The Court of Appeal for Ontario has released its decision in Country Wide Homes Upper Thornhill Estates Inc. v. Chen, 2026 ONCA 664. The decision gives developers, vendors and purchasers more clarity on when a Certificate of Property Use (CPU) must be disclosed in a purchase of land under s. 197 of the Environmental Protection Act (EPA).
The Court of Appeal confirmed that it is sufficient for a seller to disclose a CPU before an agreement of purchase and sale is signed to avoid the transaction being voidable by the buyer under s. 197 of the EPA. In so concluding, the Court left open the possibility that later disclosure may also satisfy the requirements of s. 197 of the EPA, as it did not rule on the trial judge’s finding that disclosure before the transfer of title is also sufficient.
- The EPA CPU framework
Section 197(1) of the EPA requires any person with an interest in the property affected by a Certificate of Property Use (CPU), before dealing with the property in any way, to give a copy of the CPU to “every person who will acquire an interest in the property” as a result of the dealing. Under s. 197(4), a dealing without that disclosure is voidable at the instance of the person who was not given the CPU.
Under s. 168.6(1) of the EPA, the Director may issue a CPU to the owner of a property requiring the owner to take specified actions to prevent, eliminate or ameliorate an adverse effect identified in a risk assessment, or to refrain from specified uses or buildings on the property. Where the owner of a property is subject to a s. 197(1) CPU disclosure requirement, s. 197(2) provides for registration of a Certificate of Requirement on title. The purpose of a Certificate of Requirement is to provide notice to persons who may acquire an interest in the property. Under s. 197(3), once registered, the disclosure requirement is deemed to be directed to each person who subsequently acquires an interest in the property.
2. Background to the dispute
In October 2016, Mr. Chen agreed to buy a home (the Property) in The Enclave, a Country Wide development, for CA$3.45 million, with closing set for November 2018.
The property backs onto land formerly used by the Ontario Ministry of Natural Resources. Groundwater near the Property was previously found to be contaminated with carbon tetrachloride, among other things. The initial developer of the subdivision was required to carry out a risk assessment under the EPA and to implement risk management measures to ready the lots for residential use. The Director accepted the risk assessment and issued a CPU to the initial developer. The CPU imposed conditions and restrictions on the affected lots, including the Property that Mr. Chen later agreed to buy.
Among other things, the CPU required the owner of the Property to ensure that a vapour barrier was installed and maintained to prevent exposure to the contaminants present beneath the property. It prohibited the owner from using the groundwater as a potable or non-potable water supply. It also required any person subsequently selling or leasing the property to give any prospective purchaser or tenant a copy of the CPU and any amendments “before dealing with the Property in any way”, in accordance with s. 197(1) of the EPA.
On October 1, 2016, Mr. Chen requested the Property be held for him while he considered whether to make an offer to purchase, and offered CA$100,000 to hold it. The agent for The Enclave told him there was no process for holding properties but that he would let Mr. Chen know if another buyer was interested. Mr. Chen left an uncertified cheque, which was never cashed. There was no dispute that Mr. Chen did not receive the CPU that day.
On October 2, 2016, Mr. Chen returned and signed the agreement of purchase and sale as well as an acknowledgement that he had received the CPU. Attached to both of those documents was a copy the CPU, which he also signed and initialed. Mr. Chen testified that he was not given any documents after signing that day, but the trial judge made a finding of fact that he left with copies of the acknowledgement and the agreement of purchase and sale, both of which contained the CPU.
On November 21, 2018, Mr. Chen’s lawyer told Country Wide that he would not close, taking the position that the agreement of purchase and sale was void because Country Wide had not complied with the CPU disclosure requirement under s. 197(1) of the EPA. Country Wide started its action in December 2018 and, in mitigating its loss, resold the property in December 2020 for less than Mr. Chen had agreed to pay. It sought CA$629,075, which was the difference in price plus carrying and debt costs. Mr. Chen counterclaimed for the return of his deposits.
