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Recently the Court of Appeal for Ontario clarified the law on anticipatory breach of an Agreement of Purchase and Sale (APS) of real property.

Both the Seller and the Buyer should strictly adhere to the 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 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 closings.

Facts of the case:

The Buyer contracted to acquire new condominium units under an APS. Five days before the closing, the Buyer’s solicitor asked the Seller’s solicitor for an extension of time as the Buyer had not yet secured funding. Three days before closing, the litigation counsel for the Seller advised the Buyer’s solicitor that the Seller would insist on closing, and if the Buyer could not close, they would take immediate steps to have the Buyer’s deposit released to the Seller. On the closing date, the Seller found out 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 Seller from registering the remaining condominium documents and any transfers of the condominium units on that day. Because the closing did not happen on the closing date, the Seller applied for a declaration that the Buyer had anticipatorily breached the APS and that the Seller was entitled to retain the deposit.

After 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 Buyer’s anticipatory breach, but its refusal to close on the appointed date when the Seller refused the extension as it was entitled to do.

• The Buyer’s repudiation did not excuse the Seller from its obligation to be ready, willing and able to close the transaction on the closing date. Because the Seller refused to accept the Buyer’s repudiation of the agreement, and because the Seller insisted on perfection in the Buyer’s performance, the Seller was required to render perfection in its own performance. The Seller’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.”

Whenever an extension of a closing date is a possibility it is essential to consult with your real estate solicitor to determine your rights and strategies.

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Vlad Bogoslavets is an Associate Lawyer with Kormans LLP.  You can reach Vlad at vbogoslavets@kormans.ca. All blog entries are for your reading pleasure only and are not posted to provide legal advice. For your matter, we encourage you to consult with a lawyer to review and discuss your specific facts and circumstances. The information and comments herein are for the general information of the reader and are not intended as advice or opinion to be relied upon in relation to any particular circumstances. For particular application of the law to specific situations, the reader should seek professional advice. Kormans LLP cannot be responsible for the content of other sites. We expressly disclaim all liability with respect to actions taken or actions not taken based on content received from a third party website linked, directly or indirectly, to that of Kormans LLP.  The link to another site is not to be construed in any way as an endorsement of the host, the site or the information contained therein, nor is such link to be inferred as an association or affiliation with the host.