In real estate disputes, where the property often represents a person’s most significant financial investment, the stakes are undeniably high. When transactions fall through or contracts are breached, the financial and emotional toll can be significant. 

To make matters worse, court backlogs means waiting years for a trial is often unavoidable. Fortunately, summary judgment provides a faster, more efficient path to resolving these disputes.

Summary judgment allows courts to resolve disputes without the need for a full trial, making it a powerful tool in the hands of parties seeking a swift and fair resolution. This streamlined approach is particularly well-suited to real estate cases, where issues often hinge on clear documentary evidence, such as agreements of purchase and sale (APS), amendments, financial records, and correspondence. 

Recent Ontario Superior Court decisions, including Reid v. Abass and Kinariwala v. Ruiz, highlight how summary judgment delivers fair and efficient outcomes in real estate disputes.

Reid v. Abass

In Reid v. Abass, the sellers sought damages after a buyer failed to close on a $999,000.00 home purchase. The buyer, citing an appraisal that valued the property at $795,000.00, requested a price reduction and a closing extension. 

The sellers rejected this and declared the APS breached, eventually relisting and selling the property for $850,000.00. The dispute turned on the interpretation of an extension agreement the parties later signed. 

The sellers argued it preserved their right to claim the original purchase price, but the court disagreed. It found the agreement released the buyer from liability for the original price as long as the transaction closed under the revised terms. This case highlights how ambiguous language in contractual amendments can significantly impact a party’s ability to recover damages.

Kinariwala v. Ruiz 

In contrast, Kinariwala v. Ruiz centred on whether the seller acted reasonably to mitigate damages after the buyer failed to close on a $465,000.00 purchase. The seller delayed re-listing the property, choosing instead to rent it through Airbnb while waiting for market conditions to stabilize. 

Ultimately, the property was re-listed and sold for $340,000.00, and the seller sought damages for the difference between the original price and the eventual sale price, as well as additional carrying costs.

The court ruled in favour of the seller, finding their mitigation efforts reasonable under the circumstances. The seller’s decision to delay re-listing was based on professional advice from a Realtor, and the use of the property for short-term rentals helped offset some of the losses. 

The buyer’s claim that the property would have sold for a higher price if re-listed earlier was unsupported by evidence, particularly as no expert testimony was provided. The court awarded the seller damages via summary judgment, reinforcing that sellers must take reasonable steps but aren’t expected to achieve perfect outcomes.

Summary judgment can work effectively

Together, these cases illustrate how summary judgment works effectively in real estate disputes while also highlighting its limitations. In Reid, the sellers’ inability to prove their interpretation of the extension agreement led to dismissal, demonstrating how critical it is to draft clear and unambiguous contracts. In Kinariwala, the seller’s prudent actions and thorough documentation of mitigation efforts enabled the court to resolve the dispute fairly and efficiently through summary judgment.

For buyers and sellers, these cases offer valuable lessons. Buyers must be financially prepared to fulfill their obligations under an agreement of purchase and sale, as courts rarely excuse breaches stemming from financing issues. Sellers, on the other hand, should act swiftly to mitigate their losses, keep thorough records of their actions, and rely on professional advice to strengthen their position. While summary judgment offers a faster and more cost-effective path to justice, its success hinges on detailed and reliable documentary evidence that clearly supports your case.

Alan Hu/pacificevergreenrealty.com

The Supreme Court of British Columbia has ordered Alan Hu, a Surrey-based Realtor, to surrender his profits from the sale of a $3.35-million property after breaching his fiduciary duty to a client.

According to a court decision published on Jan. 10, Pei Hua Zhong, a Chinese immigrant of “modest means,” hired Hu to sell his South Surrey, B.C. home and purchase a new property in Surrey in 2017. Zhong signed a contract to buy a property listed for $2.1-million, conditional on securing the down payment by selling his current home.

When his home failed to sell by the subject removal deadline, Zhong decided to pursue bridge financing, planning to use the equity in his existing property to secure the down payment.

While Zhong prepared a second offer of $2.05-million, Hu referred his friend Lingxia Tao, who was vacationing with him in Las Vegas, to another real estate agent to compete for the same property. Zhong was not made aware of the referral. Tao’s offer, submitted with Hu’s assistance, included a clause allowing her to assign the contract to a third party.

In January 2018, the seller accepted Tao’s bid of nearly $2.1-million, cutting Zhong out of the deal. According to court findings, Hu later acquired the property through an assignment from Tao and in 2021, sold the property for $3.35-million— a profit of more than $1.2-million. 

2038 174 St., Surrey B.C., Image source: homesbyalan.ca 2017

In her decision, Judge Amy Francis wrote that Hu “intentionally undermined Mr. Zhong’s bid to purchase the 2038 (174 Street) Property so that he could take an interest in the 2038 Property for himself,” describing his actions as a “marked departure from ordinary standards of decent behaviour,” and “deceptive and underhanded.”

Hu’s failure to act in client’s best interests

She emphasized that a Realtor’s core responsibility is to act loyally and transparently in the client’s best interests. Hu violated this duty when he shared Zhong’s bid with Tao, facilitated her competing offer and ultimately acquired the property through a contract assignment.

Justice Francis found that Tao relied on Hu for instructions and she was not held legally liable.

While litigation regarding the profit split from the sale between Hu and Tao is ongoing, the court has ordered Hu to disgorge all “ill-gotten gains” from the sale​.

