Refusing to close a property deal can be risky - and expensive


thestar.com
Bob Aaron
Bob Aaron bob@aaron.ca

Posted On: Saturday, September 19, 2020
Refusing to close a deal for the unconditional sale of a home in a rising market is never a good idea. It can lead to expensive consequences.

That’s what happened in Brampton back in March, 2016. Okey Eze owned a property on Lonetree Ct. He signed a power of attorney allowing his son Fabian to sell the property. Three months later, Parag Datta and Tandra Acharjee submitted an offer to buy the property for $940,000. It was accepted by Fabian as the seller but, in fact, he was acting for his father under the power of attorney.

Just before closing, Fabian’s lawyer wrote the buyers’ lawyer saying that the agreement was terminated because Fabian was at the time “suffering from certain medical conditions which affected his mental capacity.”

The buyers sued Fabian, demanding that he complete the transaction (legally: “specific performance”) or pay damages for breach of contract. Four months later, Datta and Acharjee bought a substitute property for $945,000 in what the court later called a “hot market.” Following their purchase, they abandoned the claim for specific performance and limited the litigation to a claim for damages.

In February of this year, the buyers brought a court application for what is known as summary judgment: a court ruling on the case, based on affidavit evidence without the necessity of a full trial. Ontario Superior Court Justice Leonard Ricchetti agreed to this procedure.

Justice Ricchetti ruled that the last-minute evidence that the power of attorney had been revoked was not admissible during the hearing, nor was a letter from Fabian’s doctor claiming that Fabian told him he didn’t understand how it happened that he signed the sale agreement.

The judge found that the sale agreement was binding when it was signed, and there was no reason to conclude it became “non-binding” at any subsequent time. He also decided that it was not affected by any “prior or subsequent purported revocation of the power of attorney.”

The buyers were awarded partial judgment of $4,799.65 for their legal costs associated with Fabian’s breach of the agreement, with the remaining damages to be assessed at a later hearing.

The second hearing was held by videoconference last month before the same judge. The evidence showed that the buyers paid $5,000 more for another property which was 400 square feet smaller, had no finished basement, and was on a lot 44 per cent smaller.

Appraisal evidence showed that the Lonetree Ct. property had increased in value by $220,000 at the time of the hearing, and that the substitute home had increased by $70,000. The court found that the “net differential increase” was therefore $150,000.

Justice Ricchetti awarded the plaintiffs the full $150,000 plus “punitive” costs of $33,771. In addition Fabian had to pay his own lawyer for two hearings.

The case emphasizes the substantial risks for a seller who attempts to breach a contract without just cause.

***

Datta v. Eze, 2020 ONSC 1240 (CanLII), <http://canlii.ca/t/j5m3t> first hearing

 

Datta v. Eze, 2020 ONSC 4796 (CanLII), <http://canlii.ca/t/j97pm>  assessment of damages

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Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at bob@aaron.ca, phone 416-364-9366 or fax 416-364-3818.

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