When parties enter into an Agreement of Purchase and Sale (APS) for a residential property, there are consequences for breaching the agreement by failing to complete the transaction. Often, it will be the purchaser who breaches an agreement, due to a failure to secure sufficient funds on time. In that case, the vendor will generally be entitled to any loss of profit they suffer if they are then forced to sell the property for a lower amount to a new buyer. In addition, they might incur additional expenses in the interim, such as carrying two mortgages while they wait for the house to be sold again, as well as legal fees. All of these costs will generally be factored into any damages award in court. However, in some cases it is is the seller who fails to meet their obligations under the APS. In that case, what options are available to the buyer with respect to remedies? Can a buyer force a seller to carry out their duties under the APS and sell the house as agreed?
The Remedy of Specific Performance
Specific performance is used to put the aggrieved party into the place they would have been had the contract not been breached. It involves holding the party in breach to their original obligations under the contract, and mandating that they carry them out. This remedy is reserved for situations where traditional monetary damages would not suffice given the unique nature of the property in question. For example, if a purchaser bought a historic home on the waterfront that had been completely renovated inside, it would be difficult to obtain a similar property in a reasonable time, for a similar price. In that case, a court may force the seller to move forward with the sale. Given the requirement for a property to be unique, one might think this remedy would be less likely in a case involving a home in a modern subdivision, where houses are generally similar to one another, with minor differences.
A recent decision of the Ontario Superior Court of Justice, however, found that a purchaser was owed the remedy of specific performance due to the unique nature of the property, despite the fact that the house was in a subdivision. However, there had been a number of years between the breach and the court decision, so the court but compensated the buyer monetarily to make up for what they could have gotten with a remedy of specific performance.
A Subdivision Home, With Unique Attributes
The purchasers had entered into an APS with the vendor, who was acting under the authority of the Power of Attorney on behalf of his father, the owner of the property. Prior to the closing of the deal, the father objected to the sale and the vendor did not close as a result. Rather than waiting for a court remedy, the purchaser looked for another home right away because the market was active and they feared they would lose out as housing prices continued to rise. They had initially agreed to pay $940,o00 for the original house, and found a replacement property for which they paid $945,000.
Had the court simply awarded them damages for the difference, they may have only been entitled to the extra $5,000, as well as some other costs of the delay. However, the purchasers argued that the original house had been unique, and they were entitled to be compensated for the specific performance the vendors should have been held to. While the vendors raised the fact that a home in a subdivision was not inherently unique, the court disagreed. The court found that there were a number of characteristics of the house that, when taken together, made the property unique, including:
- the proximity to a school, religious facility, the highway and a golf course
- the large size of the lot
- the fact that the basement had been finished
- it was in the neighbourhood the purchasers wanted to be in
While any one of those factors may not have been enough on its own to qualify as unique, taken together they did. Given the activity in the housing market, the purchasers were not in a position to wait for a judgment of specific performance, and so the court compensated them financially for the ‘uniqueness’ they lost when forced to purchase a new home, awarding them $150,000 plus legal expenses. The amount represented the increase in the price of the original home from the planned closing date to the date of the trial.
The lawyers at Prudent Law in Mississauga and Milton represent clients in a number of real estate matters, including the purchase and sale of residential property. We provide practical advice and experienced due diligence to minimize risk for our clients in every transaction and will represent them in court if litigation becomes necessary. For skilled representation by one of our real estate lawyers, please call us at 905-361-9789 or contact us online.