topbar

Articles

Seller’s Lawyer Verbally Extends Closing Date Indefinitely; Buyer’s $230,000 Deposit Returned

A purchaser agreed to pay $913,000 for a unit in a hotel condominium called Trump International Hotel & Tower, which was under development at that time. Under the purchase agreement, the buyer was to pay a series of deposits over a roughly two-year period. To this end, the buyer had paid almost $230,000 in pre-closing deposits.

However, upon reviewing the Statement of Adjustments prepared by the seller, the buyer realized that the common expenses for his unit were shown as $2,500 per month, which was about 40% higher than the amount promised at the deal-signing stage. Since he considered this a “material change” to the Disclosure Statement within the meaning of the Condominium Act, 1998, he requested a Revised Disclosure Statement within 15 days, as he was entitled to do under that legislation.

The deal did not close on the scheduled date, despite repeated e-mail attempts by the buyer’s lawyer to get a satisfactory response from the seller’s lawyer with respect to issue of the common element increase. A voicemail from the seller’s lawyer on the closing date advised the buyer’s lawyer that the matter could be delayed “a few days” to allow the common expenses issue to be “sorted out”; however, several additional weeks went by, with little correspondence exchanged and no real movement on the deal. As the court explained:

[The seller’s lawyer] extended the closing date to an indefinite date in the future, "until we sort this out". He took no steps whatsoever to sort things out. He never established a new closing date. He did not even communicate with the plaintiffs' lawyer until after the deadline for closing had expired

Finally, after two more months had elapsed without a meaningful reply from the seller’s lawyer about the common expenses, the buyer demanded the return of his $230,000 deposit. When the request was refused, the buyer sued.

The court sided with the buyer. Viewed objectively, the seller’s lawyer had given an unambiguous assurance that the closing was being extended to some unspecified future date, and the buyer had relied and acted on this assurance to his detriment. For example, were it not for the seller’s lawyer’s verbal extension, the buyer would have been in breach of the condominium purchase contract by failing to close on the specified date.

Also, the buyer’s legal rights in this scenario had been curtailed by the seller’s own conduct. Faced with a “material change” under the Condominium Act, 1998, the buyer would normally have had 10 days to take certain steps (including rescinding the agreement or obtaining a court determination), starting from the date the seller gave either a formal notice of change or the requested Revised Disclosure Statement. Since neither were provided by the seller here, the buyer’s rights to take remedial steps were never engaged.

The court held that once the original closing date had lapsed, the deal was at an end and the buyer had no obligation to close the transaction thereafter. No new date had been set, and neither party had tendered on the other (which would have shown that they were ready, willing and able to close the transaction on the scheduled date).

The deal collapsed through no fault of the buyer, who had simply raised a valid concern about the increase in the common expenses. The buyer was therefore entitled to the return of the entire $230,000 in deposits paid, plus interest of over $8,000. See: Ram v. Talon International Inc., 2015 (ONSC).