Wu v. Charles, 2024 ONSC 947 (CanLII)
In Wu v. Charles, the Ontario Superior Court of Justice considered whether a purchaser who failed to close a residential real estate transaction was entitled to the return of her deposit. The Court held that the purchaser breached the Agreement of Purchase and Sale (“APS”) and ordered that the $150,000 deposit be forfeited to the Sellers.
The case reinforces that a purchaser who signs a firm APS, even without financing or inspection conditions, is generally bound by the agreement. A Buyer’s dispute with their own real estate agent does not relieve the Buyer of contractual obligations owed to the Seller.
Background Facts
The Sellers owned a property located at280 Woodgate Pines Drive, Vaughan, Ontario.
On April 15, 2022, the purchaser, Nwoyibo B. Charles, entered into an Agreement of Purchase and Sale to buy the property for $3.2 million.
The APS:
- was prepared on the standard OREA Form 100;
- required a $150,000 deposit payable to the listing brokerage, Re/Max Gold Realty Inc.;
- had a closing date of August 15, 2022;
- contained no financing condition;
- contained no home inspection condition; and
- provided that time was of the essence.
The purchaser later claimed she did not understand what she had signed. She alleged that her real estate agent pressured her into signing, failed to explain the transaction, and failed to include financing and inspection conditions.
She also claimed she mistakenly signed the APS electronically while sitting in her vehicle and did not realize she had agreed to purchase the property for $3.2 million.
Purchaser Attempts to Terminate the Transaction
Shortly after signing the APS, the purchaser attempted to get out of the transaction.
She:
- approached the Sellers directly at their home seeking to be released from the agreement;
- sent handwritten letters requesting that the deposit be returned;
- advised that health issues affected her ability to complete the purchase;
- asked that another purchaser take over the APS; and
- requested an extension and reduction in the purchase price.
The Sellers refused to release her from the agreement.
They remained ready, willing, and able to close. Their lawyer delivered closing documents and advised that the Sellers would pursue forfeiture of the deposit and damages if the purchaser failed to complete the transaction.
The Buyer Failed to Close
The purchaser did not provide the required closing funds on August 15, 2022.
The Court found that:
“The Buyer breached the APS.”
The Sellers had continued to treat the agreement as binding and had even moved out of the property in preparation for closing.
The purchaser’s inability to obtain financing did not excuse her failure to close because the APS contained no financing condition.
Buyer’s Arguments Rejected by the Court
1. “I Did Not Read the Agreement”
The purchaser argued that she signed the APS without understanding it.
The Court rejected this argument.
Justice Healey held that a person who signs a legal document without reading it generally remains bound by its terms.
The Court stated:
“The defence of non est factum is not available to a party who did not exercise reasonable care by failing to read a document before signing it.”
The purchaser knew she was making a significant real estate purchase and was responsible for reviewing the documents before signing.
2. Problems with the Buyer’s Agent Did Not Affect the Sellers’ Rights
The purchaser argued that her agent failed to properly advise her and failed to include financing and inspection conditions.
The Court acknowledged there were concerns regarding the agent’s conduct, stating:
“There are certainly red flags concerning Dogra’s conduct…”
However, those issues were between the purchaser and her own agent.
The Court emphasized that the Sellers were innocent parties:
“The Sellers are innocent; it is not for them to shoulder the consequences of the actions of either the buyer or her agent.”
If the purchaser had claims against her agent for negligence or misrepresentation, those claims could be pursued separately.
They did not invalidate the APS.
What Happened to the Deposit?
The purchaser paid a $150,000 deposit, which was held in trust by Re/Max Gold Realty Inc.
The purchaser asked that the deposit be returned.
The Sellers sought an order that the deposit be forfeited.
The Court ordered:
- “The deposit monies paid by the respondent in the amount of $150,000 together with any accrued interest are hereby forfeited to the applicants.”
- The Court further ordered the brokerage holding the deposit to release the funds to the sellers.
Why Was the Deposit Forfeited?
The Court applied the principles governing deposits in real estate transactions.
A deposit is not simply security for damages. It also compensates a seller for:
- taking the property off the market;
- losing other potential purchasers; and
- losing bargaining power after publicly committing to a sale price.
The Court noted that the deposit represented approximately 4.7% of the purchase price, which was not excessive or unconscionable.
The purchaser sought relief from forfeiture, arguing that losing $150,000 would create financial hardship.
The Court rejected that argument.
Although Justice Healey expressed sympathy for the purchaser’s circumstances, personal hardship was insufficient to justify returning the deposit.
The Court concluded:
“There is no basis to relieve against forfeiture.”
Result
The Court ordered:
- The purchaser breached the Agreement of Purchase and Sale.
- The $150,000 deposit was forfeited to the sellers.
- Re/Max Gold Realty Inc. was directed to release the deposit funds to the sellers.
- The Sellers retained the right to pursue additional damages arising from the failed transaction.
Considerations for Ontario Real Estate Transactions
1. A firm APS is binding
A purchaser who signs an unconditional Agreement of Purchase and Sale cannot usually walk away because financing becomes unavailable or the market changes.
2. Deposits are at risk when Buyers fail to close
A Buyer who breaches an APS may lose the deposit even before the Seller proves the full extent of damages.
3. Buyer-agent disputes do not affect seller rights
A purchaser may have a claim against their own agent, but that does not excuse contractual obligations owed to the Seller.
4. Read before signing
Failing to review an APS before signing will rarely allow a purchaser to escape the agreement.
5. Financing conditions matter
If a purchaser requires financing protection, that condition must be included in the APS. Without it, the purchaser assumes the risk.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com