We are a business savvy Toronto litigation law firm that represents individuals and business owners in complex litigation disputes related to the commercial and residential real estate market primarily in the Greater Toronto Area (GTA). We have a high level of business acumen and we work as litigation lawyers and strategic business advisors for our business clients to ensure that we protect the financial interests of your client.
One of our primary practice areas is handling commercial and residential real estate disputes. The strength of the Greater Toronto Area (GTA) real estate market in recent years has made the residential market a breeding ground for real estate litigation disputes. Real estate breaches of contract are all too common in our local housing market; primarily due to the frenetic changes in house prices that we have experienced over the last number of years.
Breach of Contract by Buyers
Oftentimes, unwitting buyers and sellers enter into Agreements of Purchase and Sale in an unprepared manner; with one side to the transaction unable to close for any number of reasons. Buyers typically do not include conditional financing arrangements in their offers, for fear that they will not be successful in attaining an accepted offer and binding agreement with the seller as the GTA real estate market has been fierce over the past few years; however, this often comes back to haunt them. Buyers whom enter into binding agreements with a seller, whom are unable to subsequently obtain financing, and thereby default on the agreement, will subject themselves to potentially significant damages for breach of contract. The non-defaulting seller will be entitled to retain the deposit or more of the total purchase price of the property), and any other costs that are a natural consequence of the breach (i.e., if they are able to re-sell the home at a lower price), the defaulting buyer will be on the hook for the shortfall.
We have negotiated with numerous buyers and sellers for extensions to Agreements of Purchase and Sale. Buyers are most typically requiring extensions to purchase agreements due to their inability to obtain financing to close transactions. With the recent softening of the GTA housing market, many purchase agreements that were entered into several months back are at purchase prices above the market price of the property at closing. Accordingly, tier one banks are appraising the value of the home at a price lower than the purchase price, and accordingly, are not willing to provide mortgage loans sufficient to cover the balance of the purchase (above the equity down payment). In the circumstances, buyers are seeking out alternate financing from secondary lenders, which can often come at prohibitive interest rates, to finance the difference between the value as appraised by the banks at closing and the purchase price of the property according to the Agreement of Purchase and Sale. Rather than take on high interest financing, many buyers opt to forego the deal altogether, thereby forfeiting their initial deposit and subject themselves to future claims from non-defaulting sellers for damages.
Breach of Contract by Sellers
Goldstein Lawyers has represented both defaulting and non-defaulting sellers and buyers in breach of contract claims relating to real estate agreements of purchase and sale. We have found that a number of sellers will sign an Agreement of Purchase and Sale, and later decide to change their mind and not sell. If the prospective purchaser does not execute a Mutual Release, which releases all parties from future claims and actions against one another, the seller could be exposed to a claim for breach of contract damages.
Sellers may repudiate Agreements of Purchase and Sale if they have entered into an agreement prior to an appreciation of prices in the marketplace. In such scenarios, the sale price of the property is below the current market value, and sellers will not wish to convey their property at such a low price. Accordingly, they will attempt to default on their agreement, hoping that a buyer does not seek recourse. Buyers of these properties, intending to close the transaction and experience an immediate capital appreciation, will pursue sellers for all losses that are a reasonable and natural consequence flowing from the breach of contract.
With a recent downturn in the Toronto residential housing market, buyers are now walking away from their deposits after they have entered into Agreements of Purchase and Sale, and they may be unable to recoup the same unless through a Mutual Release, Court Order, or the closing of the home. When you are embroiled in a real estate dispute, it is advisable to call a lawyer that understands the standard form documentation that govern real estate transactions in Ontario, and how to protect your rights.
If you are embroiled in a real estate dispute, please contact us today for a free consultation on your matter.