A neighbour's handshake deal nearly cost him the sale

The situation

The number on the table was roughly nine million dollars, and for most of the negotiation it had not moved. Willem was selling the second company he had built, a distribution operation in Thornhill that had grown steadily for over a decade, and the buyer's opening offer had held firm through two rounds of diligence. Then, three weeks before the scheduled closing, the buyer's real estate counsel flagged a single line in the survey report and the number stopped holding.

The company's Thornhill facility had one usable route for delivery trucks, a paved strip running along the side of the building that crossed onto the property next door before reaching the public road. Willem had used it without incident for as long as he had owned the business. He had never questioned it. His forklift operator, Minh, who also filled in on the loading dock schedule, had told him years earlier that the neighbouring business had always been fine with it, and nothing in the day-to-day operation of the company had ever suggested otherwise.

The problem was that nothing in the title record confirmed it either. The survey showed the access route crossing onto land owned by the neighbouring business, and no easement, right-of-way, or licence had ever been registered to protect it. The buyer's lawyers were direct about what this meant: if the neighbouring owner ever chose to block the route, or to sell the property to someone who would, the company's only means of receiving and shipping product could disappear.

For a going concern being sold as a package of assets and goodwill, that kind of exposure was not a footnote. Willem's deal was structured with a significant portion of the purchase price contingent on the business operating without disruption through a transition period, and an access failure in month two would have been catastrophic for that structure. The buyer's counsel put the deal on hold pending an explanation Willem did not have.

Willem's own instinct was to offer the buyer a personal indemnity, a promise to cover any loss if the access ever failed, and to push for closing on the original schedule. That instinct made sense to him because the arrangement had never caused a problem in ten years, and he genuinely believed it never would. But an indemnity from an individual is only as good as that individual's ability to pay years later if the risk materializes, and the buyer's lawyers were not interested in trading a structural gap in the real estate for a personal promise with no security behind it. They wanted the access fixed, not insured against, and they wanted it fixed before money changed hands.

Where it went wrong

We went looking for the paper Willem assumed existed and found instead a chain of informal understandings that traced back further than his ownership of the company. The access arrangement had originated not with Willem, and not even with the company's previous owner, but with the founder of the neighbouring business, a man named Linh who had sold that business years earlier and no longer had any legal connection to the property. The current owner of the neighbouring lot had simply inherited an informal courtesy his predecessor had extended, without ever being asked to formalize it.

This mattered because the person who actually controlled the outcome was not a party to Willem's sale at all. Linh was retired, uninvolved in either company, and under no obligation to help resolve a dispute he had no stake in. But he was the only person who could speak to what the original arrangement had actually been intended to cover, because the current owner of the neighbouring lot, now a numbered corporate entity with new management, had no records of it and no institutional memory of the terms.

Ontario land registration does not protect an arrangement that was never put on title. As a general rule, a verbal understanding between two business owners, however long it had been honoured, would not create an interest in land binding on a future purchaser of the neighbouring lot. That rule is not absolute: long-standing use can in some circumstances ripen into a right over the land, and a party who has acted to its detriment on the strength of such an arrangement can sometimes hold the other side to it despite nothing being written down. Whether either of those routes was open here would depend on the specific history of the access and how the neighbouring lot had come onto title, and nothing we found gave Willem's company that kind of case to make. The buyer's diligence had done exactly what it was supposed to do: it found the gap between what the business actually depended on and what the law would actually protect.

The neighbouring business, once approached, was not hostile, but it was not obligated either. Its management understood the access request was now worth something to Willem's sale, and their opening position reflected that leverage plainly. What had cost nothing for a decade suddenly had a price, and the price was being set by a party who had never been part of the deal and had no reason to make it easy.

There was also a timing problem layered on top of the ownership problem. Willem's purchase agreement had a closing deadline the buyer was not eager to extend indefinitely, and every week spent tracking down Linh, confirming the neighbouring owner's position, and negotiating terms was a week the buyer's financing commitment sat unused and the buyer's patience wore thinner. A gap in the title record is rarely fatal to a deal on its own; what kills deals is the gap combined with a clock the seller does not control and a counterparty on the other side of the fence who has no reason to move quickly.

