In Short:
- In Menon v. Simpson, 2025 ONSC 6720, the buyer had signed the Agreement of Purchase & Sale with the seller for the sales price of $8.3 million for a property in Mississauga.
- Despite multiple extensions, the buyer eventually backed out of the sale, forcing the seller to sell the property at a reduced price of $6.5 million.
- The seller brought a motion for summary judgment against the aborted buyer for the damages from the reduced sales price and carrying costs of $550,000.
- The summary judgment was granted in favour of the plaintiff, requiring the defendant to pay $1,835,000 in damages for the difference in sales price and $550,000 in carrying costs, along with litigation costs and interest.
Most buyers do not realize the full legal implications of signing the Agreement of Purchase and Sale. It is a legally binding contract between the two parties. If either one of them fails to meet the obligations outlined in the agreement, the aggrieved party is well within their legal rights to sue the other for damages and legal costs. This is why it is essential to get an experienced real estate lawyer involved in the transaction from the beginning to advise you on the legal implications of all the provisions of the agreement before you commit to it.
Background of the Case
In Menon v. Simpson, 2025 ONSC 6720, the buyer and seller agreed to the sales price of $8,385,000 for a property in Mississauga and signed the Agreement of Purchase and Sale. With the buyer struggling to secure the financing on time, they requested repeated extensions to the closing date. Despite multiple extensions, the buyer eventually backed out of the sale, breaching the agreement. The seller was then forced to sell the property at a reduced price of $6,550,000 because of the prevailing market conditions.
Subsequently, the seller filed a motion for summary judgment against the aborted buyer for damages for the loss of the benefit of the bargain and carrying costs of $550,000. While the defendant agreed to the carrying costs of $550,000, they claimed that the plaintiff did not take reasonable measures to mitigate the risks when selling the property.
Key Observations
While granting the motion in favour of the plaintiff, the motion judge made the following observations.
- It is clear that the plaintiff acted within a reasonable time and listed the property back on sale within two weeks of the breach of the agreement at the same asking price as before.
- The evidence proved that the plaintiff made all reasonable efforts to mitigate the risks associated with the sale of the property. These included listing the property on MLS as well as featuring the property in select magazines to attract more buyers.
- The plaintiff was forced to reduce the sales price multiple times to attract buyers and maintained proper records of these negotiations, which were also submitted to the court.
- At one point, they even considered leasing the property as an option to mitigate the losses.
- On the other hand, despite the matter being adjourned to provide plenty of time for the defendant to gather evidence, they were unable to submit any to back their claim of the plaintiff’s failure to mitigate losses.
The defendant was therefore ordered to pay the plaintiff $1,835,000 towards the difference in the sales price, along with the carrying costs of $550,000, litigation costs, and interest.
Conclusion
It is clear from the circumstances of this case that the buyer was not able to get the financing secured in time for the closing. Multiple extensions allowed by the seller to accommodate the buyer’s financial situation still did not resolve the issue. The plaintiff was able to prove that they took all reasonable measures to mitigate the risks. Despite their best efforts, they were forced to sell at a much lower price because of the market conditions. This was a clear case of breach of agreement by the defaulting party.
How can we help you in such a case?
- If you engage the services of an experienced real estate lawyer early on, they will advise you on the legal consequences of failure to close and help you with negotiating any unfavourable terms of the agreement.
- The same applies if you are considering the option of an assignment sale. Your lawyer will negotiate favourable terms for you with the new buyer, obtain the necessary consent from the seller, and arrange all the required documentation.
- Also, if you are dealing with a failure to close, you need to contact an experienced litigation lawyer immediately and follow their advice in protecting your financial interests from the legal consequences of breaching the agreement.
If you are planning to buy or sell a real estate property, obtain tailored legal guidance from our experienced real estate lawyers to protect your investment.
Get in touch with our legal team today for legal guidance and support.
