Shiralian v. Wyldewood Creek Inc., 2026 ONCA 163
A recent decision from the Ontario Court of Appeal confirms that purchasers of pre-construction homes may be limited to the return of their deposits, even when the developer breaches the agreement.
The ruling in Shiralian v. Wyldewood Creek Inc. reinforces the principle that parties to real estate contracts are generally free to allocate risk and limit liability, particularly where the parties are sophisticated and legally represented.
Background Facts
The purchasers bought a pre-construction condominium unit in Collingwood as a partnership investment from developer Wyldewood Creek Inc.
The Agreement of Purchase and Sale (APS) included:
- The mandatory Tarion Addendum, required by the Ontario New Home Warranties Plan Act, and
- A limitation of liability clause stating that if the developer defaulted, the purchasers’ sole remedy would be the return of their deposits (plus applicable interest).
Later, the developer terminated the agreement after the deadline allowed under the Tarion Addendum.
The purchasers argued that because the developer breached the contract by terminating late, they should be entitled to damages beyond the return of their deposits.
The Motion Judge’s Decision
The application Judge agreed that the developer breached the agreement by issuing the termination notice after the permitted deadlines.
However, the Judge also held that the limitation of liability clause was enforceable, meaning the purchasers’ damages were limited to the return of their deposits with interest.
The purchasers appealed.
The Court of Appeal Decision
The Ontario Court of Appeal dismissed the appeal and upheld the limitation clause.
The court relied on established principles of contract interpretation, including those from Sattva Capital Corp. v. Creston Moly Corp., which emphasize that appellate Courts should generally defer to a Judge’s interpretation of a contract unless a clear error has been made.
No such error was found.
Sophisticated Purchasers and Negotiated Terms
A key factor in the decision was that the purchasers were experienced real estate investors.
Importantly:
- They were represented by lawyers, and
- Their lawyers negotiated changes to the agreement.
This meant the APS was not a simple take-it-or-leave-it standard form contract.
As a result, the developer had no obligation to specifically highlight the limitation clause, and the purchasers were presumed to understand the contractual risk allocation.
The Tarion Addendum Did Not Prevent the Clause
The purchasers argued that enforcing the clause undermined the consumer protections provided by the Tarion Addendum.
The Court of Appeal rejected that argument.
The Tarion Addendum ensures that deposits must be returned with interest in certain circumstances, but it does not require that purchasers receive additional damages if the developer defaults.
Therefore, parties remain free to contractually limit liability, as long as the agreement does not contradict statutory protections.
Not Unconscionable
The Court also considered whether the clause should be invalidated as unconscionable.
Applying the framework from Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), the Court concluded:
- The clause clearly applied to the dispute.
- It was not unconscionable when the contract was signed.
- There was no overriding public policy reason to refuse enforcement.
The Court also followed its earlier decision in Ritchie v. Castlepoint Greybrook Sterling Inc., which upheld similar deposit-only limitation clauses in pre-construction purchase agreements.
Importance of Shiralian v. Wyldewood Creek Inc
This decision is an important reminder that real estate contracts are ultimately commercial agreements.
Even in the context of pre-construction homes:
- Developers and purchasers can allocate risk through contractual terms.
- Courts will generally enforce clear limitation clauses.
- A purchaser may end up with nothing more than a returned deposit and interest, even where the developer has technically breached the agreement.
For real estate investors, the lesson is simple:
Read the limitation clauses carefully.
They may determine whether a failed deal results in substantial damages—or merely the return of your deposit.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com