Superior Court orders a buyer to pay over $600,000 to the builder of a Thornhill development where she walked away from her deal.
Over the last five years, Ontario’s courts have been busy with litigation involving failed residential real estate transactions.
When the market tanked in 2017 after the introduction of the 15 per cent “speculation” tax on non-resident purchasers, lawyers and courts were — and still are — occupied with cases where buyers defaulted on their transactions.
And as the market experienced dramatic increases in value until the spring of this year, sellers, including builders, became creative in trying to terminate their agreements so they could re-sell at higher prices.
With the market on a downward slide in recent weeks, I expect that courts and litigation lawyers will soon be busy again with litigation against buyers who were unable or unwilling to close on their purchases.
Last month, a Superior Court decision by Justice Susan Vella awarded the plaintiff builder eye-popping damages of more than $600,000 against a purchaser who failed to close on a transaction.
In March, 2017, Qi Cui signed a purchase agreement with Country Wide Homes Upper Thornhill Estates for a high-end pre-construction home. With extras, the price was $4,100,268. When Cui failed to close her purchase, Country Wide resold the property for $3,250,000 plus
HST, and sued Cui for its damages of slightly more than $906,000 after deducting Cui’s deposit of $334,100.
Cui counterclaimed for a determination that the purchase agreement was void, and for the return of her deposit.
In November, 2021, the court held a summary hearing — a proceeding where all the documentary evidence establishes there is no genuine issue requiring a trial. The decision was released last month.
The evidence before the court was that Cui was out of the country at the time she agreed to buy the house on Lady Jessica Dr., in Vaughan. The agreement was signed by her proxy. Cui’s refusal to close was based on an argument that she claimed the property was subject to
certain use restrictions and alleged environmental contamination.
Similar arguments were previously used by two unsuccessful purchasers in cases involving Country Wide in the same subdivision. In Cui’s case, the judge rejected the same arguments.
Justice Vella noted that Cui is not a novice purchaser of real estate in Ontario, writing: “Indeed,between Cui and her spouse, they have purchased a total of eight properties prior to March 2017 (the date of the [agreement]), including one other pre-construction property from Country Wide.”
Country Wide’s evidence in this case was that its losses totalled $906,474 including lost interest of $283,000 but the interest charges were disallowed resulting in a net damages award of $623,507.88 after credit for the deposit of $334,100.
The takeaways from this case are:
- Defaulting purchasers’ best choice is to try negotiate a settlement outside of court, at the earliest possible opportunity.
- Buyers who do decide to breach a purchase agreement need to be realistic about potential and real weaknesses of their case.
- Litigating a hopeless case only delays the inevitable result.
Country Wide Homes v. Cui, 2022 ONSC 3460 (CanLII), https://canlii.ca/t/jpvhs