator is recognized to administer the deceased's estate. Such a delay may be particularly problematic if the transaction is part of a land assembly, as the entire land assembly and redevelopment process could be stalled.

In British Columbia, one way to minimize the delay caused by the death of a seller is to apply to court on an urgent basis for a limited grant of administration allowing the applicant to deal specifically with the land under contract rather than any other aspect of the deceased's estate. The provisions of the Wills, Estates & Succession Act give the courts the jurisdiction to grant this type of relief.³ To obtain a limited grant like this, the applicant must show that there are special circumstances, that such an appointment is necessary and that it does not prejudice the interests of the beneficiaries of the deceased's estate.

Footnotes

1. Naylor Group Inc v Ellis-Don Construction Ltd, 2001 SCC 58, paras 53-55.

2. Butterfield v Todd Estate, 1996 BCJ No. 826 (BCCA).

3. Berkner (Estate), 2017 BCSC 619.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.