Insurance and regulatory implications

In February 2022, Hu submitted statements to the Real Estate Errors and Omissions Insurance Corporation, though intentional misconduct like fraud typically falls outside the scope of coverage. The B.C. Financial Services Authority, which oversees real estate agents in the province, is reviewing the judgment and considering regulatory action.

In addition to surrendering profits, Mr. Hu must also repay the $19,000 referral feed he took for the original purchase of the Surrey property. 

QUICK HITS

 

• When the buyers of a $937,400 home backed out of the deal, they claimed the contract was void because deadlines had been missed.
• The court found that their actions—like paying deposits and not cancelling the agreement earlier—showed they intended to proceed until they later breached the contract. 
• The seller was awarded $232,400 in damages, the difference between the original price and eventual resale price. 

When a buyer fails to complete the purchase of a property, disputes often arise over who is at fault. In some cases, buyers may argue that the seller breached the agreement by missing deadlines. In such cases, the doctrine of repudiation of contract comes into play. It requires an objective evaluation of both parties’ actions, as demonstrated in the case Vandermolen Homes Inc. v. Mani.

Key facts of the APS

In January 2022, the defendant buyers signed an agreement of purchase and sale (APS) for the purchase of a single-family home in Exeter, Ont. from the plaintiff builder for $937,400, with a scheduled completion date of Aug. 31, 2022. The buyers paid a deposit of $5,000 upon signing.

The APS was conditional upon approval by the buyers’ lawyer and arrangement of suitable financing. The deadline for confirmation of the fulfillment of conditions was 6:00 pm on Jan. 20, 2022. A further deposit of $88,740 was due upon removal of the conditions.

On Jan. 20, 2022, the buyers offered to extend the conditional terms to Jan. 26, 2022.  The offer to extend was stated to be irrevocable until 11:59 pm on Jan. 21, 2022, failing which the offer to extend became null and void. The seller did not sign the confirmation of acceptance until Jan. 22, 2022. On Jan. 26, 2022, the buyers nevertheless signed a waiver of the conditions and paid the second deposit.

Breakdown in communication and escalation

Nothing further occurred until May 2022, when the seller began to email and text the buyers regarding interior decor selections, with no response. A dispute subsequently arose over whether the buyers had received these emails and texts.

The buyers took the position that since they heard nothing from the seller for several months following Jan. 26, 2022, they assumed the deal was not proceeding. However, there was no evidence that the buyers contacted the seller to request the return of their deposits or to notify them that they did not intend to complete the purchase during that time period.

On Aug. 10, 2022, the seller’s real estate lawyer wrote to the buyers’ lawyer asking how they intended to take title. On Aug. 12, 2022, the seller spoke to one of the buyers regarding a pre-delivery inspection. The buyer advised that he needed to speak to his wife (the co-buyer) who was in India at the time. He gave no indication that the purchase would not be completed.

Repudiation of the agreement and market impacts

On Aug. 17, 2022, the buyers contacted the seller and cancelled the pre-delivery inspection, which was scheduled for later that day.  On the same day, the buyers’ lawyer advised the seller for the first time that they would not be able to complete the purchase.

On Aug. 29, 2022, the seller’s lawyer spoke to and emailed the buyers’ lawyer to confirm whether or not the buyers were going to complete the transaction. The buyers’ lawyer confirmed that his clients were unable to close the transaction and requested that the property be re-listed so that “the damages can be lessened”.

The seller retained a Realtor and listed the property for sale for $849,000, but there were no offers. In February 2023, the price was reduced to $799,900, without success, and in April 2023, the listing price was dropped to $749,900. While conditional offers were received, the property did not sell.

In September 2023, the price was reduced again to $724,900 and the property was finally sold for $705,000 in October 2023.

The seller sued the original buyers for damages of more than $175,000 relating to their breach of the APS, and brought a motion for summary judgment, arguing that this was a straightforward case of buyers’ remorse.

In response, the buyers took the position that the APS was “dead” when the conditions in the APS were not fulfilled by Jan. 21, 2022. As a matter of law, they pointed to the term in the APS which stated “time is of the essence”, which generally means that a time limit in an agreement is essential, such that breach of the time limit will permit the innocent party to terminate, or rescind, the contract.

Prior decisions have held that the effect of a party’s repudiation of an agreement depends on the election by the non-repudiating (or “innocent”) party as to whether or not to terminate the agreement. If that party treats the contract as still being in full force and effect, the contract remains in force and effect for both sides.  However, if the non-repudiating party accepts the repudiation, the contract is terminated, and the parties are discharged from future obligations.

Determining who is in breach of contract

To determine whether the party in breach has an intention not to be bound by the agreement, the courts assess whether a reasonable person would conclude that the breaching party no longer intends to be bound by it.

In the case at hand, the buyers argued that they had not expressly indicated that they wished to revive the APS after the deadline for waiving conditions. The court was not persuaded by this argument, however, given the buyers’ own conduct in treating the APS as still being in force despite the deadline missed by the seller on Jan. 21, 2022.  

In that regard, the buyers delivered a waiver of conditions on Jan. 26, 2022, and paid the second deposit by cheque, which was cashed by the seller without any protest from them. The seller continued to construct the home over the ensuing months and the buyers did not request the return of the deposits totalling almost $100,000, prior to the commencement of the litigation. Viewed objectively through the lens of a reasonable person, the buyers did not demonstrate that they no longer wished to be bound by the APS.

