December 30, 2025
We have written before about what happens if a prospective buyer is unable to close the real estate deal.
This may not be as big a problem in Thunder Bay and Northwestern Ontario, where the market is still vigorous, but it is a significant issue in the GTA, where a soft market has led to houses being worth less by the closing date, which may make it impossible to obtain financing. This arises particularly with houses under construction, which have extended closing dates.
THE ISSUE
However, the risk is there, so we felt you should know about it, whether you are a buyer, a seller, a realtor, or just an interested observer.
THE CASES
Two Ontario Court of Appeal cases released on the same day spell out the situation clearly. Each case is very brief. The court upholds the decisions of Superior Court judges on motions for summary judgment. This brevity is also an indication of just how obvious the court finds the answer.
The court found the answers so obvious that in neither case was the respondent to the appeal called upon to make submissions.
It is good to have clear guidance. This is true even if you find yourself on the “wrong” side of your dispute. Settling a case that you are likely to lose quickly is always a wise course of action. Clear law makes that easier to achieve.
The issue on the motion for summary judgment was whether the sellers had properly mitigated (reduced) their damages. All parties agreed that it was an appropriate case for summary judgment.
The Court of Appeal agreed with the motion judge that the motion did not need to be adjourned to allow the buyer to bring a motion for production. On a motion for summary judgment, it is up to the parties to put their best foot forward.
There is no right to an adjournment. It is a matter of the judge’s discretion, which an appeal court will only interfere with if there is an error in principle. The Court of appeal almost never finds an error in a refusal to grant an adjournment. The most common exception is where there was clear medical evidence to support the request, but in that situation, the motions judge is almost certain to grant the adjournment.
They also agreed that the seller had acted reasonably in turning down an offer from the buyer to close at a lower price (by way of mitigation) because there was no proof that the buyers could get financing even at the reduced price.
The appeal was dismissed. The buyer owes the seller $ 366,513.00 plus interest and costs. That includes the costs of the appeal, fixed at $12,000.00. Plus of course, the buyer has their own legal costs to pay, which are increased by bringing the unsuccessful appeal.
It is possible to understand that the buyers probably don’t have $366,000 or $400,000to spare so investing in the cost of appeal seems reasonable. But is that really the case when the appeal is almost certain to be dismissed?
Samiy Retail Inc. v. Kallarakkal
The same panel of Court of Appeal judges decided this case. It was also a case where the buyer was unable to obtain financing.
The main issue in this case was whether it was an appropriate case for summary judge. Recall from above that in the Singh case, the parties agreed that it was an appropriate case of summary judgment.
In Samiy Retail, the court explains that: “failed real estate transaction cases typically lend themselves to being decided by summary judgment given their heavy reliance on documents.”
The buyer also complained on appeal that the damages were set at too high an amount on the motion. The Court of Appeal’s response was that the “ findings of fact the motion judge made were fully available on the record. Further, we see no reviewable error in her application of the legal principles to those findings.”
The appeal was dismissed. The costs payable to the seller of the appeal were fixed at $15,000.00 in this case, which are added to the damages, interest, and costs already payable.
TAKEAWAYS
- If you are a buyer, make sure that you have financing lined up before you make an offer without a financing condition, or before you waive that condition
- Courts have little patience for would-be buyers who opposed motions for summary judgment.
- If you are stuck in a position as a would-be buyer where you face a judgment, negotiating a settlement is your best bet.
- If you are the seller, you do have a duty to mitigate, and you face the cost of a lawsuit, which is not cheap. You will never recover all your legal expenses. Settlement is also in your best interests.
- If you do proceed to summary judgment, be prepared to put your best foot forward.
HOW WEILERS LLP CAN HELP YOU
The real estate section at Weilers LLP carries on our proud tradition of advising clients about the risks and obligations that they are accepting before they sign a contract.
If difficulties arise, we work with our clients and their other advisors to attempt to resolve the problems.
If the problems cannot be resolved on a friendly basis, then our litigation lawyers may be able to assist with damage control. If there is a question about how to calculate or prove damages, we have the benefit of having Brian Babcock as counsel. Brian teaches the course on Remedies, including damages, numerous times at the Bora Laskin School of Law.
We know the law of damages, the rules of evidence, the art of advocacy, and how to blend them together to get your best possible results.
Our litigation team works well with outside real estate lawyers who do not do litigation, as well as with our own clients.
If you find yourself needing advice about your risks or obligations under a real estate contract, it is best to seek the advice early. Feel free to give Weilers LLP a call and see if we are the right lawyers for you.