Ontario Superior Court awards damages for aborted sale of residential property

The sellers had the right to seek extension terms, which the buyers refused: court

Ontario Superior Court awards damages for aborted sale of residential property

In a recent decision, the Ontario Superior Court of Justice awarded the plaintiffs damages for the defendants' breach of a real estate agreement involving the aborted sale of their residence in Clarington, Ontario.

In Philp v. Osungade, 2024 ONSC 3064, the plaintiffs listed their property for $799,900 and received 32 showings within four days. The defendants, Tolani Osungade and Marisa Bahadur, submitted an offer of $999,000. After removing the standard financing condition, they increased it to $1,035,000. The plaintiffs accepted this offer, forming a binding agreement.

The agreement specified April 25, 2022, as the closing date. However, that day, the plaintiffs' lawyer received an email from the defendants requesting an extension until May 2 due to a mortgage lender's requirement for an appraisal. The plaintiffs' lawyer communicated that the agreement would be null and void unless the defendants accepted all proposed terms for the extension, which they did not. Consequently, the transaction did not close.

The plaintiffs re-listed the property for $799,900, the same price as the initial listing. After 17 showings, they sold the property for $850,000. Due to this delay, the plaintiffs incurred additional costs, including bridge financing for their new home.

The plaintiffs argued that the defendants' breach entitled them to damages, particularly the difference between the original offer ($1,035,000), the final sale price ($850,000), and other consequential costs.

The defendants contended that the plaintiffs did not act in good faith by refusing to extend the closing date and failed to mitigate their damages by accepting a lower sale price. They argued that the plaintiffs' decisions were unreasonable and sought court intervention to rectify these perceived mistakes.

The Superior Court rejected the defendants' arguments, noting that no case law supports the obligation for vendors to extend closing dates in standard agreements. The defendants chose to submit a "clean offer" without a financing condition and only communicated their need for mortgage financing on the closing date. The court found this approach unreasonable and ruled that the plaintiffs were within their rights to seek terms for the extension, which the defendants refused.

Regarding mitigating damages, the court observed that the plaintiffs re-listed the property at the same price and sold it for the highest offer received in the softened real estate market. The court noted that the defendants did not provide evidence to support their claim that the plaintiffs acted unreasonably.

Ultimately, the court awarded the plaintiffs $159,915.26 in damages, reflecting the difference in sale prices and related costs minus the forfeited deposit of $25,000.

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