You’re finally ready to leave your “starter” home and move into your dream home. The moving truck is loaded and you’re expecting a call from your lawyer telling you that the deal has closed and the money from the sale has gone towards the purchase of your new house.
But when the phone finally rings, your lawyer informs you that the purchaser has backed out of the deal at the last minute. Your lawyer told him that you were ready, willing, able – and anxious – to close the deal, but the purchaser still refused to comply. You don’t have the funds to buy your new home. Now what do you do?
Three options
Aside from tearing your hair out, you have a choice of three courses of action.
• You can act as though the agreement of purchase and sale was never signed and ask that both you and the purchaser be placed back in your original positions.
• You can demand that the agreement be carried out.
• Finally, you can claim damages, instead of/or in addition to actual performance of the agreement.
Cancellation of the contract
When the contract between the purchaser and vendor is treated as though it never occurred, it is said to have been “rescinded.” The parties are restored to their pre-contractual positions and the purchaser’s deposit is returned to him.
Of course, in most cases, when the purchaser refuses to complete the contract without a valid legal reason, the vendor will not return his deposit. In this case, the contract is said to have been “cancelled.”
Specific performance
If you want to try to force the purchaser to carry out the contract as agreed, you can sue for specific performance of the agreement. You might want to do this, for example, where the price of the property has since dropped. Of course, if you do so, you can’t sell your property while you’re waiting for the court to try your case.
Specific performance is rarely awarded, as courts are reluctant to force someone to buy something he doesn’t want. The usual remedy for a jilted vendor is damages for any loss he has suffered.
Damages
Damages are awarded to compensate the vendor for the loss of the bargain. They restore him to the same financial position he would have been in if the sale had actually gone through.
The vendor may be found partly responsible for the financial loss he suffers if he doesn’t try to minimize his loss. A vendor should usually re-list the property for sale as soon as possible. If he ends up selling it for less than the price the first purchaser agreed to pay, his damages will include the difference in the sale price and any additional legal fees, as well as maintenance and carrying costs and property taxes paid after the originally scheduled closing date.
If you had planned to use the money from the sale of your house to buy a new one, then you will either have to borrow money to close the deal on your new house, or not go through with it. Any expenses that you incur as a result of either borrowing money or breaching your agreement may also be recovered from the purchaser.
Dan Cooper is an award-winning associate broker with Royal LePage Real Estate Services Ltd. Dan can be reached at 905-338-3737, direct line at 849-3360, or through his web site at www.dancooper.com.
Dan has written a comprehensive guide for those looking for a home in Oakville. Called “Your Guide to Oakville Real Estate,” it includes area profiles and maps. Call Dan for your free copy.