Can I Back Out of Signing an Agreement of Purchase and Sale in Ontario?

You accepted an offer and now you are having doubts, maybe because of another offer, a change in plans or a worry about where you will live. Before you say anything to the buyer, it helps to know what is at stake.

This article explains how Ontario courts approach a seller who will not close. It does not predict an outcome in your case, because the agreement's wording and your conduct matter a great deal.

Short answer: second thoughts are not a way out

Whether you can end an accepted agreement without consequences depends on its wording and on the facts, so it is worth confirming with a lawyer before you act. If a seller refuses to close, the buyer can ask a court for specific performance, which is an order forcing the sale. The sections below explain what a court looks at, and the situations that are different from simple second thoughts.

What the buyer can ask a court for

If a seller refuses to close, the buyer can ask for specific performance, which is an order forcing the sale. The court asks whether the land, rather than money, better serves justice between the parties. It weighs the nature of the property, whether damages would be an adequate remedy, and how the parties behaved. Uniqueness is only one factor.

In Dhatt v. Beer, specific performance was ordered against residential sellers who refused to close. The court upheld findings that the property had unique qualities and that damages were inadequate because the sellers lacked the funds to pay a damages award.

• A buyer may ask for the sale to be completed.
• A buyer may instead seek money damages, whose amount depends on the facts.
• Your conduct, including whether you can afford a damages award, can influence which remedy a court prefers.

Why sellers and buyers are treated differently

The remedy picture is not symmetrical. When a seller sues a buyer who will not close, money damages will often be adequate, and the seller must show a fair, real and substantial justification to get specific performance. Where a buyer defaults, the seller's damages are measured as the difference between the agreed price and the later resale price. A forfeited deposit is treated as part payment of those damages. A seller must also take reasonable steps to avoid losses, though is not required to accept a lower offer from the defaulting buyer.

These rules matter to you because they show what a court looks at in a failed closing. In Dhatt, the court upheld a finding that damages were inadequate because the sellers lacked the funds to pay them, but uniqueness is only one factor and each case turns on its own facts.

Legitimate reasons a sale may not proceed

Some situations are not simply second thoughts.

• Spouse's consent: you may not sell a matrimonial home unless the other spouse joins in or consents, the other spouse has released their rights in a separation agreement, a court order authorizes it, or another property is registered as the matrimonial home by both spouses. A sale without required consent can be set aside, unless the current holder bought for value, in good faith and without notice. This protects married spouses, not unmarried partners.
• Conditions: a condition giving a party sole and absolute discretion is still read together with any duty to act in good faith and with due diligence. How a condition applies to your agreement depends on its exact wording, so it is worth confirming with a lawyer.
• Other circumstances: whether anything else in your situation affects the sale depends on the agreement's wording and the facts, so it is worth confirming with a lawyer before you act.

Concealment is a different issue. Sellers can be liable for hiding defects. In Bowman v. Martineau, the trial judge found the sellers liable for non-disclosure and concealment of water damage.

What to do next

Limits on suing exist. A buyer generally has two years from the day the claim was discovered to sue, and a limitation period applies despite any agreement to vary it, unless a narrow business-agreement exception fits. That does not mean waiting is safe.

• Read the agreement for any conditions and their deadlines.
• Do not stop responding or take the home off the market without advice.
• Check whether a spouse's consent is an issue.
• Keep all messages, offers and dates.
• Speak to a real estate lawyer before telling the buyer anything.

Frequently asked questions