How Much Do You Have to Pay for Backing Out of a Home Purchase?
Time flies. The earth-shattering COVID pandemic now feels like it happened more than six years ago. Yet the social and economic effects it brought are still clearly visible today.
During COVID, Canadian housing prices climbed to historic highs due to extremely low interest rates at the time. Prospective homeowners who purchased real estate during that period later found themselves facing multiple challenges: high inflation, rising mortgage rates, and falling home prices. This led many buyers to be unable to complete their real estate transactions, requiring them to compensate the sellers.
The case of Mattamy (Jock River) Limited v. Tripple S & A Inc., 2026 ONSC 4012 (CanLII), discussed below, is a typical example of exactly this kind of dispute.
This case involves a motion for summary judgment brought by the plaintiff (the "Vendor"). The lawsuit arose because the defendant failed to complete the purchase of a newly built home in accordance with the Agreement of Purchase and Sale (APS) signed by both parties, prompting the plaintiff to seek damages.
The parties did not dispute the basic facts of the case. In November 2022, they formally signed an Agreement of Purchase and Sale for a new home in Ottawa (total price of $789,301), with closing scheduled for the end of May 2024. Unfortunately, the closing date fell during a period when mortgage rates were rising and real estate values were declining.
Just before the closing date, the defendant notified the plaintiff that it could not complete the transaction, which constituted a material breach of the Agreement of Purchase and Sale. Subsequently, in July 2024, the plaintiff successfully resold the property for close to $700,000. The defendant agreed that this resale price accurately reflected the property's fair market value at that time in 2024.
Based on this, the plaintiff sought total damages of $97,945.65, which included the price differential, real estate agent commission, legal fees for the resale, minus the forfeited $30,000 deposit. The plaintiff also sought costs for the litigation and the motion.
The judge noted that, according to the evidence, around the end of 2023 — roughly six months before the scheduled closing date — the defendant had informed the plaintiff that it wished to sell the house before the official closing. The plaintiff agreed at the time, allowing the defendant to sell it by way of an "assignment" of the contract. The defendant subsequently attempted to sell the house for $770,000 in September 2023 and again in April 2024, but was unable to find a suitable buyer on either occasion.
A few days before the closing date, the defendant's lawyer formally notified the plaintiff: "due to the deterioration of the market environment, the client stated that it would be unable to complete the transaction." The plaintiff immediately accepted this "anticipatory breach" by the defendant, clearly informing the defendant that it would pursue legal liability for the price shortfall and all resulting costs, and promptly relisted the property for sale.
Other evidence showed that, before the breach, the defendant had asked the seller to lower the contract purchase price, indicating that it would complete the purchase if the seller agreed to reduce the price. However, the seller was unwilling to lower the price, and even less willing to waive its legal right to seek damages from the defendant.
The judge noted that in the Agreement of Purchase and Sale (APS) signed by both parties, "Schedule Q" expressly contained the following terms regarding the "Purchaser's Acknowledgement":
The Purchaser acknowledges and agrees that the purchase price set out on the cover page of this Agreement is firm and legally binding.
The Purchaser is fully aware that real estate market conditions may fluctuate and change between the signing of this Agreement and the closing date. Such fluctuations may trend upward or downward. The Vendor is not responsible for, and has no control over, such market conditions.
The Purchaser understands that this Agreement is binding once accepted by both parties. Accordingly, the Vendor will not agree to any modification or reduction of the purchase price. The Vendor also has no obligation to provide any incentives, deposit structure changes, design studio credits, adjustments, or any other changes to the terms of the Agreement.
The judge found that the existing evidence showed the defendant had no concrete grounds for defence, and there was no evidence that the plaintiff had made any misrepresentation. Even though the defendant tried to defend itself by citing "fluctuations in land value" and "rising interest rates" as amounting to "frustration of contract," such grounds were legally wholly insufficient to succeed. The possibility of price fluctuations was clearly something both parties would have anticipated at the time of signing the contract.
Taking all these factors into account, the judge ruled in favour of the plaintiff, ordering the defendant to pay the plaintiff $78,845.90 in damages. This figure reflects the total amount after the judge reviewed the plaintiff's claim and made adjustments to the agent commission and legal fees. The judge also awarded the plaintiff $8,000 in costs.
Although the judge ultimately reduced the plaintiff's damages award by nearly $20,000, this "savings," once the defendant's own legal fees and the costs awarded to the plaintiff are factored in, was essentially wiped out. Perhaps settling with the plaintiff early, before litigation, would have been the more timely and rational way for the defendant to cut its losses.