The court’s assessment and damages 

The court therefore concluded that the APS became binding on Jan. 26, 2022. Although the APS could have been terminated by the buyers after the seller missed the deadline, they did not elect to treat it as at an end.  Rather, they continued to treat the APS as being in full force and effect until Aug. 17, 2022, when it was anticipatorily breached.

As for damages, the measure for contractual breach is generally “expectation loss,” namely the amount required to put the innocent party in the position it would have been in had the contract been performed as agreed.

Although the buyers contended that the seller had failed to take appropriate steps in marketing the property for sale, they did not obtain an appraisal to challenge the price obtained by the seller. It is well-settled law that the onus of proof to establish a failure to mitigate is on the defendants. The buyers failed to meet this onus.

The seller was therefore entitled to the full difference of $232,400.00 based upon the lower sale price of the home, along with property taxes and utilities paid during the relisting period, less the deposits paid. While this figure may seem high, the buyers are fortunate that the damages were not substantially greater. 

There have been many cases in Ontario in 2024 where the difference between the original contract price and the subsequent resale price obtained by a seller has been much larger due to the change in market conditions. 

QUICK HITS

• In Ali v. Patel, the Ontario Superior Court ruled that no binding agreement of purchase and sale was formed because the seller’s inclusion of Schedule B, which was not signed by the buyer, constituted a counteroffer rather than acceptance of the buyer’s offer.
• The court emphasized that a binding contract requires a “meeting of the minds” on all essential terms, which was absent in this case as the buyer neither signed nor agreed to the amended terms.
• Consequently, the buyer was not liable for the $50,000 deposit, illustrating the importance of ensuring all terms are finalized and agreed upon before declaring an agreement binding.

In Ali v. Patel, 2024 ONSC 3505 (CanLII), the Ontario Superior Court of Justice determined that a binding agreement of purchase and sale had not been formed between a seller and buyer because the seller had added a schedule which had not been signed by the buyer.’

The buyer’s unconditional offer

On Jun. 5, 2023, the buyer made an unconditional offer to purchase the seller’s property, which was irrevocable until 11:59 pm on the following day. The offer to purchase contained an offer summary document, an offer of purchase and sale, and a Schedule A. 

On the evening of Jun. 6, 2023, the seller’s agent sent the signed offer back by email. The price, deposit, closing date and Schedule A remained unchanged. However, the seller added a notation on the first page of the agreement indicating that it now included a Schedule B. The cover email stated: “Can you have your clients initial Schedule B and on the first page that there is a Schedule B?  Accepted offer and deposit info attached.” There was no new irrevocable date proposed. 

The form of the Schedule B document included provisions dealing with issues such as defined “banking days” and how the parties would conclude the transaction in the event that banks and registry offices were closed on the anticipated closing date, the timing and form of deposit and where the keys would be left. The MLS listing for the property included a stipulation that all offers were required to include Schedule B.

Schedule B was not attached to the agent’s initial email enclosing the signed offer. A few minutes later, however, the agent re-sent the documents, this time attaching Schedule B, under cover of an email stating “Sorry. Use this.” The buyer did not respond or deliver the $50,000 deposit required by the agreement.

The controversy over Schedule B

The next morning, on Jun. 7, 2023, the buyer advised that they would be unable to proceed with the transaction for unforeseen family reasons. The buyer sent the seller a mutual release later that day. The seller did not sign the release. Rather, the seller’s agent sent an email advising that her clients would hold the buyer liable for any loss or damages.

The seller re-listed the property. One week later the seller sold the property for $25,000 less than the previous buyer had agreed to pay.

Litigation ensued and the seller ultimately brought a motion for summary judgment concerning the buyer’s liability for the $50,000 deposit. The seller argued that there was a binding agreement and that they were entitled to the $50,000 deposit that should have been paid by the buyer.

A “counteroffer” is a non-acceptance of a previous offer

The motion turned on the issue of whether the addition of Schedule B in the final version of the agreement and the demand from the seller that the buyer acknowledge the Schedule by signatures and initials, was a counteroffer that needed to be accepted by the buyer to form a binding agreement.

The court referred to the principle that—by definition—a “counteroffer” is a non-acceptance of a previous offer. In order for a binding agreement to be formed, there must be a meeting of the minds. The court may look beyond the formal written document, to the words and conduct of the parties, if all the essential terms have been agreed upon.

First, the seller argued that there was a binding agreement in place because Schedule B did not include essential elements of the contract.

The motion judge noted that the circumstances were unusual because Schedule B did not address what would typically be considered necessary and essential clauses to find that there had been a meeting of the minds and the conclusion of a binding agreement. 

“Their return of the agreement including Schedule B was therefore a ‘counteroffer’ which the buyer was free to accept—or not.”

However, the treatment of Schedule B by the seller as a necessary inclusion in any final agreement indicated that it was essential in their view. Their return of the agreement including Schedule B was therefore a “counteroffer” which the buyer was free to accept—or not.

Second, the seller argued that they had accepted the buyer’s offer without attaching Schedule B, so a binding agreement was struck, and their later communication which included Schedule B came after a contract already existed. This argument was rejected since the failure to include Schedule B in the agent’s first email was obviously inadvertent, as is evident in the wording of the follow-up email stating “Sorry. Use this”.

Counteroffer or binding agreement?

The motion judge commented that the argument might be more persuasive if the facts were that the seller had fully accepted the offer and then later changed their mind to decide that they wanted to include a new Schedule or additional provisions to the deal. 

