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When the housing market drops, it is not for the faint of heart

Gamoff v. Hu1 – a case review

Douglas and Shila Gamoff listed their home for sale for $2,000,000. They had 18 showings leading to a bidding war. The prospect of competing against multiple offers prompted Yixing Hu and David Lea to make an offer to buy the house for $2,250,000. Their offer was accepted. But sometime after signing the agreement of purchase and sale, the purchasers had buyers’ remorse. David Lea pleaded with the vendors to let him out of the deal. The buyers felt they overpaid.

The vendors treated the buyers’ letter seeking out of the deal as a repudiation of their contract. The vendors therefore proceeded to sell their home again, but the highest bid they could get by that time was only $1,780,000. They sued the buyers for the difference.

The buyers argued that had the vendors sold their home sooner it would have gone for more money and the buyers should not be required to subsidize the vendors’ failure to mitigate their damages. The judge found as follows:

I find that the vendor reasonably mitigated her damages when confronted with the purchasers’ repudiation. She need only have acted reasonably. The onus is on the purchasers to show that she did not meet the standard. The evidence demonstrates that she relisted the property within six or seven days of the repudiation. She retained the services of the same real estate agent who had acted for her on the initial sale. The property was marketed using essentially the same methodology that resulted in the first sale. There were multiple offers, two or three of which did not result in binding agreements before the final one was entered into. All of this speaks of reasonableness. Of greater significance, however, in the context of a summary judgment motion, is the absence of evidence from a professional which opines that the shortcomings in the sale process alleged by the purchasers actually had any impact on the final sale price. It is not enough for the purchasers, upon whom the onus rests, to plainly and merely state, for example, that the six or seven day “delay” in the relisting of the property must have negatively affected its market price. The purchasers, it must be assumed, have put their “best foot forward” and it is lacking. The same holds for the other criticisms raised in their amended factum. It is similarly insufficient to argue that prices in the area generally rose during the relevant time period, thus suggesting that the vendor must have accepted less than market price when she agreed to sell the property for $50,000 less than the amount the purchasers were initially willing to pay. In the absence of a qualified appraiser’s opinion that she did so, I am not convinced that a trial is required to determine whether she undersold the property. There is little better evidence of market value than the price at which the property actually sold following what appears to be appropriate and apparently motivated marketing.2….. The Plaintiffs are entitled to damages based on the difference between the contracted for sale price between the parties and the ultimate sale price of $1,780,000. The Plaintiffs are also entitled to the special damages claimed.3

So what should prospective buyers and sellers take away from this case? First and foremost, the courts are going to hold purchasers to their bargains and require them to pay damages for any decrease in sale price following the breach of an agreement of purchase and sale. In addition, for sellers, when advised by a buyer that s/he wants out of a deal the seller must take steps to mitigate and be able to demonstrate that s/he has done so. The seller cannot sit back and wait. That said, the seller need only act reasonably in seeking to mitigate.

With respect to purchasers, when a purchaser seeks to challenge the reasonableness of the steps taken by a seller to mitigate, s/he is best advised to retain expert evidence to show that the steps taken by the vendor to mitigate damages were unreasonable and delayed. Bald faced allegations just won’t cut it.

 

 

Footnotes
  1.   Gamoff v. Hu, 2018 ONSC 2172. Found on line at https://www.canlii.org/en/on/onsc/doc/2018/2018onsc2172/2018onsc2172.pdf
     
  2.   See
     
  3.   See paragraph 40
     

Gregory Sidlofsky and David Wagner

The authors of this blog are Gregory Sidlofsky and David Wagner .

Gregory is a Certified Specialist in Litigation by The Law Society of Ontario and partner at Wagner Sidlofsky LLP. David is a member of the firm’s Estate and Commercial Litigation Groups. He received his TEP designation from STEP and he deals with will challenges, dependants support, guardianship and applications to compel an accounting.

This Toronto office is a boutique litigation law firm whose practice is focused on estate and commercial litigation.

This blog is not intended to serve as a comprehensive treatment of the topic. It is not meant to be legal advice. Every case turns on its specific facts and it would be a mistake for the reader of this blog to conclude how it might impact on the reader’s case. Nothing replaces retaining a qualified, competent lawyer, well versed in this niche area of practice and getting some good legal advice.
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