Buyers' Liability To Sellers In Aborted Real Estate Closings - Part 1

• Published date: 04 May 2021
• Subject Matter: Finance and Banking, Litigation, Mediation & Arbitration, Real Estate and Construction, Charges, Mortgages, Indemnities, Financial Services, Trials & Appeals & Compensation, Real Estate
• Law Firm: Gardiner Roberts LLP
• Author: Mr James R.G. Cook

"The factual background to this summary judgment motion is a sad story that has frequently been retold in courtrooms across the land with the same tragic ending."

So begins Ontario Superior Court Justice Paul Perell in the latest summary judgment decision obtained by the seller of a property against a buyer who couldn't complete the purchase after entering into a binding Agreement of Purchase and Sale: Deco Homes (Richmond Hill) Inc. v. Serikov, 2021 ONSC 2079 (CanLII).

The defendant buyer had agreed to purchase a property in the Town of Richmond Hill from the plaintiff for $1,248,380. Deposits were duly paid and the completion date was scheduled for March 15, 2019. Shortly before closing, the buyer's intended mortgage lender obtained an appraisal indicating that the property was worth $300,000 less than the purchase price. The lender would not agree to advance that amount, leaving the buyer scrambling to try and negotiate a vendor take back mortgage with the seller or find alternative financing. The buyer could not arrange to make up the shortfall and the transaction failed to close.

The seller subsequently resold the property for $980,800 and sued the buyer for the shortfall of $268,415.30 and associated expenses.

The buyer simply had no defence to the seller's claim. The only complaint the buyer could raise was that the seller had not agreed to accept a vendor take back mortgage for the balance of the agreed-upon purchase price rather than the full price on closing. While the seller could have elected to do so, there is generally no obligation on a seller's part to accept revised terms from a buyer to purchase a property at a lower price: Azzarello v. Shawqi, 2019 ONCA 820.

Justice Perell had no issue with the seller's efforts to resell the property for its current market price. As a result, the seller obtained judgment, and was entitled to retain the deposit of $120,915.30 and an additional $154,164.26 in damages against the buyer.

The case bears the hallmarks of dozens of others that arose from a real estate market correction in the Greater Toronto Area in mid-2017, when property values were suddenly reassessed by potential lenders and buyers could no longer obtain as much financing from their preferred bank as they had anticipated. In these cases, buyers have attempted to justify their failure to close on a variety of unsuccessful grounds:

• The failure of the seller to properly re-market the property for a certain time to obtain a better price...