What we did

1. Traced the arrangement's history by pulling the chain of title on both properties back to their original owners, which let us identify Linh as the source of the original understanding and confirm the current neighbouring owner had no documentation of its terms, giving us a clear picture of exactly how weak the company's position actually was before we advised Willem on strategy, and letting us decide early that transparency with the buyer would serve Willem better than trying to negotiate a quiet fix in the background.
2. Interviewed Linh directly to establish what the original arrangement had actually contemplated, since his account, while not legally binding on the current owner, gave us leverage in negotiation by showing the access had been intended as permanent and unconditional rather than a temporary courtesy that could reasonably be revoked at will, a distinction that carried real weight once we sat down with the neighbouring owner to negotiate.
3. Commissioned an updated survey that precisely measured the footprint the access route actually required, so that any negotiated easement would be drawn tightly enough to be acceptable to the neighbouring owner while still covering everything the buyer's operations would need after closing, avoiding the common mistake of drafting the request too broadly and giving the neighbouring owner a reason to balk at scope before price was even discussed.
4. Opened negotiations with the neighbouring owner for a registered easement rather than a renewed informal arrangement, making clear to their counsel that a permanent, recorded right-of-way was the only outcome that would satisfy the buyer's lawyers, and that the alternative was likely years of costly dispute over blocked access with no guarantee either side would come out ahead of a negotiated settlement now.
5. Reported the unresolved risk to the buyer's counsel as soon as we understood its shape, rather than trying to paper over it while negotiations with the neighbour were still underway, because an access failure discovered by the buyer after closing would have exposed Willem to a far larger claim than being upfront about a gap he was actively working to close, and credibility with the buyer's side mattered for everything that followed.
6. Negotiated a price adjustment with the buyer that reflected the cost of formalizing the easement, the risk premium for the period before registration was complete, and a holdback tied to the easement actually closing on schedule, converting what had been an open-ended threat to the whole transaction into a quantified, bounded reduction both sides could live with and move past.
7. Closed the easement negotiation on a compressed timeline by keeping steady pressure on the neighbouring owner through the certainty of a modest, one-time payment rather than an open-ended negotiation, and by setting a firm date after which the offer would be withdrawn and the matter left to a formal dispute instead, avoiding the drawn-out stalemate that would have run out the buyer's patience and killed the sale entirely if left to find its own pace.
8. Kept the buyer's counsel updated on a fixed weekly schedule throughout the negotiation rather than going quiet until a resolution was reached, sending a short written status even in weeks where nothing had moved, because a buyer left without updates tends to assume the worst and start pricing in a walk-away. Regular, candid progress reports did more to hold the deal together through the delay than any single piece of good news could have on its own.

The outcome

The sale closed, but not at the number that had held for most of the negotiation. The purchase price came down by an amount in the mid six figures to account for the cost of the easement, the risk premium the buyer insisted on for the gap between signing and registration, and a modest holdback tied to the easement actually completing on schedule. Willem accepted the reduction rather than risk the deal collapsing entirely or closing on terms that left the access problem for the buyer to discover on their own after the fact.

The registered easement itself came through within the transition period, on terms narrower than Willem's original informal use but wide enough to cover the company's actual operational needs going forward. The neighbouring owner was paid a one-time amount for granting it, a fraction of what the dispute would have cost either side in a drawn-out disagreement, and the corridor was permanently secured on title for the first time in the building's history.

The buyer, for its part, treated the episode as a diligence success rather than a reason to distrust the rest of the transaction. Once the easement was registered and the price adjustment agreed, the buyer's counsel signed off on the remaining closing conditions without further delay, and the transition period that followed proceeded without any disruption to deliveries or operations. The access route that had quietly supported the business for a decade continued to do exactly that, now with a legal foundation underneath it.

Willem later described the reduced price as the cost of a decade of not asking a simple question. Nothing about the original arrangement had been improper, and nothing the company had done was wrong; the exposure existed simply because a convenient practice had never been converted into a legal right. The lesson he took from it, and the one we pass along to any client running a business on a property with shared or informal access, is that the value of formalizing an arrangement is invisible right up until someone is trying to put a number on the business and the gap becomes everyone's problem at once.

What you can learn from this