The argument then would be that, in fact, there was no counteroffer and a binding offer was in place, and any events thereafter could not impact the already existing contract. However, that is not what occurred.

Rather, the signed counteroffer was inadvertently sent without Schedule B. The email referenced Schedule B and asked that the buyer initial the first page of the offer document and sign Schedule B. 

In the motion judge’s view, giving effect to the seller’s argument would have ignored the fundamental contractual law principle that a contract requires a meeting of the minds to be formed. Here, there was no meeting of the minds as the buyer did not sign or accept any agreement that included a Schedule B.

No binding agreement, no deposit liability

In the result, the court found on a balance of probabilities, that the returned agreement was a counteroffer, and that the seller viewed Schedule B as a necessary component of a concluded agreement. As the counteroffer was never accepted or signed by the buyer, no binding agreement was reached. The buyer was therefore not liable to pay the deposit.

The decision demonstrates that a party should be cognizant that changing or adding any terms to an offer may constitute a counteroffer that requires acceptance. Schedules or other additional terms should be included in the original form of the offer that is intended to be accepted without further negotiation. 

A B.C. Realtor has been fined $10,000 for allowing her clients to view a home unsupervised in Maple Ridge.

Nan (Nancy) Wang, a representative with Metro Edge Realty, was disciplined by the BC Financial Services Authority (BCFSA) following an investigation into the 2021 incident. Wang was found to have committed professional misconduct and conduct unbecoming of a licensee under the province’s Real Estate Services Act, according to a consent order issued on Nov. 6, 2024.

What happened?

The misconduct stemmed from a property viewing on Jul. 17, 2021. Rather than attending the showing with her client, Wang gave the client her Sentrilock access card, which allowed them to view the home alone.

After the viewing, the sellers found that both the front and back doors had been left unlocked. When the listing agent confronted Wang about the situation, she initially claimed that the client had been accompanied by an unlicensed assistant who had used the access card. She later admitted this wasn’t true, apologized to the listing agent and sellers and accepted responsibility for her actions.

In a written statement to BCFSA investigators, Wang confirmed the details of the incident, acknowledging that she had allowed the client to view the home without her supervision and apologized for her misconduct.

Professional standards breached

In the consent order, Wang admitted she failed to act in the best interest of her clients by “failing to attend the viewing of the Property to provide her knowledge and advice about the proposed purchase transaction,” failed to act honestly by misleading the listing agent and endangered “the safety of the Property by not being there to ensure it was secured after the viewing.”

Why the fine was reduced

The initial penalty for Wang’s misconduct was $20,000; BCFSA ultimately reduced it to $10,000. This decision took into account several mitigating factors, including her early acknowledgment of the misconduct, her apologies to those involved and her cooperation throughout the investigation. She also completed remedial education.

Wang has been a licensed real estate agent since 2012 and has no record of disciplinary action, according to the consent order. She has three months to pay the fine, and failure to comply could result in her license being suspended or cancelled. 

Cases arising from failed residential real estate transactions in a falling market reaffirm that buyers who breach purchase agreements may face significant financial repercussions. 

Often, buyers argue that sellers have failed to mitigate losses by not re-listing the property or securing another buyer at the same price. However, this argument, as seen in Singh and Kaur v. Feneich, must be backed by evidence and cannot be based on speculation.

In this case, the plaintiff sellers agreed to sell their property for $1.25-million with a closing date in early August 2022. Despite several extensions, the defendant buyer was unable to secure financing and the transaction failed to close. 

The sellers re-listed the property in 2022 and accepted a significantly lower offer of $965,000. They sued for damages and brought a motion for summary judgment in the Ontario Superior Court of Justice based on the well-established principles for motions in similar cases.

Mitigation efforts and legal obligations

The defendant conceded to breaching the Agreement of Purchase and Sale (APS) and acknowledged liability for damages but disputed the sellers’ calculations for the damages sought. 

The defendant challenged both the sellers’ conduct in failing to consider another offer to purchase made by the defendant after the breach of the APS in August 2022, and the date to be used for calculation of the damages. In that regard, the defendant’s evidence was that she had made a further offer to purchase in January 2023, with a proposed closing date of February 2023 that ought to be used for the calculation of damages.

The court noted that sellers are required to take reasonable—not exhaustive—steps to mitigate losses.

The sellers presented evidence that they relied on professional advice from their real estate broker and accepted a reasonable offer given the market conditions. They also faced the unexpected burden and challenge of carrying two properties and accepted a reasonable offer.

The defendant did not file any independent, objective evidence in support of her position that the sellers failed to mitigate their damages in the form of evidence from a real estate broker as to reasonable listing prices for the property during the re-listing period or as to the nature of the real estate market in late 2022 and early 2023. 

The defendant’s attempt to characterize the sellers’ conduct as unreasonable in the market conditions was rejected as being pure speculation.

Closing date and calculation of damages

As to the date and calculation of damages, the motion judge relied on the propositions for the assessment of damages for breach of an APS:

• The court is to consider context, including “the plaintiff’s duty to take reasonable steps to avoid (their) loss”;
• The nature of the property and the type of market in which the plaintiff is required to re-list and sell the property are both relevant;
• Specific considerations apply in a falling market; and
• A plaintiff who retains the property solely for the purpose of speculation will be entitled to damages assessed as of the original (i.e., failed) closing date.

