In a recent case, Menon v. Simpson, the Court awarded damages and costs of $2,405,693.85 on a $8,385,000.00 residential deal, about 30 months later. That’s equal to about 28.7% of the value.
If this was a commercial deal, that would not have happened for several reasons:
- Due diligence conditions would likely have extended until close to the completion date, meaning that the Buyer seeing that the price and market value dropped could have elected not to proceed,
- The Deposit likely would have been a lower percentage than 5%,
- The Buyer likely would have been a newly incorporated numbered company with no assets, meaning that only the deposit was at risk,
- The Buyer might have bought “in trust” on behalf of a company to be incorporated, again, meaning that only the deposit was at risk,
- The commercial agreement would have included a limitation of liability clause.
A 5% deposit in this deal would have been $419,250.00. On a commercial transaction that would be more than enough,
However, at the present time, this is the usual risk faced by residential Buyers in Ontario.
Brian Madigan LL.B., Broker