An Ontario Superior Court judge has ordered a couple to pay more than $169,000 in damages after they failed to close on their agreement to purchase a $1.6 million home in the spring of 20221. The decision, delivered via summary judgment, found that Lindsay Engel and James Marchand breached their contract with sellers Jerry and Shelley Romano when they were unable to secure funds for the purchase after the sale of their own home fell through. The court dismissed the buyers’ arguments that the sellers, who are both registered real estate agents, had acted in bad faith or failed to properly mitigate their losses in a cooling market.
The legal dispute began after a series of events in the volatile real estate market of 2022. In the spring, Jerry and Shelley Romano decided to sell their property located at 7 Polo Court. In anticipation of the sale, they signed a lease on a new rental property and took out a line of credit before listing their home for $1,799,999 on May 6, 2022. After an initial offer of $1,750,000 failed to close, they relisted the property. Meanwhile, Lindsay Engel and James Marchand had entered into an agreement to sell their own home in Woodstock on May 6, 2022, with a closing date set for August 17 of that year.
On June 5, 2022, Engel and Marchand submitted an offer to purchase the Romanos’ property for $1,600,000, with a $50,000 deposit and a closing date of August 15, 2022. The offer contained only one condition: that the property appraise at the purchase price for their lender. The Romanos, being real estate agents themselves, ensured proper disclosure of their professional status, which the buyers acknowledged in writing before making their offer. Two days after the offer was made, and before the deal was firm, the Romanos gave notice to a tenant living in the property’s basement unit. On June 8, Engel and Marchand delivered a notice fulfilling their appraisal condition, making the agreement firm and binding on all parties.
The transaction began to unravel in late July. On July 26, the Romanos’ lawyer contacted the buyers’ lawyer after learning that the sale of the buyers’ Woodstock home had fallen through and that their property had been relisted. The sellers’ lawyer sought assurances that the buyers would be able to close on the August 15 date. In response, the buyers’ lawyer confirmed they would need an extension but could not provide a new timeline. The sellers then proposed a one month extension to September 15, but on strict terms. They asked for the immediate and non-refundable release of the existing $50,000 deposit, plus a second non-refundable deposit of $50,000. They also offered to provide a vendor take back mortgage of up to $300,000 at nine percent interest.
The buyers rejected these terms. On August 8, they countered with a request for an unspecified extension and a $100,000 reduction in the purchase price. The sellers refused this proposal and informed the buyers they would be held in breach of contract if they failed to close on August 15. The sellers made one final offer to release the buyers from the agreement in exchange for a total payment of $100,000, which was not accepted. On the scheduled closing date, the Romanos’ lawyer tendered, confirming they were ready, willing, and able to complete the sale. The buyers’ lawyer responded that their clients were not in a position to close. The deal was officially dead.
Following the collapse of the agreement, the Romanos moved back into the Polo Court property on September 1, 2022, and began the process of mitigating their damages. Before they could formally relist the home on the Multiple Listing Service, another opportunity arose. A new couple, the Othmans, had contacted Mr. Romano about a different property and subsequently hired him to be their agent for both buying a new home and selling their existing one. During their discussions, the Othmans learned the Polo Court property was available and expressed interest. On August 30, just fifteen days after the original deal failed, the Romanos accepted an offer from the Othmans for the same price of $1,600,000. However, this new agreement was conditional on the sale of the Othmans’ own home.
The challenges of the shifting real estate market quickly became apparent. When the Othmans’ property failed to sell at its initial list price, the Romanos agreed on October 6 to reduce the sale price of their own home to $1,500,000 to help the transaction proceed. To ensure they were not selling for less than fair market value, the Romanos obtained a professional appraisal, which valued their property at $1,305,000 as of November 8, 2022. When the Othmans’ home still had not sold, the Romanos agreed to a final price reduction on November 16, bringing the purchase price down to $1,325,000. The sale to the Othmans successfully closed on December 15, 2022.
The Romanos then commenced a lawsuit against Engel and Marchand, seeking the difference between the two sale prices plus various carrying costs. The buyers countersued for the return of their $50,000 deposit. The sellers brought a motion for summary judgment, asking the court to rule on the case without a full trial. The buyers argued a trial was necessary, claiming there was an imbalance of bargaining power because the sellers were realtors, and that the sellers had negotiated in bad faith. They also contended that the subsequent sale was not an “arm’s length” transaction because Mr. Romano acted as an agent for the Othmans, and that the price obtained was therefore not a reliable measure of their damages.
Justice MacNeil rejected the buyers’ arguments and granted summary judgment in favour of the sellers. He found no genuine issue requiring a trial, as the key facts were not in dispute. The buyers had entered a firm and unconditional agreement and had breached it. The judge noted that the sellers’ status as realtors was properly disclosed and that the buyers, represented by their own agent, took a calculated risk by making an offer that was not conditional on the sale of their own home. He ruled that the sellers’ proposals for an extension did not constitute bad faith, as they were entitled to seek terms for any deviation from the agreed upon contract.
Furthermore, the court found the resale to the Othmans was an arm’s length transaction conducted reasonably and prudently to mitigate damages. Justice MacNeil concluded that the sellers acted in their own self interest to secure the best possible price in the circumstances. The decision to lower the price was supported by the fact that the final sale price of $1,325,000 was higher than the property’s appraised value of $1,305,000. The judge stated that speculation by the buyers that a higher price could have been obtained by listing the property more broadly was not sufficient to prove the sale was improvident.
In calculating the final award, Justice MacNeil started with the $275,000 difference between the original contract price of $1,600,000 and the final resale price of $1,325,000. To this, he added damages that flowed directly from the breach, including $2,800 in moving costs, $7,195.65 in net carrying costs for the property between the two closing dates, and $1,380.86 in legal fees for the aborted transaction. The judge denied the sellers’ claims for lost investment income and additional interest on their line of credit, finding them to be too remote and not reasonably foreseeable at the time the contract was made. From the total damages of $286,376.51, the judge made two significant deductions. First, the buyers’ forfeited $50,000 deposit was credited against the amount owed. Second, the court deducted $67,000, representing the real estate commission the sellers saved by not completing the original transaction.
The final judgment ordered Engel and Marchand to pay the Romanos $169,376.51 plus interest. The court also formally declared the $50,000 deposit forfeited to the sellers and dismissed the buyers’ counterclaim for its return.
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