BUYER FAILS TO CLOSE REAL ESTATE PURCHASE
The Ontario real estate market experienced a significant correction in the spring of 2017 with the foreign buyer 15% tax imposed by the provincial government for GTA properties and the new Mortgage Stress Test rules. Consequently, many Buyers in the GTA did not close on their transactions because they could not or because they chose not to because of the decline in sale price.
Sellers were left in a difficult position, particularly if they had purchased another property. Many Sellers incur losses on reselling the property and they incur carrying costs (mortgage, taxes, insurance) on the property pending its resale.
A Seller in this situation can sue the defaulting Buyer for the loss on the resale plus their carrying costs. If the defaulting Buyer cannot be located, or they have no assets or income, the Seller might obtain a judgment for their full losses, but only recover the deposit.
A Seller should be cautious in any renegotiation of the transaction initiated by a Buyer trying to renegotiate the price because of the market correction or asking for an extension of closing to facilitate mortgage financing. A seller should consult with a lawyer experienced in advancing claims against defaulting Buyers if faced with this situation to ensure negotiations do not prejudice their claims.
It may be prudent for a Seller to treat the inability of the Buyer to complete the transaction as an “Anticipatory Breach” of the Agreement of Purchase and Sale (APS), before any discussion takes place regarding price or closing date. Any later discussion regarding changes to the APS should make it clear the Buyer remains in breach and that the discussions do not reinstate the APS.
Feel free to contact us at any point for assistance or advice pertaining to Real Estate Law. We may be reached at 705-435-4339 / 1-877-85LEGAL (1-877-855-3425) or contact us via email.