3. The trial decision
At trial, Callaghan J. held that s. 197(1) requires disclosure before the buyer acquires an interest in the property. The trial judge relied on appellate authority describing the relevant time as “prior to the transfer of title” (Crosslink v. CN Railway, 2014 ONCA 247, at para. 12) or before the purchaser “acquired an interest in the property” (Starport Landing Inc. v. Laurel Springs Water Corp., 2015 ONCA 772, at para. 20). The trial judge reasoned that an expression of interest does not amount to acquiring an interest, and on October 1, Mr. Chen was not someone who will acquire an interest in the property, so disclosure of the CPU was not required that day. Given that Mr. Chen received the CPU before he signed the agreement and left with copies on October 2, the requirement in s. 197(1) was satisfied.
The trial judge also dismissed Mr. Chen’s misrepresentation claim. He found that Mr. Chen bought the property as an investment and did not rely on its environmental status. There was no omission, as the CPU provided sufficient disclosure of the contaminants and the risk management measures. Each page of the agreement of purchase and sale also stated that oral representations do not form part of it. Referring to Country Wide Homes Upper Thornhill Estates Inc. v. Ge, 2020 ONCA 400 and other Enclave cases, the trial judge observed that purchasers have an obligation to read the agreement, including the CPU. Purchasers who fail to take heed of the CPU will not be excused from their contractual obligations.
Finally, the trial judge held that the agreement was not voided by a contractual term providing that the agreement was conditional for 5 days to permit the buyer to obtain legal advice. The objective evidence showed that the parties agreed to extend the deadline while they negotiated the assignment clause, which Mr. Chen confirmed on cross-examination, and that he later signed a Notice of Fulfillment of the condition. In any event, this condition was not a true condition precedent and nothing prevented the parties from agreeing to extend it. A true condition precedent relates to a future, uncertain event that depends entirely on the will of a third party, whereas waiver of this condition depended solely on Mr. Chen. In the alternative, the trial judge applied the test for waiver set out in Technicore Underground Inc. v. Toronto (City), 2012 ONCA 597, and found that Mr. Chen had waived the condition by carrying on with the agreement.
4. The Court of Appeal’s decision
On appeal, Mr. Chen argued that Country Wide failed to comply with s. 197(1) of the EPA, so the agreement could not be enforced. He made two arguments. First, he argued that disclosure was required on October 1, 2016, when he provided the uncertified CA$100,000 cheque with a request that the property be reserved and, he claimed, began negotiations toward acquiring it. Second, he argued that any disclosure provided on October 2 was inadequate.
The Court of Appeal rejected both arguments. It saw no error in the trial judge’s finding that no agreement to reserve the property was made on October 1, so s. 197(1) was not engaged on that day. It also rejected the argument that there was still a “dealing” in the property even without an agreement.
The Court noted the trial judge’s finding that Mr. Chen received the CPU before signing the agreement of purchase and sale, which he had acknowledged in writing. The Court assumed, without deciding, that the trial judge may have been wrong to state that disclosure was required before the transfer of title, but held that this did not assist Mr. Chen as disclosure was provided before signing the agreement of sale. Citing Starport, at para. 24, the Court held that disclosure of a CPU before the agreement of purchase and sale was signed was sufficient to avoid voidability under the EPA.
The Court dismissed the appeal and ordered Mr. Chen to pay CA$25,000 in agreed costs.
5. Conclusion
The Court’s decision makes clear that a buyer cannot take the position that an agreement of purchase and sale is void simply because the seller did not provide a CPU at the earliest stage of discussions. At the same time, the Court’s decision leaves some uncertainty about whether later disclosure may also satisfy the requirements of s. 197(1). Until this issue is clarified in a future decision, developers and vendors should as a best practice deliver the CPU and obtain a signed acknowledgment before the agreement of purchase and sale is signed.
For more information on this topic, please reach out to Dina Awad and Oliver Flis.