Taking into account these propositions, the motion judge found that the sellers acted reasonably in their efforts to mitigate their losses, including keeping their property on the market when two deals fell through between August 2022 and March 2023.

Lastly, the court found no evidence to support a finding that the defendant was financially in a position to purchase the property in February 2023, had the sellers accepted her January 2023 offer.

The importance of market context

The court assessed damages at $366,513, which included:

• A $287,500 price difference between the original and resale values.
• $31,906 in carrying costs, such as utilities, taxes, and mortgage interest.
• $47,107 in interest related to financing the sellers’ new build home.

Legal obligations of both purchasers and sellers

The decision underscores the importance of securing reliable financing and understanding the legal obligations of both purchasers and sellers before making a firm and binding commitment to a real estate purchase. 

Prospective buyers of a property must appreciate that they need to be fully prepared to close a transaction on the agreed-upon date, failing which they may not only lose the deposit but be faced with a claim for significant damages based upon the current market value of the property. 

In a rising market, the seller may be able to obtain a higher price but in a falling market, the price difference may result in damages well in the hundreds of thousands. The seller may also claim additional carrying costs and expenses for maintaining the property which are recoverable as part of the damages.

Written by James R.G. Cook and Delila Bikic

Sunshine Coast, B.C. (Canva)

QUICK HITS

 

• Two B.C. Realtors were fined over $200,000 for failing to disclose key restrictions in a 2017 waterfront property sale on the Sunshine Coast.
• Acting as dual agents, they marketed the cabin as “legal non-conforming” without informing buyers of its seasonal-use limitations on Crown foreshore land.
• The B.C. Financial Services Authority found their actions misleading, ordering penalties and remedial education for violating disclosure and client care standards.

Two Realtors in B.C. are facing more than $200,000 in fines for failing to disclose information to clients related to a 2017 oceanfront property sale on the Sunshine Coast. 

According to a consent order by the B.C. Financial Services Authority (BCFSA), Joel Patrick O’Reilly and Denise Anne Brynelsen with Royal LePage Sussex in Sechelt acted as dual agents, representing both the buyers and sellers in the sale. 

Property in question

The waterfront property included an 800-square-foot cabin and a dock, both built on Crown foreshore land in Pender Harbour, B.C. Foreshore land, the area between high and low tide, is subject to strict provincial regulations. 

According to the consent order, the cabin had initially been built as a shed in the 1960s. Over time, the previous owners remodelled it into a residence, without obtaining permits. In 2010, the sellers signed a tenure agreement with the provincial government, acknowledging that the cabin was only allowed to be used as a seasonal residence. The government had also communicated that the foreshore tenure was temporary and subject to renewal or revocation.

The sellers did not share this information with the agents at the time of listing.

Professional misconduct

O’Reilly and Brynelsen eventually learned of these restrictions, not through the sellers, but through an inquiry on behalf of a prospective buyer. A foreshore tenure consultant confirmed the cabin was “not legalized” and classified as a “non-conforming use,” and “that structures on Crown foreshore are generally not approved.” 

Despite being made aware of the cabin’s non-conforming status through a government email in 2017, O’Reilly dismissed these concerns, writing in an email to the sellers he thought there was “zero chance of a government agency removing the cabin.”

The agents marketed the cabin as “legal non-conforming” without disclosing the provincial restrictions or the seasonal limitation. On MLS, the property was described as “freehold nonstrata” and highlighted the cabin as a “completely renovated beach cottage.” 

According to the consent order, the buyers, who eventually purchased the cabin for $900,000, asked about foreshore tenure and the possibility of rebuilding. The agents assured them that the tenure transfer would be straightforward and that the cabin’s legal non-conforming status allowed rebuilding within its existing footprint.

After the sale

After the sale, the provincial government refused to transfer the foreshore tenure to the new owners until the cabin was removed. The buyers filed a complaint with BCFSA in 2019, ultimately building a new home on the property in 2023.

In the consent order, O’Reilly and Brynelsen admitted to advertising the property with “false and/or misleading representations” and failing to disclose “material information” regarding the cabin’s use. They also admitted to providing inaccurate information to the buyers and neglecting to conduct necessary verifications about the property’s restrictions.

As a result, the agents were found to have violated the Real Estate Services Act’s requirements for accuracy, honesty and client care in advertising, disclosure and due diligence. 

They each agreed to pay a $100,000 penalty and $2,500 in enforcement costs to BCFSA, and are required to complete a real estate trading services remedial education course.

“The licensees’ failure to disclose information was harmful to their clients”

“It is imperative that licensees disclose all pertinent information to their clients about a property or transaction,” said Jonathan Vandall, BCFSA’s senior vice president of compliance and enforcement in a press release. 

“In this case, the licensees’ failure to disclose information was harmful to their clients. The penalties handed down are reflective of the severity of their misconduct and serve as a reminder to all real estate licensees about the importance of disclosing crucial information to clients.”

QUICK HITS

 

• In Langen v. Sharma, buyers who agreed to purchase a $2.9-million home later discovered discrepancies in the listing’s tax and square footage information, affecting their financing.
• They requested a price reduction and an extension, which the sellers denied, leading to the buyers backing out.
• The court upheld the sellers’ position, citing an “entire agreement clause” that blocked the buyers from relying on listing representations in their legal claims.

When deciding to buy a property, buyers may review various representations in the real estate listing which purport to list the property’s key facts such as the square footage and measurements of various rooms. 

