What happens if a buyer or seller backs out of a real estate Agreement of Purchase and Sale in Ontario?

An Agreement of Purchase and Sale (APS) for Ontario real property is a binding contract. If one party refuses to close without a valid legal reason, the other party may have claims for breach of contract.

If a buyer fails to close, the seller may keep the deposit (usually), claim the difference between the contract price and the eventual resale price (if the resale price was lower), and may pursue other damages flowing from the breach. If a seller refuses to close, the buyer's most powerful remedy is often specific performance — a court order requiring the seller to complete the transaction — since real property is treated as unique.

Courts have awarded specific performance in Ontario real estate cases, though they look at the specific facts: whether the buyer can demonstrate a continuing desire to own this particular property and that damages would be inadequate. In competitive markets where equivalent properties exist, courts may be more inclined to award damages instead.

Depending on the circumstances, an injunction may be sought to prevent the seller from selling to a third party while litigation proceeds. Time is critical in these situations given the risk that the seller completes a sale to another buyer, which can complicate or eliminate your claim for specific performance.