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 Bang v. Sebastian, 2018 ONSC 6226 (CanLII), Sebastian agreed to purchase Bang’s Mississauga property for $995,000 through an APS dated May 2017. Sebastian paid a deposit, but with house prices falling, purchased another house and informed Bang that she wouldn’t be able to close. Bang brought suit, and Sebastian (as purchaser) was found to be in breach of contract.
Conversely, the Rayat et al v. Salmon et al, 2018 ONSC 6169 (CanLII), case is an example of a breach by seller. In that case, the Rayats 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 (Rayats) 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 judgement 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 Sebastian case, that included damages (payable by Sebastian, the breaching buyer) reflecting a lower subsequent sale price ($75,000.00), 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. This approach was recently affirmed by the Court of Appeal in Azzarello v. Shawqi, 2019 ONCA 820 (which also clarified that deposits made are generally credited against damages).
Likewise, in the Rayat case, the Rayats 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 ($20,000.00), which was not done when the property closed. In addition, the defendants were liable for $50,000.00 in legal fees, $6,500.00 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.