With the recent drop in the Canadian housing market, buyers are considering strategic ways to renege on their agreements. While buyers typically understand that they will forfeit their deposit if they back out of the sale contract, they should be aware that the financial consequences may not end there.
Imagine the following scenario: you entered a contract to buy a house for $500,000 and put down a $10,000 deposit. The market has now dropped and that house may only be worth $400,000. If you think you’re better off backing out of the agreement and losing the $10,000 deposit – think again.
Let’s say the vendor sells the house for $400,00 to a second buyer. The vendor can now sue you for the difference in the sale prices between the two contracts ($100,000). Not only that, but the vendor can sue you for expenses they incurred while waiting the second sale to close such as mortgage interest, property taxes, utility bills, legal fees, and the differences in the realtor’s commission between the first anticipated sale and the second sale. This is exactly what the buyer was liable for in the case of Briscoe-Montgomery v Kelly, 2014 ONSC 4240.
Point being, reneging on a sale contract may not mean just losing your deposit- you are exposing yourself to liability for so much more.
At simplyclose, our experienced real estate lawyers can help you plan your transactions. We take the time to walk you through your options and ensure you are fully informed and comfortable with your choices. For more information, please contact our office at 519-997-3775 or [email protected]. Our real estate lawyers and closing specialists are always available to help.
Author: Lauren Delgreco, Law Student
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