Resale and Mitigation of Loss Steps

Let’s have a quick look at the steps taken by Mr. Pollard to mitigate his loss on the resale after Ms. Perry defaulted on their agreement. This is information drawn from the decision of Justice Vella in his decision dated 14 September 2022 in Pollard v. Perry in the Superior Court of Justice.

From the reasons for Judgment, with my comments in Italics:

[12] Accordingly, the real estate agent re-listed the property

  • on the multiple listing services and
  • kept the marketing website advertising the property active.
[13] The listing price was $1,100,000.00.

          The sale price was $1,050,000.00

          This is a $50,000.00  premium

[14] After receiving no activity, Mr. Griffith recommended that the price be lowered to the original listing price of $995,000. The price was changed.

It was the $995,000.00 listing price which generated the Offer from Perry at $1,050,000.00

[15] After nearly 20 days had passed, an offer was received from Mr. Lister and Ms. Fortier on July 19, 2021 for $900,000 with a closing date of October 26, 2021.

          APS date                                  21 June 2021

Closing Date                            17 September 2021

Breach of Contract Date          22 June 2021

Listing appears to be almost immediately, less than 30 days after Perry purchased

This is $150,000.00 less than the Perry Offer, but, of course, Perry was the high bidder. She was #1. Right now, in terms of mitigation, we are looking for the second highest bidder

The offer was conditional on the sale of the purchasers’ current property. The APS provide that Mr. Pollard could continue to market the property for sale and in the event that another offer was provided by a third party, the purchasers had the option of waiving the condition and matching the subsequent offer, or terminating the transaction.

[16] On August 20, 2021, a competing offer was received from Mr. Brown and Ms. Hawkins. This offer was for $910,000 with a closing date of October 27, 2021.

Another month passes, and now we have an unconditional Offer for another $10,000.00, accepted, with a similar closing date

[17] Lister and Fortier declined to match, and the Brown and Hawkins’ offer was accepted.

[18] The Brown-Hawkins’ transaction closed on October 27, 2021.

          It is at this point, that we finally know Pollard’s losses

[19] Ms. Perry no longer denies liability.

Rather, she submits that fairness and equity should not require her to pay $140,866.11 in damages because she promptly disclosed her inability to close the transaction, and

Mr. Pollard failed to mitigate adequately his damages by failing to leave the property on the market for a longer period of time.

The property was placed on the market almost immediately, and continued for two months

[20] Ms. Perry also submits that Mr. Pollard has not proven what the fair market value of the property was (to establish with the mitigation effort was reasonable) and by not leaving the property on the market longer, Mr. Pollard sold the property at a lower price that he might have received had he left the property on the market.

          Is two months long enough!

Two Offers were generated, one at $900,000,00 and the second one at $910,000.00

[21] Had Mr. Pollard followed Ms. Perry’s strategy he would have had to reject the two offers he received after Ms. Perry’s repudiation of the APS.

          Of course, two months is long enough!

There are no material facts in dispute and no issues of credibility to resolve. The defendant, however, requests that this matter be referred for an assessment as to the damages in light of her mitigation defence.

Analysis

[23] Dealing with the first issue raised by Ms. Perry. Contrary to her submission, Mr. Pollard has produced uncontested evidence of the market value of the property.

That evidence is in the form of the various offers received for the property and the ultimately accepted offer from Brown and Hawkins.

The best evidence as to the market value of a property is the price that an independent third-party purchaser is willing to pay to the vendor (Scott v. Farjani, [2021] ONSC 1996 at para 44; Victorian Homes (Ontario) v. DeFrietas et al, [1991] 16 R.P.R. (2nd) 55, at para 55).

Why would anyone think that the property was worth more than $910,000.00, that was the highest bid, there were no others?

The true high bidder was Ms. Perry, but no one else was in that range

[24] There is no suggestion that Mr. Pollard manipulated the price paid by Brown and Hawkins such as to depress it or the property’s value. There is no suggestion that Mr. Pollard had any prior relationship with Brown and Hawkins that may have caused him to enter into an improvident or below market deal either.

The purchaser was an arms-length purchaser, no favours to a friend or colleague, nothing behind the scenes

[25] I note that only the defendant, Ms. Perry, offered to pay a price that was above the original listing price of $995,000. The competing offer by the other prospective buy at the time, 1430850 Ontario Limited, was for $950,000. Furthermore, the price the property sold for is about 9% under the asking price.

In a hotter market, Perry outbid the #2 bidder at the time (without knowledge of the bid) by $100,000.00

          Unfortunately, this person did not rebid later

          They were approached at the outset before listing

[26] I also note that when Mr. Pollard re-listed the property at $1,100,000, he received no offers, though he only left the property listed at that price for a relatively short period of time.

