Real Estate Law. Real-World Lessons.

Every week, Ontario courts deliver decisions that reshape how real estate deals play out - impacting your closings, commissions, and client relationships. But who has time to sift through 50+ pages of legalese?

We do.

Clause & Effect breaks down Ontario’s biggest real estate cases into clear, practical takeaways for realtors, mortgage advisors, and investors. No fluff. No Latin. Just sharp lessons you can actually use.

Let’s dive in!

What happens when buyers submit a "clean offer" to beat out competition, knowing full well they need to sell their own home first?

What happens when the market turns, their sale falls through, and they can't close?

That's the story in Romano v. Engel, where two buyers took a calculated risk to secure a $1.6 million property. They waived their conditions. Submitted an unconditional offer. Then watched helplessly as their own home sat unsold. The court's verdict? Pay up.

The Case: A Race to Buy Without the Funds to Close

May 2022. Lindsay Engel and James Marchand spotted a listing for 7 Polo Court in Hamilton at $1.8 million. They'd already sold their Woodstock home for $1.16 million with an August 17 closing. The math worked. Barely.

On June 5, they made their move. Offer price: $1,600,000. Deposit: $50,000. Closing date: August 15, 2022. One condition. The property had to appraise at the purchase price for their lender.

Their realtor gave them advice. A conditional offer would be a barrier to acceptance. Remove the conditions or miss out.

So they did. On June 8, the buyers waived the appraisal condition. The deal went firm.

Then everything unravelled.

The buyers' Woodstock sale collapsed. They relisted. By late July, they told the sellers they couldn't close without an extension. And a $100,000 price reduction.

The sellers, Jerry and Shelley Romano, refused. They offered an extension to September 15 in exchange for an additional $50,000 non-refundable deposit. The buyers balked.

On August 15, the Romanos tendered. Ready, willing, and able to close. The buyers couldn't perform. The deal was dead.

The Court Showdown: Bad Faith or Hard Bargaining?

The buyers argued:

• The sellers are realtors with specialized market knowledge. That created an imbalance.

• The sellers should have accepted our request for a price reduction. Everyone could have closed.

• The sellers' demand for another $50,000 was unconscionable. They negotiated in bad faith.

• The subsequent sale to the Othmans wasn't arm's length. Mr. Romano was their agent too.

The sellers argued back:

• The Agreement had no sale condition. The buyers took a risk and lost.

• There was no obligation to grant an extension. Time was of the essence.

• Proposing favourable terms isn't bad faith. It's negotiation.

• The Othman sale was arm's length. We sold for more than the appraised value.

The Decision: Buyers Liable for the Full Shortfall

Justice MacNeil granted summary judgment to the sellers.

• No condition means no excuse. The buyers knew they needed to sell their Woodstock home. They submitted an unconditional offer anyway. That was their choice and their risk.

• Hard bargaining isn't bad faith. Demanding $50,000 for an extension isn't unconscionable when the other side is asking for more time and a $100,000 price cut.

• The resale was arm's length. The Romanos sold to the Othmans for $1,325,000. An independent appraisal valued the property at $1,305,000. The sellers got more than market value.

• Saved commission gets deducted. Because Mr. Romano acted as the listing and buyer's agent for the Othman sale, the sellers saved $67,000 in commission. The court reduced damages accordingly.

Result: $169,376.51 in total damages. The $50,000 deposit was forfeited and credited against the judgment.

Key Takeaways (Without the Legalese)

1/ A "clean offer" transfers all the risk to the buyer.

The buyers needed their Woodstock sale to close. Their agent advised that conditions would hurt their offer. So they waived them. When their sale collapsed, they had no protection.

Lesson: Think twice before advising clients to submit unconditional offers when financing depends on selling another property. The "winning" strategy can become a six-figure liability overnight.

2/ Time is of the essence means exactly that.

The sellers had no obligation to extend. The contract set August 15 as the closing date with a time-of-the-essence clause. When the buyers couldn't perform, the sellers were entitled to terminate and sue.

Lesson: Remind your clients what "time is of the essence" actually means. Missing a closing date isn't just inconvenient. It's a breach that can trigger serious damages.

3/ Saved commission reduces your client's damages.

Because Mr. Romano handled the resale himself, he saved approximately $67,000 in real estate commission. The court deducted that amount from the damages award.

Lesson: If your seller client resells a property after a buyer defaults, document any commission paid. If the seller saves on commission by self-representing or using a reduced rate, expect the court to reduce the damages accordingly.

Questions or advice needed on your next closing? Reach out at [email protected] or call 519-997-3775.

Solid contracts ensure seamless closings.

Until next time.

-Christian