Reneging Home Sellers Liable For Buyer’s Price Difference for New Home

After a 2-year search in a competitive market, involving 50 home viewings and at least 10 unsuccessful bids, a buyer finally succeeded on placing the winning offer on a sellers’ north Toronto home. To do so, she agreed to pay $685,000, which was $35,000 over the asking price.

However, soon after the sellers changed their minds and advised they would not be completing the transaction. Adamant to proceed nonetheless, the buyer launched a lawsuit for specific performance about two weeks before the intended closing, but the sellers did not yield. The sellers acknowledged fault for breaching the contract, returned the $35,000 deposit, and continued to live in the home.

Faced with the collapsed deal and an ever-rising market, the buyer continued to look for another suitable home in the area. After yet another bidding war, she bought a less-suitable home for $760,000, which was over her budget.

The buyer claimed $315,000 in damages from the sellers based on the difference between the original sale price, ($685,000) and the home’s current appraised market value ($1,000,000). Alternatively, she asked for $75,000, which was the extra she spent to buy the less-appealing $760,000 home in mitigation of the sellers’ breach.

The matter eventually came before the Ontario Court of Appeal, which first considered the buyer’s initial specific performance claim. It pointed out that such a remedy is not automatic: there must be evidence that the property is unique and that a substitute is not readily available. Here, the buyer had indeed shown “fair, real and substantial justification” for her position; her prolonged and intensive home search was a testament to the uniqueness of the sellers’ home. However, since the buyer had accepted the return of the $35,000 deposit, this was tantamount to acknowledging the end of the contract, so the specific performance remedy was found to be foreclosed to her in law.

However, she could still claim damages for the sellers’ admitted breach. In assessing those, the court dismissed the sellers’ objection that the buyer had been unreasonable in buying the $760,000 home in mitigation. That purchase resulted from a frantic and intense search by the buyer’s agent, and had to be viewed in the context of the other failed deal, the stiff competition for homes in the area, and the limited availability. Her decision to pay more than originally budgeted for was also reasonable in the circumstances, particularly in light of her living situation and her family’s needs. Despite the higher price, the home was not necessarily “better” (as the sellers claimed); the buyer was essentially forced to pay $760,000 to be placed in the same position she would have been, had the sellers not breached the contract. The $75,000 price difference between homes was therefore granted as an appropriate measure of her damages, plus $2,000 for other expenses. See Chai v Dabir, 2015 (ONSC).