One statement typically found in the listing is the amount of the recent year’s municipal property taxes, which may be relevant to a buyer’s decision as to whether they can afford to own the property. However, if a representation in the listing turns out to be inaccurate, this may not entitle a buyer to back out of a transaction.

In the case of  Langen v. Sharma, the buyers entered into an agreement of purchase and sale (APS) to purchase a home in Brampton, Ont. from the sellers for $2.9-million. The transaction was supposed to close in August 2022.

Pricey mistake

The listing for the property stated that it contained at least 6,900 square feet of living space, approximately 4,800 of which was above ground. The buyers visually confirmed that those dimensions were reasonably accurate but did not make specific measurements.

The listing also stated that the municipal taxes on the property were $7,297.03 for 2021, which was approximately $600 to $700 more than the buyers were paying on their existing home. The stated amount of assessed taxes was a factor in their assessment of whether they could afford the property.

Square footage and taxes

A few weeks before the scheduled completion date, after the APS was signed, the buyers learned from their mortgage broker that they could not obtain financing to buy the property because the municipal taxes were incorrect due to a discrepancy in square footage. 

The sellers had made renovations to the property that were not brought to the attention of the Municipal Property Assessment Corporation (MPAC). MPAC had relied on the pre-renovation square footage for the property in making the assessment for the tax figure stated in the listing. A correction in the assessment would increase the taxes on the property. Indeed, MPAC subsequently reassessed the property and the property taxes became $10,050.

Buyers request concessions as tax liability changes

As a result of being unable to secure financing on the scheduled closing date, their concern about an increase in taxes going forward, and the possibility of back taxes being owed on the property, the buyers requested a three-month extension of the closing date and a $200,000 reduction in the purchase price.

In response, the sellers proposed an extension of the closing date to Sept. 16, 2022, conditional on the buyers paying a further deposit of $25,000 and delivering their mortgage commitment or approval at least one week prior to closing. The buyers rejected these conditions and refused to complete the transaction.

Sellers resell and pursue legal action

Although the sellers eventually re-sold the property to another buyer for $2.5 million and incurred over $25,000 in carrying costs, the sellers brought an application against the original buyers for forfeiture of the $100,000 deposit and damages for breach of the APS.

In response to the application, the buyers claimed that they were entitled to rescind the transaction because the sellers had misrepresented the amount of municipal taxes. They also argued that the sellers had acted in bad faith by refusing to grant an extension to accommodate the buyers’ efforts to obtain financing.

Innocent misrepresentation and the entire agreement clause

The application judge first considered the nature of the alleged misrepresentation by the sellers concerning the municipal taxes. The buyers argued that they were entitled to rescind the APS on the basis of a non-negligent, “innocent” misrepresentation of a fact that was material to their decision to enter into the transaction.

However, the buyers’ position that they relied on the innocent misrepresentation faced an insurmountable hurdle due to the terms of the APS, which included an “entire agreement clause” stating as follows:

This Agreement including any Schedule attached hereto shall constitute the entire Agreement between Buyer and Seller. There is no representation, warranty, collateral agreement, or condition which affects this agreement other than as expressed herein.

In Ontario law, an entire agreement clause operates as a general bar to claims for innocent—as opposed to fraudulent—misrepresentations.

Seller’s duty versus buyer’s expectation

In the case at hand, the buyers did not argue that the misrepresentation concerning the property taxes in the listing was intentional or fraudulent. The application judge therefore concluded that the entire agreement clause in the APS precluded reliance by the buyers on the alleged misrepresentation.

As to whether the sellers had acted in bad faith by failing to accommodate the buyers’ request for an extension, the application judge referred to the governing principles of good faith contractual performance. The duty of good faith does not require that contracting parties serve each other’s interests. However, they may not seek to undermine those interests in bad faith.

The court’s decision

The application of the doctrine of good faith to the facts at hand turned entirely on the application judge’s conclusion that the entire agreement clause in the APS governed the dispute. Since the application judge rejected the buyers’ position that the sellers were obligated to accommodate their request for an extension due to the misrepresentation, the sellers did not act in bad faith in relying upon the terms of the APS.

The application judge therefore decided in favour of the sellers.

The parties did not dispute the quantum of damages that would follow the application judge’s decision on liability. In the circumstances, the buyers will likely be liable to the sellers for the difference in sale prices and the carrying costs.

Lessons learned: Verify listing facts before signing

Given the consequences illustrated in the decision, buyers should attempt to independently verify important information in a listing before entering a binding agreement that contains an entire agreement clause or ensure that the agreement contains terms that confirm any representations which are of concern. 

While there may be situations where a party is not entitled to rely on an entire agreement clause due to fraud or other misconduct, the courts will certainly consider whether such a clause is a bar to any claims for factual representations that could have been verified before entering into the agreement.

QUICK HITS

 

• A Realtor misrepresented the location of a new-build property to buyers, leading them to believe it was in Brampton when it was actually in Caledon, three kilometres away. 
• After discovering the mistake, the buyers sued, and the Ontario Court of Appeal held the Realtor and their brokerage liable for negligent misrepresentation.
• The court ordered them to repay the buyers’ $120,000 deposit.

In some cases, misrepresentations made prior to the signing of an Agreement of Purchase and Sale (APS), may allow a buyer to sue for damages, as demonstrated by Zhang v. Primont Homes (Caledon) Inc., in which a real estate agent was found liable to his clients for misrepresentation concerning the location of a development property.

