Court looks to the parties’ behavior while buying a home to find an enforceable agreement of purchase and sale.
A recent Ontario Court of Appeal decision, VanderMolen Homes Inc. v. Mani, 2025 ONCA 45, serves as an important reminder for both buyers and sellers in real estate transactions: clear communication is key when dealing with missed deadlines and potential breaches of an agreement of purchase and sale for property (“APS”).
Case background
An agreement of purchase and sale will typically be subject to the fulfillment (or waiver) of certain “conditions”, such as the buyers securing a home inspection, or, as in VanderMolen Homes, the buyers securing financing and a review of the transaction by a solicitor.
In January 2022, the appellant couple entered into an APS for a home in Exeter, Ontario, with a purchase price of $937,400 and a closing date scheduled for August 31, 2022. The buyers paid an initial deposit of $5,000. The APS required that the buyers confirm by January 20, 2022, that the financing and solicitor’s review conditions had been fulfilled.
Presumably needing more time, on January 20, 2022, the buyers offered to extend the conditional terms to January 26, 2022, but importantly, that offer stated the extension must be accepted no later than January 21, 2022. The seller accepted the extension offer one day late—on January 22, 2022. Despite this, the buyers proceeded to waive their conditions and pay the second deposit on January 26, 2022.
Over the next few months, communication between the buyers and seller broke down (potentially attributable to incorrect email addresses and phone numbers). Ultimately, the buyers alleged in the litigation that they “heard nothing” for six (6) months and thought the deal was dead. But, on August 12, 2022, the parties scheduled a pre-delivery inspection for August 17, 2022.
On August 17, 2022, the buyers cancelled the pre-delivery inspection the day it was set to occur. That same day, and for the first time, the buyers advised the seller that they would not be able to complete the transaction. A few days later, the buyers’ lawyer wrote to the seller’s, stating: “I confirm my clients are unable to close the deal and request that property be listed for so [sic] that the damages can be lessened”.
Key Takeaways
The seller successfully secured summary judgment for damages against the buyers, for their failure to close the purchase. The buyers’ appeal raised several issues, but boiled down to the essential allegation that the buyer’s acceptance of the “extension offer” one day late meant that the APS had been terminated: in the buyers’ view, once the extension offer became null and void at midnight on January 21, 2022, so too was the entire APS because its conditions had not been fulfilled and agreement to extend those conditions had not been reached.
The Court of Appeal noted that the seller’s accepting the extension offer late was a “repudiation” of the contract, a kind of breach which entitled the seller to choose whether to terminate the APS, or continue with it: the critical requirement is that this choice must be communicated to the repudiating party.
The essential element of this appeal was the parties’ behavior: given that both parties acted as though the transaction was continuing, the Court found that the APS became firm and binding when, on January 26, 2022, the sellers waived their conditions and paid the deposit: that conduct does not communicate a choice to terminate the contract, but just the opposite.
Finally, the Court of Appeal found support for its conclusions in the fact that on August 29, 2022, the seller’s lawyer asked the buyers to put the home back on the market to “limit damages”, a sign that the buyers knew the APS had not been terminated earlier, when the extension offer was accepted late. The sellers argued this evidence should be excluded because it was “subsequent conduct” which should not affect the interpretation of the APS. The Court of Appeal, however, agreed with the motions judge that this statement confirmed the parties treated the APS as valid after January 26, 2024.
Lessons for Buyers and Sellers
As this case shows, parties to a contract should consider their actions carefully when they believe there has been a breach: If a party to a contract misses a deadline, the other party must decide whether to enforce the agreement or terminate it—and must communicate that decision clearly, and promptly. In absence of a clear choice being communicated, the Court may look to the parties’ behavior and determine they have lost their ability to complain about a breach which, at the time, their behavior excused.
In VanderMolen Homes, the sellers essentially “waived” their right to point to the late acceptance of the extension offer by afterwards acting as though it had never occurred. While the Court of Appeal did not raise the point outright, the case is suggestive of an overarching principle of fairness: if the sellers wanted to point to the missed deadline to kill the contract, the time to do so was when the deadline was missed, not after instead leading the seller to believe the deal was in place for several months.
Real estate purchases can be fast-paced, however, this case underscores the benefits of timely legal advice when complexities like a missed deadline occur: for a seller or a buyer, their actions will have consequences.
For buyers, this decision is a cautionary tale about ensuring that any assumptions about a deal’s status are backed up with clear, documented communication made after careful consideration of the ramifications of their chosen course of action. For sellers, it highlights the importance of keeping detailed records and continuing to act in accordance with the contract.
In the last several years, Nelligan Law saw an uptick in failure of residential real estate transactions, at least in part as a result of the costs of financing for buyers: while the motion and appeal decisions do not state why the buyers became unable to close in 2023, it is notable that the transaction in VanderMolen Homes occurred throughout 2022, when interest rates rose rapidly. Buyers should be aware of the potential consequences of waiving financing conditions in an environment of rising interest rates because if their financing qualifications change, a buyer may find themselves in breach of their APS if they are left without financing and unable to close.
Real estate deals can be complex, and misunderstandings can lead to costly legal disputes.
If you’re unsure about your legal responsibilities in a real estate transaction, we’re here to help. Get in touch with our team today.
