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Buyers Bound To Agreement Of Purchase And Sale Negotiated By Family Friend – Real Estate and Construction

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Buyers who rely on real estate services provided by a family member would do well to make sure they are fully aware of the consequences of entering into a binding purchase and sale agreement before doing so, as evidenced by Defendants’ plight. Pomata Investment v. Young, 2021 ONSC 6786 (CanLII).

In September 2016, Defendants entered into a Purchase and Sale Agreement (APS) for the purchase of a residential property prior to construction in Wujan, Ontario from Plaintiff for $ 2,199,900. Defendants subsequently sought additional additions, options and upgrades that increased the total price to $ 2,214,813.70.

The closure was scheduled to take place in April 2018. However, about six weeks before the closing date, the defendants informed the plaintiff that they would not be able to close the deal.

The plaintiff accepted the breach of the defendants’ expectations and sold the property to another buyer in January 2019 for $ 1,500,000. Plaintiff then sought forfeiture of $ 150,000 from Defendants and compensation for breach of contract in the amount of $ 616,601.13, reflecting the lower selling price received from the other buyer.

In October 2021 the plaintiff filed a motion for summary judgment. In response, the defendants argued that at the time of the bond negotiations the plaintiff knew that the defendants did not have the financial capacity to close the deal and they relied on the placement of the bond to another buyer before closing with any profits paid to him. The defendants.

In this connection the defendants claimed that he had known them the property, and the possibility of “flipping” the property for profit, by their old family friend, who was an active real estate agent in the Chinese community in the greater Toronto area for many years.

Defendants say a meeting was held at Plaintiff’s sales office, attended by a family member, where they explicitly stated that they had no ability to close on a nearly $ 2.2 million property and that they were given an oral reassurance by Plaintiff that the property. Will be assigned to another buyer before closing. Defendants did not speak English, and neither did the seller’s agent. Thus, it was not clear to the court how all Conversations would occur unless the family member acted as a translator while the APS was being discussed and signed.

Defendants initially assumed that their family member also serves as the plaintiff’s authorized representative. But later admitted that at no time did he act as the plaintiff’s agent in any legal role. On the contrary, the plaintiff maintained its own sales agent through another broker.

A real estate agent has a fiduciary duty towards his manager, who owes the highest duty to full disclosure and fair treatment: SG Investments Group Ltd. V Avison Young Commercial Real Estate (Ontario) Inc., 2016 ONSC 2272 (CanLII). Given that the defendants maintained and relied on their family member as their real estate agent, his actions (or inaction) did not bind the plaintiff seller.

Defendants’ evidence was that a friend of theirs advised them that since the real estate market was “hot” (at the time), they could make money by entering APS and allocating it to a third party before closing for profit, despite their limited financial resources. Defendants testified that their friend guaranteed that the property would be allotted to another purchaser at the time of closure.

The court wondered that the defendants did not raise any issue of misrepresentation – whether it was innocent, negligent or fraudulent – in response to a request for summary judgment. Instead, they promoted the “position of itching in the head,” whereby the seemingly untranslated back and forth among themselves, the plaintiff’s friend and agent somehow constitutes an oral contract.

However, the court noted that neither the plaintiff’s real estate agent nor a friend of the defendants’ family provided any evidence for the application or were questioned as witnesses.

In an application for summary judgment, the court may act on the basis that the respondent parties have placed all the relevant evidence in the minutes. In the circumstances of the case, the court drew negative conclusions against the defendants as a result of the lack of evidence supporting their position. Given the clear and unequivocal language of the USSR, they have a legal and evidentiary burden both on “leading Trump or risking a loss” of the petition, and they have failed to do so.

Plaintiff’s testimony was that by spring 2018 the real estate market had cooled considerably since signing the APS more than two years earlier. Plaintiff presented a table of nine similar properties sold in the general area of ​​the property from February 2018 to October 2018, and the average sale price for those nine properties Was $ 1,475,750.00, about $ 24,250.00 less than the resale value of the property.In the circumstances, the court accepted that the $ 1,500,000.00 price received in the sale to a second buyer was reasonable and in line with market conditions at the time.The defendants failed to prove otherwise.

The plaintiff complied with all the terms and obligations under the APS, gave any required notice to the defendants, and acceded to the defendants’ requests for additions, options and upgrades as these requests were received, and the defendants clearly violated the obligation to complete the purchase. The plaintiff was therefore entitled to forfeiture of the deposit and a judgment in the amount claimed.

The court noted that the defendants may have a proper claim to file against their family friend but this was not a ground for delaying the judgment for the plaintiff seller.

The case is another warning story for many who have only experienced an increase in the value of real estate. As the court noted, markets can change abruptly, and where there are opportunities for significant gains, there are also risks of very significant financial losses. The financial resources to complete the purchase is rarely a wise decision.

The content of this article is intended to provide a general guide to the subject. Seek expert advice regarding your specific circumstances.

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