In 2021, a mother and daughter in Ontario decided to sell their individual properties and purchase a new home together. The closing dates for all three transactions were scheduled for the same day. However, one buyer involved in purchasing one of their properties was unable to secure a mortgage on time and needed an extension for two days.

The seller of the new property agreed to extend the closing date by two days but demanded $75,000 in compensation from the mother and daughter. Under pressure to close, the pair accepted this condition and sought to recover the $75,000 from the defaulting buyer. This dispute was eventually brought to court.

Key Legal Disputes

The central issue was whether the defaulting buyer should be held responsible for the losses resulting from the chain of transactions. The buyer argued that they were unaware the mother and daughter needed the sale proceeds to complete the purchase of their new home. Since they did not foresee that their delay would cause such significant consequences, they claimed they should not be liable for the resulting damages, because it is too remote. The legal question was whether the buyer could rely on the foreseeability of damages under contract law as a defense.

The judge ruled in favor of the plaintiffs. The court reasoned that selling and buying on the same day is common in real estate transactions. A reasonable buyer should have foreseen that a delay in their transaction might jeopardize the seller’s ability to close on their new home purchase. Therefore, the defaulting buyer was held responsible for the losses resulting from the chain of contracts.

Was $75,000 Too High?

Another contentious issue was whether the $75,000 compensation was excessive. The judge once again sided with the plaintiffs, stating that had they not agreed to the seller's demand, the potential losses could have been even greater. These could include costs related to short-term rentals, moving expenses, and legal fees.

Lessons from the Case

This case highlights the importance of clear communication in real estate transactions, particularly when selling and buying on the same day. It would be prudent to advise buyers about such arrangements. Additionally, given that mortgage-related delays are common, it may be wise to avoid scheduling same day transactions to prevent similar disputes.

Some critics argue that the ruling encourages sellers to exploit brief delays with unreasonable demands. It remains to be seen whether the defendant will appeal the decision.

Full decision: Bonner v. Gill, 2024 ONSC 3270.

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