What to do if a seller doesn’t close a home sale in Ontario

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In the real estate market, things can get tricky due to the substantial number of unknowns. Prices of property and homes can fluctuate relentlessly which can cause trouble in other areas of real estate. Sometimes, this can cause sellers, or purchasers to back out of a sale and leave the other party with nothing.

If a seller has backed out of the sale without lawful reason while the price for real estate is on a rise, this is very much in breach of a purchase and sale agreement. The buyer or purchaser may then be out of pocket due to paying more for similar real estate. When this happens, the purchaser is able to sue the seller for damages arising from the breach of contract.

Sellers Backing Out

In a previous article, we discussed buyers backing out of a deal. Now, we will look at what happens when the seller backs out. Sellers may back out due to many reasons. These reasons include, but are not limited to:

  • Sellers realize they have accepted too low a price
  • The seller has become emotionally attached to the home
  • The seller has become sentimentally attached to the home

In any case, when the seller backs out without good reason, the buyer is not without recourse according to law. When the seller breaches a contract for purchase or sale, the buyer may decide to sue the seller for damages.

Rayat v Salmon

A good sample of a breach by the seller is the Rayat v Salmon case from 2018. This case began when the Rayat’s entered into an APS with the sellers for their listed house in Brampton. The scheduled date to close was in July of 2016.

The seller refused to close after many minor issues arose regarding the closing. It was then that several thousand dollars’ worth of damage to the property was found. The Rayat’s began a real estate lawsuit and sued for specific performance as well as damages.

It was then that the seller was found to be in breach of the aforementioned contract. It wasn’t hard at all for the Court to find that summary judgement was needed considering that the Salmon party had failed to perform.

Parag Datta and Tandra Acharjee vs Fabian Eze

Another situation to keep in mind is the real estate litigation in relation to the Parag Datta and Tandra Acharjee vs Fabian Eze case. Back in March of 2016, Okey Eze owned a nice property on Lonetree Court. Okey went forth and signed a power of attorney which allowed his son, Fabian, to sell the property at it was no longer needed.

A few months later, Parag Datta and Tandra Acharjee submitted an ideal offer to buy the property. At this time, they offered $940,000 which was a great price for the house. Fabian was quick to accept as the seller.

However, he was acting on behalf of his father under the power of attorney. Only a short amount of time before closing, Fabian’s lawyers got in contact with the buyers’ lawyer and let them know that the agreement was therefore terminated immediately. The termination was on the grounds of Fabian’s apparent “medical conditions which affected his mental capacity”.

This caused the buyers a great deal of uncertainty and due to the nature of the termination, they sued Fabian and demanded that he complete the legally binding transaction or pay damages for the breach of contract.

Afterwards, Datta and Acharjee decided to buy a substitute property for $945,000 in what was referred to in court as a “hot market”. Due to closing on the home, they abandoned the claim for specific performance and limited the real estate litigation to a claim for damages alone.

This case, in particular, emphasized the huge risk for a seller who attempts to breach a contract without viable cause.

A Costly Endeavor

The cases above indicate exactly how failing to close upon an Agreement of Purchase or Sale can be bad for both buyers and sellers. Not only is it frowned upon and costly, but without reason, it is also one way to get sued. Refusing to close the deal in a rising market is never a good idea and the consequences can become expensive.

When a seller is no longer able to fulfil their obligations outlined in the contract, it is up to the purchaser whether to terminate the contract or complete it and sue the seller after completion. You will be able to sue the seller for failure to comply with the terms of the contract.

When a seller is no longer able to fulfil their obligations outlined in the contract, it is up to the purchaser whether to terminate the contract or complete it and sue the seller after completion. You will be able to sue the seller for failure to comply with the terms of the contract.

Rectification of Costs

In some cases, the buyer may be able to recover compensation for the cost of rectification of the defect occasioned by the seller’s inability to fulfil their obligations or the loss in value of the property. Usually, this is seen as the most common form of damages awarded to a purchaser.

The court also goes as far as to consider whether or not the rectification work is reasonable or necessary. When deciding this, the court must consider:

  • Whether the building will be sold prior to the rectification work
  • The cost of the rectification as opposed to the loss of value
  • Whether the buyer intends to undertake the rectification work
  • Whether the work that has already been completed is fit for its purpose

The Bottom Line

Refusing to close a sale can be a risky and expensive move to make, which is why it is so frowned upon. Not only is it immediately inconvenient for the buyer, but it becomes a burden for the seller when they are made to recoup damages. The bottom line is that it is never a good idea to refuse to close a sale as a seller or a buyer.

If you are considering backing out of a legal agreement of Purchase and Sale or if another party has gone forth and breached its agreement, you may be seeking help. Get in touch with the competent lawyers at KPA Lawyers for help with further proceedings.

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