Damages Awarded for Aborted Sale of Residential Property
Damages Awarded for Aborted Sale of Residential Property
Blog Article
In the recent case of Philp v. Osungade, 2024 ONSC 3064, the Ontario Superior Court of Justice addressed a significant issue in Canadian real estate lawyer mississauga, awarding damages to the plaintiffs for the defendants’ breach of a real estate agreement. This case provides valuable insights into the complexities of real estate transactions and the importance of adhering to contractual obligations.
Background of the Case
On February 3, 2022, Bianca Philp and Blake Philp, the plaintiffs in this case, listed their residential property in Clarington, Ontario, for $799,900. Within four days, they received 32 showings and an offer from the defendants, Tolani Osungade and Marisa Bahadur, for $999,000. This initial offer was subsequently increased to $1,035,000 when the defendants learned of other offers being entertained. They submitted the new offer after removing the standard financing condition, resulting in a binding agreement. The agreed closing date was April 25, 2022.
On the day of closing the Defendants advised the Plaintiffs for the first time that their purchase was being financed through a mortgage and requested an extension until May 22, 2022, so that their lender could complete an appraisal of the property. The Plaintiffs’ lawyer communicated the Plaintiffs’ terms of extension which were non-negotiable. The Defendants did not consent to the extension terms and the agreement of purchase and sale was terminated.
The Plaintiffs relisted their property for sale for the same listing price, had 17 showings and ultimately accepted an offer for $850,000.00.
The Plaintiffs had purchased another property, also closing on April 22, 2022, and required bridge financing in the amount of $276,000.00 to close their purchase transaction. The bridge financing was not repaid until May 27, 2022, when the property was ultimately sold.
The Dispute
The Plaintiffs sued the Defendants for damages, including the difference between the Defendants’ offer and the ultimate purchase price of $850,000.00, being $185,000.00 less and other consequential damages.
The Defendants raised two defences:
The Plaintiffs did not act in good faith by not granting an extension to May 2, 2022; and
The Plaintiffs failed to mitigate their damages when they resold their property for $850,000.00.
Court’s Findings
The Defendants chose to submit an offer with no financing condition,
The Defendants chose not to advise the Plaintiffs they were relying on mortgage financing to fund their purchase until the day of closing.
It was incumbent on the Defendants to notify the Plaintiffs in a much timelier fashion of any need they might have to extend the closing date to accommodate the requirements of their financial institution.
The Plaintiffs were under no obligation to extend the closing date where the agreement contained a clause that time was of the essence and the Defendants were “perfectly entitled” to seek terms of an extension.
Although the court agreed the Plaintiffs were under an obligation to mitigate their damages, it also found there was no evidence to suggest they failed to do so: they listed their property for sale at the exact same listing price, entertained multiple offers and ultimately entered into an agreement with an arm’s length purchaser for the highest price submitted – all reasonable conduct.
Court’s Judgment
The court awarded the plaintiffs $159,915.26 in damages, representing the difference between the original and final sale prices and related costs, minus the forfeited deposit of $25,000. This judgment reinforces the importance of adhering to contractual obligations and the consequences of failing to do so in real estate transactions.
Legal Lessons from the Case
The Ontario Superior Court’s decision in this case underscores the fact that Sellers are under no obligation to extend a closing date (even for a few days), particularly when both parties agree that time is of the essence.
The Party (in this case the Sellers) entertaining the request for an extension are entitled to impose any conditions they see fit.
A defendant raising failure to mitigate damages as a defence must have actual evidence sufficient to satisfy the court that the steps the Plaintiff took were unreasonable.
Practical Lessons from the Case
The decision to forgo a financing condition should not be taken lightly if you are dependent on mortgage financing to fund the purchase of your property
Court’s Judgment
The court awarded the plaintiffs $159,915.26 in damages, representing the difference between the original and final sale prices and related costs, minus the forfeited deposit of $25,000. This judgment reinforces the importance of adhering to contractual obligations and the consequences of failing to do so in real estate transactions.
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