Anticipatory Breach: Advantages to Seller

The Buyer and the Seller enter into an Agreement on 1 April to convey the property for $1,200,000.00 to the Buyer closing on 30 August.

Later in the month of April, the market begins to fall, the Buyer cannot sell his own property which he needs to do and he cannot arrange first mortgage financing, since the value of his existing property and the new property have both declined in value.

Consequently, he gives notice of anticipatory breach to the Seller on 15 May that he will not be closing on 30 August.

Under the circumstances, the Seller will now have to mitigate his losses effective 15 May. He doesn’t have to wait until 30 August. The Buyer has already told him that he cannot close on 30 August, so there’s no need to wait.

The property is placed back on the market and it sells for $1,100,000.00. That’s a one hundred thousand dollar loss.

As it turns out, the market continues to decline and on 30 August the property is only worth $1,000,000.00, overall, that’s a 20% decline.

The Seller lost $100,000.00 while if there was no notice of an anticipatory breach on 15 May and he had to wait until 30 August, it would have been $200,000.00.

By accepting the notice of anticipatory breach, the Seller limited the loss to 10% rather than 20%. So, overall this made good sense!

Additionally, he was able to deal with his own purchase much earlier.

Brian Madigan LL.B., Broker

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