The 2022 Ontario court case of Thangarasa v. Aziz is an example of a Buyer trying to find an excuse for backing out of a property purchase.
On May 4, 2017, the Buyer and Seller reached an agreement for the purchase of a detached two-story house in Vaughan, Ontario. The purchase price was $1,180,000 with a deposit of $50,000. The closing date was set for July 27, 2017. The Agreement of Purchase and Sale (APS) did not include any conditions for financing approval, an inspection or survey to be provided.
The MLS listing for the property described the lot as 51 x 105 feet and this size was also reflected in the APS. However, the APS also confirmed that all measurements provided in the MLS listing was not guaranteed to be accurate and that the Buyer “is advised to verify any measurements”.
Two weeks before the closing date, the Buyer advised that he was having trouble obtaining financing and would be unable to complete the sale unless the purchase price was reduced by $100,000.
The Seller was in a bind. He had already purchased another property and was planning use the proceeds from the sale for his new house. He reluctantly offered to reduce the price by $50,000 or alternatively offered a take-back mortgage for $100,000 with the price unchanged.
In response, the Buyer changed lawyers and sent an offer with an even greater price reduction than before – $130,000. The Seller responded offering to reduce the price by $75,000. In response, the Buyer’s lawyer said the APS was being terminated because the lot size was smaller than what was listed in the MLS listing and the APS.
The Buyer refused to close and in fact purchased another house in Vaughan 10 days later for the sum of $990,000. The Seller re-listed his property and sold it on September 28, 2017 for $950,000 – $230,000 less than what was agreed upon on July 27, 2017.
The Seller sued the Buyer in court for the shortfall in the purchase price. The Buyer counterclaimed against the Seller for a return of his $50,000 deposit. He argued that the Buyer had breached the APS by listing the house as having 51 feet of frontage when it was much smaller than this amount.
The Court rejected the Buyer’s argument because the APS was clear that the Buyer was required to verify any measurements of the property. In any event, the Court found that the Buyer had not presented sufficient evidence in court (such as a survey) showing that the frontage was smaller than 51 feet. Finally, there was no evidence presented that the frontage was “materially significant” to the Buyer. The Court found that the real issue was that the Buyer could not obtain the financing to close the APS.
The Buyer also tried to argue that the Seller failed to mitigate his damages (take steps to reduce his loss). However, the Court found that the Buyer did not provide any evidence to support this argument. There was no evidence presented that the house was not resold for fair market value or that the Sellers actions were unfair or unreasonable.
The Court awarded the Seller damages of $237,923, being the difference in the sale price as well the Sellers additional mortgage expenses, property tax, utilities and home maintenance costs. The Buyer did get credit for the $50,000 deposit which was deducted from the amount owing.
MORAL OF THE STORY: Never make an unconditional offer to purchase a home unless you are absolutely certain that you can obtain the necessary financing. Also, it would be wise to make sure all measurements of the lot size are verified by a survey.
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