In this recent decision, the court ordered the return of the Buyer’s deposit after the court concluded that the Buyer’s actions leading up to, and following, the expiration of the preconditions did not equate to a waiver of those conditions.
This deal contained two preconditions that rendered the agreement of purchase and sale null and void if not waived in writing by a certain date (the “Deadline Date”). The Deadline Date came and went, without the two conditions being waived (Financing and Lawyer’s review of Status Certificate).
The Buyer wanted their deposit returned, but the Seller refused, citing that the conduct of the Buyer lulled the Seller into believing that the deal was going to go through despite the passing of the Deadline Date, and because of this, other decisions were made by the Seller (counting on the sale proceeds) that caused the Seller to sell other properties at distress amounts when the Buyer refused to close, costing the Seller losses of approximately $260,000 which formed a counterclaim against the Buyer.
The court concluded that there was no merit to the Seller’s argument that the Buyer’s conduct waived the conditions in the agreement. The following factors lead to this result:
- the parties were sophisticated real estate buyers and sellers;
- the parties, and more importantly the Seller, knew how the conditional terms worked, and that the deal became void on the Deadline Date when no written waiver was received; and
- Even though both parties understood that the agreement might be consensually revived – after it became null and void – this simply never occurred.
The court rejected the Seller’s argument that the Buyer’s failure to deliver a signed release after the deadline date sent the message that the Buyer was treating the agreement as valid and ongoing. The court did not squarely address the import of having a release, but clearly the absence of a release was not material. Put another way, once the deal became null and void, nothing turned on whether a release existed after the fact.
In the end, the court was satisfied that the Buyer did not lull or coerce the Seller to into believing the agreement was ongoing. The Seller may have taken the position that the deal could be salvaged with the Buyer (and for a certain period of time this was likely the case), but it was just as open for the Seller to have put the Buyer on notice that they lost the property (when the Deadline Date came and went), and that the property was being relisted for sale.
In other words, the Seller unilaterally decided to cling to this Buyer on the hope that it would lead to a revived deal, but it never did; the other unilateral option was to leave the Buyer in the sidelines and relist the property (and perhaps the Buyer would become involved again through this channel). But regardless, the deal came to an end, and nothing the Buyer did “revived” the deal.
The Seller was ordered to return the deposit and the Seller’s $260,000 counterclaim was dismissed.
Kwan v. LSN Investments Inc., 2022 ONSC 3174
https://www.canlii.org/en/on/onsc/doc/2022/2022onsc3174/2022onsc3174.html