What to Do When the Seller Refuses to Close in Ontario

The closing date arrives and the seller says they will not hand over the home. Perhaps they found a better offer, perhaps the market moved, or perhaps they simply changed their mind. You have an agreement of purchase and sale, a moving date and probably a mortgage commitment, and you need to know where you stand.

This article explains, in general terms, the main options a buyer has in Ontario and what the Court of Appeal for Ontario has said about them. Every situation turns on its own facts and on the exact wording of your agreement, so treat this as a map and not as advice on your file.

Start by confirming what is really happening

A seller who is late, a seller who needs a short extension and a seller who flatly refuses are three different situations. Before thinking about remedies, pin down which one you are in, and make sure you are not the one who is unready.

If time is of the essence in your agreement and neither side is ready to close on the agreed date, the agreement stays in effect. Either party can restore time of the essence by setting a new closing date and giving the other party reasonable notice. Changing a closing date is normally done by a written amendment that both sides sign, so keep any extension in writing.

• Confirm in writing that the seller is refusing to close, and on what grounds.
• Check that you were ready, willing and able to close on the date, with funds and documents in place.
• Keep copies of the agreement, any amendments, notices and all messages with the seller and the agents.
• Do not take steps that could look like you are giving up on the agreement, such as signing a release, before you understand your position.

Remedy one: damages

The usual starting point is money. When a seller fails to close, the buyer's damages are presumptively the difference between the contract price and the market value of the land on the closing date. If the market value equals the contract price on that date, there is no loss.

This is why a refusal in a flat market can leave a buyer with little to claim in damages, while a refusal in a rising market can be costly. A buyer who sues for damages must also take reasonable steps to limit the loss, because a plaintiff cannot recover losses that reasonable steps could have avoided. The defendant has to prove both that the plaintiff failed to mitigate and that mitigation was possible.

Remedy two: asking a court to force the sale to close

Specific performance is a court order that makes the sale go through. It is not granted as a matter of course. The buyer must show the property is unique, meaning a substitute is not readily available, and that damages would be inadequate. Courts weigh the nature of the property, the adequacy of damages and the parties' conduct.

Uniqueness does not mean the property is one of a kind. It means the property has qualities that make it especially suitable for the buyer's use and that cannot readily be duplicated, judged from the buyer's point of view when the contract was made. A rising market can support this.

There is an important exception. Courts should be reluctant to order specific performance of a purchase of property bought solely as an investment. A buyer who planned to live in the home, or to use it for a particular purpose, is generally in a different position from one who bought only to resell or rent.

Comparing the two main remedies

The two remedies are not a menu you can freely choose from. A court looks at the facts, and the right approach depends on the property, your reasons for buying and what has happened in the market.

What to do next

Time matters. Evidence about the property's market value and about why it suited you is easier to gather early, and delay can make it harder to show you were ready to close. The deposit is usually held in trust by a brokerage, and the balance owing to the seller can be released only when the transaction is completed or with the mutual written consent of both parties. Do not sign anything that releases the deposit without understanding what you are giving up.

• Speak with a real estate lawyer promptly, ideally before the seller's position hardens.
• Bring the agreement of purchase and sale, all amendments and every notice sent or received.
• Gather proof that you were ready to close, such as your mortgage commitment and funds.
• Collect information on comparable sales around the closing date.
• Write down why this particular property suited you, since that bears on uniqueness.

Frequently asked questions