In Kinariwala v Ruiz, 2024 ONSC 7188, the Superior Court of Justice – Ontario, dealt with yet another summary judgment motion involving a failed purchase agreement for a residential property. In Kinariwala v Ruiz, the defendant had agreed to purchase a piece of property located in Windsor, Ontario for $465,000.0 but failed to close the transaction, citing an inability to secure financing. This breach led the seller/plaintiff to re-list and eventually sell the property at a significantly reduced price of $340,000.00. The plaintiff sought to recover the financial losses incurred, including the difference in sale prices and holding costs.
At the hearing of the motion, the Court addressed two primary issues between the parties. First, the court confirmed that the defendant breached the Agreement of Purchase and Sale (“APS”) for the property. Despite her claim that misrepresentations about the property’s income as a successful Airbnb potentially influenced her decision to back out of the APS, the court found that the defendant’s failure to complete the transaction stemmed solely from her inability to obtain financing.
While the defendant did not seriously dispute that the breached the APS, the defendant argued that the plaintiff failed to mitigate losses by delaying the re-listing of the property and removing it from the market prematurely. However, the court emphasized that mitigation requires reasonable, not any and all steps, from the mitigating party.
In this respect, the Court ruled that the plaintiff acted reasonably in following the advice of a real estate agent to delay re-listing the property. Although the property was listed on Airbnb before being sold, the income from this temporary rental arrangement was accounted for in the damages calculation.
The Court rejected the defendant’s claim that the property would have fetched a higher price had it been re-listed earlier, noting that while plaintiffs must demonstrate reasonable efforts to reduce losses, defendants carry the onus of proving that alternative actions would have minimized damages. The Court held that no expert evidence to support the defendant’s claims of higher potential resale value was presented by the defendant.
Kinariwala v Ruiz should remind buyers to ensure they have the financial capacity to close transactions, while sellers should act prudently and document their efforts to mitigate losses in case of a breach. As the housing market has generally continued to fluctuate, decisions such as the above underscore the value of legal advice and thorough preparation in real estate dealings. If a breach does occur, parties involved in real estate disputes may wish to seek legal counsel to determine whether they are able to resolve issues via summary judgment without the need for a trial and the associate complexities.
The lawyers at Gilbertson Davis LLP have experience with contract litigation, summary judgment and commercial disputes. Please contact us for an initial consultation.
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