He then, on the advice of his real estate agent, Mr. Griffith, reduced the price to the original listed price of $995,000.

That prompted two separate offers that were both below the listing price, including the offer ultimately accepted (after negotiation) approximately 2 months after the failed APS transaction with Ms. Perry.

          Obviously, this is reasonable

It was on the market for two months

[27] There is no evidence offered by Ms. Perry to suggest that the market value of the property was not in or around $910,000 at the time the Brown-Hawkins’ transaction was negotiated or that Mr. Pollard did anything to compromise the market value of the property.

          If Ms. Perry wants to prove a different number she is going to need evidence

          This is “key”, she had no evidence

To support her allegations, she needed to call an Expert Witness to the stand who could say that two months was too short, that the real price was much higher

She called no one, neither an Appraiser nor real estate agent

[28] There is also no evidence offered by Ms. Perry to suggest that had Mr. Pollard waited, he would have likely received a better offer.

          If there is no evidence, then the Judge really doesn’t have much of a choice

[29] I am satisfied on the evidence that the purchase price of $910,000 as procured through the Brown-Hawkins’ transaction was the market value of the property at the time of sale. [30] The burden of proof lies on Ms. Perry to demonstrate that Mr. Pollard has failed to mitigate his damages (Southcott Estates Inc. v. Toronto Catholic School Board, [2012] 2 S.C.R. 675, at paras 24-25).

Put another way, Ms. Perry must show that she has a good chance of proving that Mr. Pollard did not take reasonable steps to mitigate his damages.

          And, there was nothing!

[31] There is absolutely no evidence from Ms. Perry challenging the reasonableness of the steps Pollard took, through his real estate agent, in marketing the property or in negotiating the sale price of $910,000 with Mr. Brown and Ms. Hawkins.

[32] The suggestion that had Mr. Pollard waited longer, he may have received a better offer is entirely speculative and not supported in the evidence.

          The Judge is going to look at the facts, not “make them up” himself

[33] Mr. Pollard relied on the advice of his real estate agent, Mr. Griffiths (both of whom filed affidavits and were cross examined). It was reasonable for Mr. Pollard to do so in terms of mitigating his damages.

          The real estate agent swore an Affidavit with respect to the facts

The Plaintiff could have called an Expert Witness, but there was no contrary evidence to that of his own agent, so, it really wasn’t necessary

[34] The fact that Ms. Perry promptly advised Mr. Pollard of her intention to not complete this transaction does not reduce her liability for the damages sustained by Mr. Pollard as a result of her repudiation of the APS, subject to Mr. Pollard’s duty to mitigate.

          A breach is a breach. It will be treated as any other breach.

No favours to Ms. Perry for breaching asap

[35] As Phillips J. observed in Briscoe-Montgomery v. Kelly, 2014 ONSC 4240, at para 21,

“the fact that the price the vendor, in a failed real estate transaction, was ultimately able to successfully secure was lower than the price negotiated with the prior defaulting purchaser, only shows that the housing market “can be fickle and inconsistent”.

[36] There was nothing untoward or unreasonable about Mr. Pollard’s decision to place the property back on the market promptly and then accepting a reasonable offer.

Mr. Pollard could have decided to accept the first, slightly lower, offer he received but instead negotiated a term of the first offer that allowed him to keep the property on the market to try to attract a better offer, which he subsequently did.

This is evidence that he took his obligation to mitigate seriously and acted diligently in discharging that obligation.

Keeping the property on the market while the first Offer was conditional made sense

It demonstrated “good faith” on the part of the Seller

It was a wise choice

[37] In addition, the steps Mr. Pollard took, through his real estate agent, to originally sell the property were repeated upon the re-listing of the property albeit initially at a higher listing price which suggests that Mr. Pollard was looking to wholly mitigate his damages if possible.

          Re-listing at a $50,000,00 premium made sense

[38] Mr. Pollard is entitled to the shortfall in the original sale price realized as a result of Ms.Perry’s repudiation of the APS. I am satisfied that Mr. Pollard discharged his duty to mitigate.

[39] Finally, I am satisfied that the plaintiff has proven his out-of-pocket damages in the sum of $886.11, by way of carrying costs over the 28-day period between the original failed closing date and the subsequent closing date. These carrying costs were not challenged by Ms. Perry.

Conclusion and Disposition

[40] Accordingly, there is no genuine issue raised that requires a trial.

It is interesting that the real estate agent’s commission was not added to the lawsuit. It could have been.

This case outlines the necessary step related to mitigation, and re-sale of the property. Handled correctly, the Seller will have full compensation.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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