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Backing out of an Ontario Agreement of Purchase and Sale

By Michael Lesage

Two recent Superior Court decisions should serve as a reminder that backing out of a signed (and enforceable, which is not always the case) Agreement of Purchase and Sale (APS) for a property can prove costly. In this case, the defendant agreed to purchase the plaintiff’s Mississauga property for $995,000 through an APS dated May 2017. The defendant paid a deposit, but with house prices falling, purchased another house and informed the plaintiff that she wouldn’t be able to close. The plaintiff brought suit, and the defendant (as purchaser) was found to be in breach of contract.

Conversely, this case is an example of a breach by seller. In that case, the plaintiffs entered into an APS with the sellers for their house in Brampton, which was scheduled to close in July 2016. Minor issues arose around closing (several thousand dollars of damage to the property was discovered), after which the seller refused to close. The buyers (plaintiffs) sued for specific performance (to acquire the property for the price agreed to in the APS) along with damages, and the seller was found to be in breach of contract.

Summary judgment – liability

In each case, the court had little difficulty in finding that summary judgment was appropriate as against the party that failed to perform.

Damages

In breach of contract cases, a party is entitled to financial damages in an amount that would put them in the same monetary position they would have been in had the contract been performed. In the first case, that included damages (payable by the breaching buyer) reflecting a lower subsequent sale price ($75,000), extra financing charges ($32,940.93) and carrying costs ($13,325.55), plus a small amount for transactional legal fees thrown away ($954.85), for a total of $122,221.33, plus tens of thousands of dollars of costs for the proceedings, in an amount to be determined

Likewise, in the second case, the plaintiffs were entitled to damages from the breaching sellers for additional living expenses incurred (to be determined later), legal fees thrown away in connection with the closing and negotiations regarding same ($8,232.02), unpaid taxes on the property ($6,453.24), additional moving expenses ($564.72) along with a credit for their initial deposit ($20,000), which was not done when the property closed. In addition, the defendants were liable for $50,000 in legal fees, $6,500 in HST and disbursements of $3,330.46, for a total to date of $95,080.44.

As these cases indicate, failing to close upon an Agreement of Purchase and Sale can be costly for buyers and sellers alike. If you’re thinking about backing out of a signed agreement of Purchase and Sale, or if another party has breached its agreement with you, contact the lawyers at Michael’s firm for a consultation.

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