Would-be buyer anticipatorily breached contract to buy condo: Ontario court

The Ontario Court of Appeal held that the supposed buyer anticipatorily breached his contract, that his rescission notice was invalid, and that the would-be seller was thus entitled to retain the deposit and to seek damages for contractual breach.

In January 2017, the appellant agreed to buy from the respondent – Brookfield Residential (Ontario) Limited – a luxury detached single-family home, structured as a condominium, with joint ownership of the common elements. The agreement of purchase and sale stipulated that non-completion of the common elements before the occupancy dates would not be considered a failure to complete the unit.

The closing date was set for Dec. 11, 2017, at which point market conditions had changed and the home’s value had significantly declined. The appellant advised the respondent that he wanted either a postponement or a mutual release from the transaction. He then told the respondent that he wanted to cancel the deal.

On Dec. 7, 2017, the appellant provided a written “notice of rescission” under s. 74(6) of Ontario’s Condominium Act, 1998. He claimed that the “amenities” – namely, the parkette and entry and exit gates – had not been completed and that this non-completion amounted to a material change that justified rescission.

That same day, the respondent told the appellant that it was terminating the agreement based on anticipatory breach, that his deposit would be forfeited, and that it was reserving its right to recover losses.

In January 2018, the appellate filed a claim asking for the return of his deposit and damages. The respondent brought an application seeking a declaration that there was no material change and seeking the damages arising from the appellant’s failure to complete the agreement, as provided in its counterclaim.

The appellant withdrew his claim. The respondent filed a motion for summary judgment on its counterclaim for damages.

Last February, Justice Myrna Lack of the Ontario Superior Court of Justice granted the respondent’s summary judgment motion. She allowed the appellant to reinstate his claim but dismissed this claim.

The appellant sought an order setting aside the motion judge’s decision and a return of his deposit monies and accrued interest.

Rescission notice invalid

In Chen v. Brookfield Residential (Ontario) Limited, 2022 ONCA 887, the Ontario Court of Appeal dismissed the appeal.

First, the appellate court ruled that the appellant’s “notice of rescission” was invalid on its face because the alleged “material change” – specifically, the respondent’s failure to complete the parkette and entrance and exit gates before closing – did not meet the express definition for that term under s. 74 of the Condominium Act because the gates and the parkette were amenities that were statutorily precluded from being material changes.

Lin v. Brookfield Homes (Ontario Limited), 2019 ONCA 706 stated that the non-construction, at closing, of the parkette and entry and exit gates in the same subdivision as the one involved in this case was not a material change under s. 74.

Second, the Court of Appeal agreed that the appellant’s purported rescission was an anticipatory breach that entitled the respondent to terminate the agreement and to sue for damages. Before delivering his notice of rescission, the appellant told the respondent that he did not intend to perform the contract and could not close due to the low appraisal value and requested cancellation of the deal.

Jung v. Talon International, 2019 ONCA 644, which the appellant cited, was distinguishable from this case, the appellate court said.

Finally, the appellant alternatively asked for leave to amend his pleading to claim damages for contractual breach due to the respondent’s sale of the property to a third party or for leave to amend to plead relief from forfeiture. The Court of Appeal noted that the appellant did not raise these two claims on the motion and said that it was not in the interest of justice to allow such amendments.