This is yet another recent case ruling against a Purchaser who could not get their financing in order prior to closing, primarily because the market value of the property had dropped significantly after the agreement and purchase was signed. I previously blogged about this tragedy in a declining real estate market:
- Damage Assessment in Failed Real Estate Closing During Declining Market; and
- The Danger of Making “Clean-Offers” when Financing is Needed
The one twist in this case is that it illustrates how a purchaser, during a declining market, remains vulnerable to significant losses due to factors beyond their control, such as the change in the borrowing landscape where the lender will no longer lend the same amount given that the declining value of their collateral. This case also reaffirms many of the same concepts dealt with in the earlier blogs, such as how damages are calculated. In this regard, the court said:
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- Assuming the Vendor took reasonable steps to protect the property following the breach, the Vendor is entitled to be put in a position it would have been in if the contract had been performed, so far as money can do. Bang v. Sebastian, 2018 ONSC 6226, at para. 40;
- The Vendor is entitled to the difference between the original sale price and the re-sale price for which the property was eventually sold. 767804 Ontario Limited v. Bartoletti, 1998 CarswellOnt 1567; Azzarello v. Shawqi, 2018 ONSC 5414; Bang v. Sebastian, 2019 ONCA 501 (CanLII); Victorian Homes (Ont.) Inc. v. DeFreitas, 1991 CarswellOnt 414, at para. 20; Briscoe-Montgomery v. Kelly, 2014 ONSC 4240 (CanLII), at para. 22;
- The Vendor can claim interest and interim financing costs, real estate commissions, legal fees, and other carrying costs associated with the breach. Briscoe-Montgomery v. Kelly, supra, at para. 23; Fang v. Peroff, 2014 CarswellOnt 3800, at para. 51; Azzarello v. Shawqi, supra, at para. 54.
In the end, the damages were assessed summarily, meaning that the court was satisfied that a full trial was not required.
Park Avenue Homes Corp. v. Malik, 2022 ONSC 973
https://www.canlii.org/en/on/onsc/doc/2022/2022onsc973/2022onsc973.html