“He who lives by the sword dies by the sword”: Court of Appeal for Ontario clarifies the law on anticipatory breach of the real estate agreement.
Both the vendor and purchaser should strictly adhere to the agreement of purchase and sale of real property (APS). If one of the parties does not close the transaction in accordance with the APS, the breaching party may have negative financial consequences.
In its recent decision in 1179 Hunt Club Inc. v. Ottawa Medical Square Inc., 2019 ONCA 700, the Ontario Court of Appeal provides a number of clarifications in regards to the repudiation of real estate closing.
Facts of the case:
The purchaser had to acquire new condominium units under an APS. Five days before the closing, the purchaser’s lawyer asked the vendor’s solicitor for an extension of time as the purchaser had not yet secured funding. Three days before closing, the litigation counsel for the vendor advised the purchaser’s lawyer that the vendor would insist on closing, and if the purchaser could not close, they would take immediate steps to have the purchaser’s deposit released to the vendor. On the closing date, the vendor got to know that the Land Registry Office had made an error in assigning parcel identification numbers to the condominium project. This error was remedied later that day, but it prevented the vendor from registering the remaining condominium documents and any transfers of the condominium units on that day. Because the closing did not happen, the vendor applied for a declaration that the purchaser had anticipatorily breached the APS and that the vendor was entitled to retain the deposit.
Reviewing the decision of the application judge, the Court of Appeal for Ontario held that:
The mere request for an extension of time of the real estate closing would not ordinarily amount to anticipatory repudiation. However, the fact that the buyer sought the extension of time because it did not have funds to complete the transaction on the appointed date gave the seller the right to not to agree to the extension. It is not the request for an extension that amounted to the purchaser’s anticipatory breach, but its refusal to close on the appointed date when the vendor refused the extension as it was entitled to do.
The purchaser’s repudiation did not excuse the vendor from its obligation to be ready, willing and able to close the transaction on the closing date. Because the vendor refused to accept the purchaser’s repudiation of the agreement, and because the vendor insisted on perfection in the purchaser’s performance, the vendor was required to render perfection in its own performance. The vendor’s failure to tender on the closing date was fatal. The Appeal Court cited an old proverbial caution that “he who lives by the sword dies by the sword.”
You can find the whole decision of the Ontario Court of Appeal in 1179 Hunt Club Inc. v. Ottawa Medical Square Inc. on the Court of Appeal for Ontario website: http://www.ontariocourts.ca/decisions/2019/2019ONCA0700.pdf