Is a Deal a Deal?

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So you’ve found your dream neighbourhood. Close to parks and schools.  Near your children’s friends. Safe. Close to work. You find the perfect house for you and your family in your dream neighbourhood and it is for sale. You make an offer and it’s accepted. It seems perfect and your dream is coming true.

Before closing, the dream turns to a nightmare. The vendor says he won’t sell you the house. You really want that house. Not any other house. That house.

Unfortunately, you may not be able to force the vendor to sell you that specific house.  Since a Supreme Court of Canada’s decision in Southcott Estates Inc. v. Toronto Catholic District School Board (2012 SCC 51), it has been clear in Canada that a purchaser cannot force a sale with respect to developable or raw land.  In that case, the court decided that the purchaser, a land developer, once it learned the deal would not close, had an obligation to go out and look for other land in order to mitigate its losses. The court found that the purpose of the purchase was to develop and build homes. Since there is a lot of land on which the developer could do just that and nothing unique about the lands in question, the court refused to require that those specific lands be sold despite the earlier agreement to do so.  The remedy for the breach of the contract was money, not a sale or transfer of the specific lands. It may not be well known, but the same principle applies in residential real estate cases as well.

A deal is a deal less often than people might expect.  In residential real estate, if the vendor refuses to sell to you, you can ask the court for specific performance – the sale or transfer of the specific house – but it is rarely awarded.  The more common remedy is financial compensation for the difference in the value between the home you tried to buy and a comparable home that is still on the market and any added expenses for the purchase of the alternative home.  The amount of money awarded may be quite limited.  

To be successful in forcing the vendor to sell or transfer the specific home to you, you may need to prove to the court that the house or property is so unique that there is no other comparable property. This is exceedingly difficult in the residential real estate industry. There are so many homes and so many neighbourhoods that there are many versions of the same home in different neighbourhoods. 

Recently, Lerners LLP was successful in advancing a specific performance argument by proving that the specific property was uniquely located, zoned and situated in an area where there were no comparable properties.  A judge ordered the sale to proceed and development of the lands went ahead.  It can be more difficult than you expect to enforce a deal.  If you find yourself in this situation, you should consult a lawyer and find out if your dream home is truly one of a kind or whether you will be forced to move on. 

 

Topics:  Canada, Real Estate Market, SCC

Published In: General Business Updates, Residential Real Estate Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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