Buyers' Liability To Sellers In Aborted Real Estate Transactions - Part 2

• Published date: 04 May 2021
• Subject Matter: Real Estate and Construction, Real Estate
• Law Firm: Gardiner Roberts LLP
• Author: Mr James R.G. Cook

We have previously addressed a number of circumstances in which buyers unsuccessfully attempted to back out of a binding Agreement of Purchase and Sale (APS) for the purchase of a residential property. This trend has continued in recent months with buyers unsuccessfully arguing that they didn't understand the terms at the time they entered into the APS, or raising other complaints against the seller.

In Prowse v. Noroozi, 2021 ONSC 3099 (CanLII), the buyer breached an APS to purchase a home in King City, Ontario, on no less than 10 occasions, most often by failing to pay a scheduled deposit and ultimately by failing to close the transaction on the final agreed-upon date. The buyer conceded that he could not obtain the necessary financing to complete the purchase.

The seller was awarded damages of $819,571.23 based on the difference between the price that the buyer had agreed to pay in March 2017 ($2,450,000) and the amount that the seller was able to obtain from another buyer in March 2020 ($1,600,000.00), and associated costs.

In Teefy Developments v. Sun, 2021 ONSC 853 (CanLII), the buyer agreed to purchase a home in Vaughan, Ontario in September 2016, for $1,539,990.00, with a closing date ultimately set for October 2018. A few weeks before closing, the buyer told the seller that she was unable to obtain mortgage financing. The seller offered to extend closing by a month to no avail.

The buyer argued that she had been pressured or misled into the purchase transaction by a real estate agent. However, she had not named the real estate agent as a party and that, in any event, was not an issue that affected her liability vis-à-vis the seller who played no part in the agent's alleged conduct. In November 2019, the seller sold the property to another buyer for $1,200,000.00. As a result, the seller's damages were $189,990 in addition to the $150,000 in deposits.

In Joo v. Tran, 2021 ONCA 107 (CanLII), the buyers entered into an APS to buy a home in Aurora, Ontario for $2.1 million in April 2017. In paragraph 10 of the standard OREA form of APS, the sellers warranted that the property was free from all encumbrances, save and except for "minor utility easements" and other enumerated exceptions. Schedule A to the APS added a term stating that the sellers would discharge any encumbrances on or before closing. Schedule A did not include the express qualification contained in paragraph 10, which excluded minor utility easements. In May, 2017, the APS was amended...