If a person agrees to buy a home and fails to complete the purchase, they may be liable to the seller for any damages suffered as a result of the failure to complete. That is what happened in Panegos v. O’Byrne, 2019 BCSC 679.
In this case, the defendants agreed to buy the plaintiffs’ two condo units in Victoria. The list price was $1,850,000. The defendants offered to buy the units for $1,750,000 and the plaintiffs accepted. The defendants placed a $50,000 deposit with a real estate brokerage involved. The parties then proceeded to address various conditions to the contract. Eventually, all conditions were removed and the contract was perfected.
On the date the sale was to complete, the defendant’s lawyer contacted the plaintiff’s lawyer to tell them that the buyers would not be able to complete the transaction as their financing had fallen through.
The sellers re-listed the condos. They eventually sold 6 months later, but only for $1,560,000.
Having received $190,000 less than they had expected and to carry the costs of the condos for an extra 6 months, the sellers sued the buyers for damages totalling $297,000. This included $52,000 in real estate commissions related to the eventual sale.
The buyers tried to argue that the sellers were not entitled to damages as they also didn’t perform their obligations under the contract. Specifically, they said the sellers’ failure to tender closing documents upon being told that the buyers couldn’t complete put the sellers in breach of the contract. The judge rejected this argument on the basis that the buyers had already made it clear that they would not complete the sale. In those circumstances, it was not necessary for the sellers to go through the formality of tendering closing documents on the sale that they knew wasn’t going to complete.
Having dispensed with that argument, the judge found that the sellers were entitled to damages. The question was, how much? As with any person who has a claim for damages, they have an obligation to mitigate their loss ie. do whatever is reasonable to reduce their damages. In this case, the judge found that the sellers did that by re-listing their condos immediately.
The sellers were awarded all damages claimed except for the real estate commission on the eventual sale. This was because the sellers didn’t pay a commission on the failed sale. Had the sale completed, they would have. Awarding them damages for a commission they didn’t pay would result in a windfall and put the sellers in a better position than they would have been had the sale completed.
This case serves as a warning to buyers in a declining market of the damages they could be responsible for if they do not complete.