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 a buyer defaults on a pre-construction deal, the builder terminates the contract, keeps the deposit… and then never builds the house?

Can the builder still sue for over a million dollars in damages?

That's the question in Ambria v. Esmaeili, where a builder tried to have it both ways. Terminate the deal, pocket the deposit, skip the construction, then claim damages as if the house had been built and sold at a loss. The court wasn't buying it.

The Case: A $4-Million Deal Falls Apart

February 2022. Reza Esmaeili and Sara Bian signed an Agreement of Purchase and Sale with Ambria (Bloomington) Limited for a pre-construction home in Aurora. Purchase price: $4,009,990. Initial deposit: $30,000.

Five more deposits were supposed to follow. None arrived.

By August 2022, the market had turned. The buyers couldn't sell their existing home. Their deposit cheques bounced. They told Ambria they couldn't continue.

On November 14, 2022, Ambria issued a formal notice. Cure the default by November 21, or face termination. The buyers responded by email. We can't make any further payments. Cancel the contract.

Nine days later, Ambria obliged. On November 30, 2022, the builder declared the Agreement "terminated effective immediately." The $30,000 deposit was forfeited "as liquidated damages."

Then Ambria sued for over $1 million more. Carrying costs. Construction cost increases. Remarketing expenses. Loss of bargain from the declining market.

One problem. Ambria never built the house.

The Court Showdown: Can You Claim Damages on a House You Never Built?

Ambria's position:

• The contract preserved "all other rights and remedies at law and equity."

• The buyers breached. We're entitled to our losses.

• We should recover carrying costs, increased construction costs, remarketing expenses, and loss of bargain damages from the market decline.

The buyers saw it differently. They argued:

• You terminated the contract. You never built the property.

• You incurred none of the construction costs you're now claiming increased.

• You suffered no loss of bargain because there was no bargain to lose. Just an empty lot.

• You kept our deposit. That's exactly what the Agreement contemplated for early default.

• You can't sue for damages as if you'd performed the contract and lost money doing so.

The Decision: Buyers Win

Justice Penman sided with the buyers.

A quick sidebar on repudiation. When a buyer declares they won't perform, that's repudiation. An advance notice of breach. The innocent party has a choice. Hold the contract open and insist on performance. Or accept the repudiation and terminate. Termination doesn't automatically kill a damages claim. You can terminate and still sue. But you need actual losses. And proof.

Ambria had neither.

• The contract already defined the remedy. Section 37.1 was clear. On early default, deposits are forfeited "as liquidated damages." That's what the parties bargained for.

• No performance means no damages for performance. The property was never built. You can't claim construction cost increases you never incurred. You can't claim loss of bargain on a property you never delivered.

• The evidence was a disaster. Justice Penman called the builder's affidavit "bald, unparticularized, and unsubstantiated." Carrying costs with no documentation. Remarketing costs that allegedly doubled with no evidence. Administrative fees that included costs from other defaulting buyers. The court called it "picked out of thin air."

Result: The $30,000 deposit? Ambria keeps it. The million-dollar damages claim? Gone.

Key Takeaways (Without the Legalese)

1/ The contract's default clause defines the remedy.

Section 37.1 said deposits are forfeited "as liquidated damages" on early default. The court treated this as the parties' agreed remedy.

Lesson: Read the default provisions carefully. The contract may already spell out exactly what happens when a buyer walks. Don't assume you're entitled to more.

2/ No performance, no damages for performance.

Ambria never built the house. You can't claim construction cost increases you never incurred, or loss of bargain on a property you never delivered.

Lesson: Damages flow from actual losses. If you terminate and don't perform, your claim is limited to what you actually lost. Hypothetical losses don't count.

3/ Prove it or lose it.

Ambria's damages evidence was rejected as speculation. No documentation. No methodology. Numbers that changed between affidavits with no explanation.

Lesson: If you're going to court, bring receipts. Unsubstantiated claims get dismissed. Vague affidavits aren't evidence.

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