Location mix-up in new build purchase

In February 2017, the buyers agreed to buy an investment property to be built in a new subdivision by a developer for $1.2 million, with a deposit of $120,000. The transaction was set to close in 2019.

The buyers had been told by their real estate agent that the property was located at or near a specific intersection in Brampton, Ont. However, in May 2018, the buyers drove by the intersection to check on the progress of the development and discovered that the property that they had agreed to purchase was not located at the site indicated by their agent but rather in Caledon, Ont., about three kilometres north of their expected site.  

Buyers take legal action

The buyers then took the position that they should not be required to close the transaction and commenced litigation against various parties, including their agent, his brokerage and the developer. The buyers argued that the defendants had misrepresented the location of the development and that they were entitled to refuse to complete the purchase of the property and recover their deposit. They also claimed damages for lost profits. The developer counterclaimed for damages flowing from the buyers’ repudiation of the APS.

Prior to the trial, the buyers settled with the developer and agreed that it was entitled to keep the $120,000 deposit. In exchange, the developer abandoned its counterclaim.

After a trial in the Ontario Superior Court of Justice, the real estate agent and brokerage were ordered to pay $120,000, the deposit amount, to the buyers, with interest, and costs of $30,000. The trial judge declined to award the buyers any damages for lost profits.

On appeal, the agent and brokerage argued that the trial judge erred in finding that they negligently misrepresented the property’s location or that the misrepresentation was the cause of any damages suffered by the buyers. The Court of Appeal for Ontario disagreed.

The first ground of appeal was whether the trial judge erred in finding that the appellants negligently misrepresented the property’s location and whether the buyers relied on this misrepresentation.

The Court of Appeal noted that the trial judge made findings of fact based on the divergent accounts of the parties’ interactions and communications prior to the signing of the APS. The trial judge assessed and preferred the buyers’ evidence concerning what the appellants allegedly communicated about the location of the proposed development. Further, the misrepresentation about the property’s location was a key factor in the buyers’ decision to invest their money in the development because they believed “it was in a ‘mature’ community with large houses and schools”. Had they known of the property’s actual location, the buyers would not have agreed to sign the APS or pay the deposit.

No expert evidence required

The appellants further argued that the buyers ought to have been required to adduce expert evidence on the standard of care of a real estate agent or broker to establish liability. As a general rule, expert evidence is required to support a claim against a licensed professional, such as a real estate agent.

A breach may, however, be established without the need for expert evidence concerning “non-technical matters or those of which an ordinary person may be expected to know to have knowledge. The trial judge found that the appellants’ representation that the property would be built near an intersection in Brampton as opposed to a completely different location three kilometres distant was an example of a “non-technical” matter. The Court of Appeal agreed with the trial judge that expert evidence was not required to find that the appellants’ misrepresentation was negligent.

Causation and legal principles 

The second ground of appeal advanced was that the trial judge erred in finding that the negligent misrepresentation was the legal cause of any loss to the buyers. The appellants argued that the buyers could not, as a matter of legal principle, recover against them without first recovering damages against the developer.

The Court of Appeal disagreed that the buyers were required to prove that they had the right to repudiate the APS as a condition precedent to any recovery against the appellants. The appellants relied on a British Columbia decision which also involved a buyer’s repudiation of an agreement due to alleged misrepresentations of the property’s boundaries. However, the court in the B.C. case had concluded that the buyer was not actually entitled to repudiate the contract.

The Ontario Court of Appeal did not agree that there was a general rule established by the decision in the B.C. case that any plaintiff who agrees to buy property based on misrepresentations of any kind by a third party, such as a Realtor or lawyer, is legally foreclosed from recovering damages for that misrepresentation if they fail to complete the purchase.

In the Court of Appeal’s view, the issue of causation was distinct from a plaintiff’s entitlement to assert a separate cause of action for negligent misrepresentation. In a case where a given wrong supports an action in contract and in tort, the party may sue in either or both, except where the contract indicates that the parties intended to limit or negative the right to sue. Nothing in the APS precluded the buyers from suing their own real estate agent or broker for negligent misrepresentation, whether or not they chose to pursue a claim in contract against the developer.

Consequences of misrepresentation

Lastly, the appellants argued that the buyers were themselves the authors of the damages they claimed since the property had increased in value between the time the buyers executed the APS and the trial. Had the buyers not repudiated the APS, they would have acquired a property worth $1,800,000, or nearly $600,000 more than they would have had to pay for it. The appellants argued that the buyers could have mitigated and avoided any financial loss had they not repudiated the APS.

The Court of Appeal noted that in claims of negligent misrepresentation, courts generally focus on the date that a misrepresentation is discovered.

In this case, once the buyers discovered the misrepresentation in 2018 (months before the scheduled completion date), they had to take reasonable steps to mitigate a potential loss, which involved deciding whether to proceed with the purchase of the property. They chose to take the position that the APS was null and void, alternatively, that they were entitled to repudiate it. Ultimately, this meant they were out of pocket for $120,000 after settling the claim with the developer.

Importance of accuracy in property details

The appellants’ position turned on the argument that the buyers should have foreseen that the property would increase in value when they discovered the misrepresentation, even though the property was not as well-situated and therefore not as attractive an investment as they had been led to believe. 

