| Sometimes, after
binding themselves to buy or sell Real Estate, clients change
their minds. Often, they are under the mistaken impression that
there are no repercussions to their not closing. Nothing could
be farther from the truth. The following is a brief summary
of the law in this area. This summary is not a substitute for
proper legal advice and agents are well advised to inform their
clients that by not closing they are entering the world of "breach
of contract" litigation and as such should seek legal advice.
There is no "cooling off" period for resales. Once
all conditions have been waived and the deposit moneys given,
the deal is firm and binding.
There are two basic legal remedies involved
in a situation of non-closing -namely an action for damages
and an action for specific performance.
DAMAGES
The aggrieved party in a Real Estate transaction has the right
to sue the wrongdoer for the monetary damages they suffer.
If the aggrieved party is the purchaser (vendor will not close)
they have a right to claim as against the vendor for their
deposit back, plus all expenses related to the non closing
including hotel expenses, moving and storage. If the market
has risen in the time between the entering into of the contract
and the notice of the non-closing, then the vendor may be
liable to the purchaser for that increase in price of a similar
residence. There is even some suggestion that the law may
permit a claim for emotional distress relating to the contract
breach. If the aggrieved party is the vendor (purchaser will
not close), they have a right to sue the purchaser for all
the expenses they incur relating to the nonclosing, including
carrying costs of the home (provided they make reasonable
efforts to sell the home in a timely manner) from the time
of the non- closing until the closing of the new sale. If
the market has fallen in the time betweenthe entering into
of the original contract of sale and the date of the second
sale, then the original purchaser is liable for that reduction
in value. Similarly there is some exposure to the wrongdoer
to an action for damages for mental distress relating to the
failure of the purchaser to complete the transaction.
SPECIFIC PERFORMANCE
Specific performance is an action to force a party to a contract
to abide by and complete the terms set out in that contract.
In a Real Estate setting this means to force the parties to
close. The Supreme Court of Canada ruled on this issue recently
in the case of Semelhago V. Paramadevan, where the court held
that specific performance is not to be granted automatically
in all cases. In order to succeed in a claim for specific
performance in a Real Estate context the party claiming has
to prove to the court that the subject property is so unique
that a substitute would not be readily available. If a substitute
is available then the aggrieved party has to resort to an
action for damages.
Recently, this test of "uniqueness" was defined
in the Ontario Courts. In the case of Tropiano v. Stonevalley
Estates, the purchaser persuaded the Court that the property
in question was "unique". The Court found in that
case that the purchaser "attached particular significance
to the fact that the property in question was a ravine lot
and the location of the lot was important to the (purchaser)"
Last year a study came out in Ontario that found the average
civil litigation in our province cost each party approximately
$35,000.00 The moral of the story is that sometimes changing
ones mind (especially after one has obligated oneself to a
Real Estate transaction) can be an expensive mistake!
You can rely on Korman & Associates (The Deal Savers!)
to provide you and your clients with quality legal advice
when you need it. We are easy to reach, anytime.
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