Section 37 of the Conveyancing and Law of Property Act (the “Act”) of Ontario regulates the rights and responsibilities of parties in connection to liens on lands for improvements performed under a mistake of title.
A lien is a legal claim or right to a piece of property as security for the payment of a debt or other obligation, according to the Act. A lien on lands for improvements describes a circumstance in which a person has made improvements to a piece of property under the assumption that they are the owner or have some other legal interest in the property.
If it is later determined that the individual does not have legal title to the property, they may still be entitled to a lien for the value of the improvements made. This is known as a lien under mistake of title.
Section 37 of the Act outlines the parties’ rights and responsibilities in this circumstance. Specifically, it states that the person who made the improvements is entitled to a lien on the property for the value of the improvements, provided they acted in good faith and were unaware of any title defects.
Dupuis-Bissonnette v. Wm. J. Gies Construction Ltd., is a perfect illustration of the application of Section 37 of the Act. The case involved a dispute between neighbours over the ownership of a piece of property and the right to retain land upon which improvements have been made under a mistake of title.
The following are the relevant facts of the case:
- The Dupuis-Bissonnettes, the applicants, were the owners of a piece of property.
- Wm. J. Gies Construction Ltd., the respondent, was the owner of a neighbouring property.
- The Dupuis-Bissonnettes built a retaining wall on the respondent’s property, encroaching onto the respondent’s land, in the mistaken belief that it was on their own property.
- The Dupuis-Bissonnettes applied for a declaration that they were entitled to retain the part of the respondent’s land upon which they had constructed the retaining wall.
The court sided with the Dupuis-Bissonnettes, granting their application and dismissing the respondent’s cross-application. The court found that the Dupuis-Bissonnettes honestly believed that the retaining wall was properly located within their lot lines when it was built and they also acted reasonably in engaging a contractor and project manager (who likewise believed that the retaining wall was correctly positioned inside their lot borders when it was constructed). The court also determined that the respondent was an innocent aggrieved party and that the Dupuis-Bissonnettes’ retention of the land was the most just solution. The most just solution was to allow the applicant to retain the land upon which the wall encroached, which was less than 1.5% of the respondent’s land. The court ordered the Dupuis-Bissonnettes to compensate the respondent at fair market value for the land they retained.
This case serves as an example of the application of the principle of good faith and the rights and obligations of parties in relation to improvements made under a mistake of title. It also illustrates the importance of seeking legal advice to protect one’s rights and interests in such situations.