However, they did not obtain a retrospective appraisal showing that the property had already increased in value at the time the buyers discovered the issue with the property’s actual location, nor was there any evidence proving that the buyers should have realized that they would not suffer damages if they proceeded with the purchase. In the Court of Appeal’s words, “(The) appellants should not be able to escape the legal consequences of their negligence because the (buyers) did not take that risk and market conditions happened to improve.”

This ground of appeal and the appeal in its entirety were therefore dismissed.

The decision shows the potential consequences of misrepresentations that are made and found to have been relied upon by a party when deciding to enter into an APS.

QUICK HITS

• Property owner (Kranenburg) overburdened shared laneway by increasing traffic; ruling limits use of laneway to reduce disruption to neighbours (Grices).
• Court sided with Grices, stating laneway’s use must revert to original purpose of serving a summer camp, limiting further development.
• Case highlights importance of proactive communication — judge suggested conflict could have been avoided if both parties had discussed changes before acting.

A shared laneway between two neighbours in Ontario became the focus of a legal dispute over its use. In the case Kranenburg v. Grice, the owners of two properties on Ontario’s Saugeen River disagreed on how the laneway should be used after one owner, Kranenburg, expanded his property’s operations from a summer camp to a busy trailer park and event space.

Neighbour’s response to increased use of access route

The laneway in question runs through the Grices’ property and provides the only access to Kranenburg’s land, which is otherwise landlocked. Historically, Kranenburg’s property had been used as a youth summer camp, with buses, service trucks, and a small number of seasonal trailers using the laneway. However, after purchasing the property in 2009 and running it as a camp for years, Kranenburg shifted its use in 2020, turning it into a busy trailer park and event space. This change significantly increased traffic on the laneway, with more vehicles coming and going, particularly on weekends.

The Grices, who have owned their agricultural property for generations, raised concerns over the increased traffic, which they claimed interfered with their farm operations and created safety risks. In response, they installed two gates along the laneway — one at the entrance and another near Kranenburg’s property — to control access. They also planted trees along the side of the laneway, which Kranenburg argued further restricted access to his land.

Lawsuit filed for damages from nuisance caused by gates and trees

In light of this, Kranenburg filed a lawsuit, claiming that the gates and trees were a nuisance and asking for damages.

The Grices defended their actions, arguing that the gates were necessary to manage the increased traffic and protect their farming operations. They pointed out that the gates were not locked, and access to the laneway was not fully blocked. They also claimed that Kranenburg had overburdened the laneway by using it for purposes beyond what had originally been intended, specifically citing the heavy traffic from the trailer park and event space.

In response, the Grices sought an injunction to restrict the use change and receive damages for trees Kranenburg had cut down for firewood.

Right-of-way use can evolve within reason, road deemed appropriate for historical low-impact use

In cases involving rights-of-way, courts must determine whether the land has been “overburdened,” meaning that the use of the easement has exceeded what was originally granted. In this case, the parties could not locate the original legal document establishing the laneway’s right-of-way, but they agreed that it had existed before 1994.

The court noted that when no specific restrictions are outlined in the original agreement, it’s generally assumed that the right-of-way use can evolve over time, provided the changes remain within reasonable limits.

After reviewing the evidence, the court found that the laneway’s historical use had been relatively low-impact. It had been used primarily for buses transporting campers, food delivery and garbage trucks, up to 20 seasonal trailers and occasional passenger vehicles. This level of traffic was in line with the laneway’s design as a narrow, single-lane gravel road.

Laneway overburdened, safety concerns deemed legitimate — injunction issued for Kranenburg’s use

However, the court agreed with the Grices that Kranenburg’s recent changes had overburdened the laneway. The increased number of vehicles, particularly on weekends, with trailers and passenger cars coming and going for events, significantly exceeded the historical usage of the road.

The narrow and winding nature of the laneway meant that two large vehicles could not pass each other easily, creating safety concerns. The increased traffic also disrupted the Grices’ enjoyment of their property, as the laneway was visible and the noise from frequent traffic was audible from their home.

As a result, the judge ruled in favour of the Grices and issued an injunction limiting Kranenburg’s use of the laneway. Going forward, the laneway could only be used for buses carrying campers and conference attendees, up to 20 seasonal trailers and service vehicles such as food and garbage trucks. The court also allowed for passenger vehicles used by Kranenburg, his staff and residents.

Kranenburg’s nuisance claim dismissed

Kranenburg’s claim that the gates were a nuisance was dismissed. The court found that the gates did not constitute a “substantial interference” with his property rights, as they did not prevent access to the laneway.

The judge acknowledged that the gates may have been an inconvenience but stated that this was an expected reality (not a “substantial interference”) when sharing a roadway between properties with different uses. The installation of the gates was deemed reasonable, given the increased traffic and the Grices’ concerns for safety.

As for the trees, the court found no evidence that they had significantly impeded access to the laneway or created a nuisance. The judge did, however, advise Kranenburg to communicate with the Grices before cutting down any trees in the future and recommended that a survey and advice from an arborist be obtained if further maintenance was required.

This case highlights the importance of clear communication between neighbours when it comes to shared property access. The judge noted that many of the issues could have been avoided if the two parties had discussed their concerns and plans in advance. Kranenburg’s decision to change the use of his property without consulting the Grices, and the Grices’ installation of gates without discussing them with Kranenburg, ultimately escalated the conflict.

In closing, the judge encouraged both parties to reset their relationship and find a way to peacefully coexist as neighbours moving forward.