The Mitigation Timeline

Employers Can Be Responsible for Significant Mitigation Costs

The Superior Court of Ontario released a decision dealing with the facts in a case where a Buyer defaulted on the purchase of a property, and the Seller resold at a loss.

In Friese v. Arfa (30 May 2019), Justice Ditomaso examined the sequence of events.

The Buyer submitted an Offer on the Seller’s property. The timing was “bad”. It was April 2017 and as we know now, the market “tanked”. So, the closing did not take place as scheduled. In fact, the Buyer was unable to close and the Seller was forced to sell to someone else at a substantially lower price within a few months.

Timeline

April 2017                     property listed for $599,900

15 April 2017                Agreement of Purchase and Sale, $590,000.00

26 June 2017                 closing date, Buyer defaults

27 June 2017                 property re-listed at $599,900.00

27 July 2017                  price reduced to $529,900.00 ($70,000.00 reduction)

September 2017             price reduced to $499,900.00 ($30,000.00 reduction)

8 September 2017          sold for $425,000.00 ($165,000.00 less than original)

6 October 2017              closing date, second transaction completed

25 April 2018                examinations for discovery held

13 May 2019                  one day trial takes place

30 May 2019                  Judge’s decision is released

Judgment

The Judgment in this case awarded the deficiency of $165,000.00 plus some incidental special damages and costs, as well ordered the deposit in the amount of $15,000.00 to be forfeited in partial payment of the outstanding amount.

Reasonable Steps and Timelines for Mitigation

The Judge agreed that the steps to mitigate and the timelines were all reasonable.

  1. Property was immediately relisted at the original listing price which generated the first Offer,
  2. Price was reduced by 11.66 % after 30 days,
  3. Price was further reduced by a total of 16.67 % after about 3 months,
  4. Property was sold to close in one month at 72 % of the initial sale price.

From the initial closing date (26 June 2017) until the next Agreement (8 September 2017), we had 76 days with a price deficiency of $165,000.00, that’s $2,171.00 per day.

So, Sellers and Buyers should be vigilant to ensure the property is re-listed and sold to a third party as soon as possible. In addition, there were further damages and costs (likely about $23,000), bringing our daily computation to $2,611.11.

The Litigation

I would presume that the lawsuit was initiated shortly after the second transaction closed. Pleadings and Affidavits of Documents were exchanged. Discoveries in this case were held about 6 months later. Because the Defendants had “pleaded” a triable issue, that is, that there was an “amended agreement” which would have an impact on the case, that meant that the case did not qualify for a Summary Motion for Judgment, but would have to go to trial. The wait for trial is about one year, so that brought us to May 2019.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

Leave a Reply

Your email address will not be published.