Buyer owes 366k in damages after failure to close

Cases arising from failed residential real estate transactions in a falling market show that buyers who break purchase agreements may face significant financial consequences. Buyers often claim that sellers did not try hard enough to reduce their losses by re-listing the property or finding another buyer at the original price. However, this claim must be supported by evidence, as demonstrated in Singh and Kaur v. Feneich.

In this case, the sellers had agreed to sell their property for $1. 25 million, with a closing date set for early August 2022. Despite multiple extensions, the buyer could not secure financing, and the deal fell through. The sellers then re-listed the property and sold it for $965,000. They sued for damages and filed a motion for summary judgment in the Ontario Superior Court of Justice based on well-established legal principles.

The buyer acknowledged breaching the Agreement of Purchase and Sale (APS) and agreed to be liable for damages but disputed the sellers’ calculations. The buyer argued that the sellers failed to consider a new offer made by the buyer after the breach and contested the date used to calculate damages. The court emphasized that sellers must take reasonable steps to mitigate their losses.

The sellers presented evidence that they followed their real estate broker’s professional advice and accepted a reasonable offer based on market conditions. They also faced challenges managing two properties and accepted an appropriate offer. The buyer did not provide any independent evidence to support claims that the sellers failed to mitigate damages.

Regarding the date for calculating damages, the court followed established principles, reminding that context matters, including the plaintiff’s duty to avoid loss. The nature of the property and market conditions are critical, especially in a falling market. The court found that the sellers acted reasonably in their efforts, including keeping the property on the market despite two failed deals.

Ultimately, the court decided that the sellers were entitled to $366,513 in damages, which included the difference in sale prices, carrying costs like utilities and taxes, and expenses tied to their new home. This case highlights the importance of secure financing and understanding the legal obligations involved in real estate transactions.

Prospective buyers must be ready to complete a transaction on the agreed date, or they risk losing their deposit and facing significant damage claims based on the property’s current market value. In a rising market, sellers may achieve a higher price, but in a declining market, the price difference can lead to serious financial consequences. Sellers can also claim additional costs for maintaining the property as part of the damages.

Source: James R. G. Cook and Delila Bikic. (Real Estate Magazine)