Weilers LLP

Specific Performance Made Easy?

Specific Performance Made Easy?

May 10, 2021

By Brian Babcock

For centuries, the primary remedy when an agreement of purchase and sale did not close was “specific performance” – a judgment of the court requiring the deal to be completed.

Then, in 1996, the Supreme Court of Canada made reference to the fact that even residential homes are often “cookie cutters houses” in subdivisions and decided that the party seeking specific performance had to demonstrate that the property was “unique” such that damages would not be an adequate remedy. This makes sense. If you can buy an almost identical house down the block, it is more efficient that you do so and sue for the difference in cost (plus remodelling if required) than tie up the property in a law suit.

Specific performance has become hard to obtain, and rare.

Uniqueness usually is found in:

  • the physical nature of the property;
  • the subjective needs of the party; and
  • the “transnational” characteristics – whether the deal contains particularly advantageous terms.

In addition, in deciding about specific performance, the courts consider the adequacy of damages and the conduct of the parties.

Now, in 2021, the Ontario Court of Appeal may be signalling an openness to increased use of specific performance. The case of Lucas v. 1858793 Ontario Inc. (Howard Park) involved a condominium, so there was not much physically unique about the unit. However, the trial judge had determined that the deal contained advantageous terms in Toronto’s volatile housing market. The value of the unit had increased substantially in value since the buyers had paid their deposit.

That deposit would be tied up as long as a law suit for damages lasted, leaving the buyers without funds to buy the replacement property they would need. Specific performance would be “a more complete and just remedy”.

The behaviour of the seller also favoured specific performance, as it had trumped up a fake reason to terminate the deal and try to retain the deposit money.

One of the difficult issues on appeal was the evidence that the buyers admitted that if they obtained specific performance, they would turn around and sell the unit. Because the buyers had originally planned to occupy the unit, the court looked at the facts at the original time of closing, and this did not count against the buyers.

The Court of Appeal backed off the requirement of uniqueness. Though a provincial Court of Appeal cannot simply ignore Supreme Court decisions, in Lucas, the Court of Appeal says that the 1996 case has been misunderstood. It does not replace the presumption of uniqueness with a presumption of replaceability.

They then go even further, ruling that the key issue in awarding specific performance is not uniqueness, but that the “more fundamental question is whether the plaintiff has shown that the land rather than its monetary equivalent better serves justice between the parties.”

Uniqueness is only part of this inquiry.

They go on to point out that even some condominium units may be unique – but regardless of that, if specific performance represents a more just result, it should be awarded.

If Lucas was not enough notice that attitudes should change, less than two months later in Dhatt v. Beer, the Court of Appeal again encountered the issue of uniqueness and specific performance. They quoted a passage from Lucas, which states: “Whether a property is unique, either by virtue of its nature or the features of the contract for its purchase and sale, operates as only one of several factors a court must consider when determining entitlement to specific performance.”

In that case, since the sellers lacked funds to pay damages, specific performance was the proper remedy.

Hopefully, in the near future, either the Court of Appeal or the Supreme Court will offer additional guidance. Although you may think that an expanded availability of specific performance is a good thing, there were reasons why the Supreme Court reduced its availability – having property and deposits tied up for years is not good for the economy. If parties know that specific performance is rare, they are more likely to get on with their lives more quickly.

In addition, the concept of “a more just result” is vague and subjective – it is less clear how a trial judge identifies what is “just” as opposed to what is “unique”. Fortunately, in these two cases, the Court of Appeal does give some guidance, but more is necessary.

Hopefully, all your real estate deals will go through smoothly, but if they fail to close, the remedy of specific performance may be more available than in the recent past.