Murphy-Larade v. Inpanayagam, 2019 ONSC 715 | Remax

Murphy-Larade v. Inpanayagam, 2019 ONSC 715

March 7, 2019

CATEGORY NAME

INTERESTING CASE - These types of cases are becoming more frequent - Buyers beware!

Murphy-Larade v. Inpanayagam, 2019 ONSC 715

Exec Summary: Seller brings forward motion for summary judgement seeking damages for a failed Agreement of purchase and sale – Granted

Interesting that the Judge found that the deposit of $15,000 was applied as consideration to the extension and did not offset the damages (see commentary below).

Summary:
Property listed at $399,900 and seller receives 7 offers with the highest offer being for $509,000.

Winning offer was for $490,000 with a $15,000 deposit – and was a firm transaction without any conditions.

Buyers submitted a request to extend the transaction as they did not have funding required to complete the transaction – extension was granted with the following terms:
1) time to remain of the essence and the statement of adjustments as of the original closing date;
2) Buyer also agreed to pay the mortgage payment in the amount of $1,766.66; and
3) Buyer signed an irrevocable direction to release the deposit in the amount of $15,000 in the event he was unable to on the new agreed closing date (without a mutual release)

Buyer then indicated that they would require a price reduction to $465,000 without which they would not be able to close on the new agreed date – SELLER AGREED!

A further extension was requested and was granted – deal failed to close as agreed.

The sellers subsequently resold the property for $375,000 - The difference between the initial Agreement and the Second Agreement was $115,000 – this deal closed.

Damages Sought by Seller:
1) Property taxes in the amount of $639.94, calculated at a per diem amount of $9.14 for the 70 days from July 1, 2017 to September 8, 2017.
2) Legal fees thrown away of $450 in relation to the failed transaction.

Mortgage Expenses - 1st mortgage:
1) Fees for discharge statements dated July 26, 2017 and August 17, 2017 of $350;
2)Insurance premium and fees in the amount of $2,267.40 paid by the First Mortgagee;
3)Fee for the discharge statement dated August 28, 2017 in the amount of $175. She had already paid for the first discharge statement dated June 28, 2017;
4)Fee for the dishonoured payment in the amount of $400;
5) A two month pre-payment penalty in the amount of $3,050.18 which was applied because the mortgage commitment required a 60 day notice; and
6)Accrued interest in the amount of $1,946.78 on the mortgage.

Mortgage Expenses - 2nd mortgage:
1)Legal fees related to power of sale proceeding commenced as a result of failure to close on June 30, 2017 in the amount of $5,604.10;
2)Missed interest-only payments for July, August and September of 2017 of $750.
3) Fees for 4 additional discharge statements in the amount of $1,000;
4)NSF fees in the amount of $600;
5)Three month interest penalty in the amount of $750;
6) 5% management fee in the amount of $1,642.50 following possession of the Property by the Second Mortgagee;
7)Administration fee in the amount of $750 for default;
8) Charge to change the locks in the amount of $550;
9)Fee for attending for possession of the Property in the amount of $1,000;
10)Inspection fees in the amount of $750 prior to Second Mortgagee taking possession;
11) Inspection fees in the amount of $5,200 as per insurance requirement after Second Mortgagee took possession;
12)Charges for bank drafts in the amount of $250 for the payments made to the First Mortgagee;
13)Maintenance fee in the amount of $600;
14)Accrued interest to September 8, 2017 in the amount of $123.44;
15)Payments made to First Mortgagee to bring the mortgage into good standing;

The Buyers dispute the entitlement to damages and state that the sellers were not in a position to close OR IN THE ALTERNATIVE:
1)The Property was sold for well below the market value – WHICH WAS appraised for $425,000.
2)The Seller was also liable to pay additional real estate fees if she completed the transaction with the Defendant (higher rate). Accordingly, any damages awarded should be net of this difference in the real estate fee (approximately 2.5%).
3)Finally, even if the Seller is entitled to damages, she is not entitled to damages incurred as a consequence of the default on her mortgages.

The Plaintiff’s default on these mortgages was not “caused” by the Defendant’s actions.

The Defendant argues that these defaults were a consequence of the Plaintiff’s own particular financial position. Accordingly, the Defendant should not be liable for the damages flowing from the Plaintiff’s own conduct.

Judge’s commentary:
"In this case, while the original offer price was $490,000, the Plaintiff agreed to re-negotiate the price and move the closing date. Ultimately, the price agreed to was $465,000. The Plaintiff ultimately sold the property for $375,000 which was $90,000 less than the amount owed by the Defendant.

According to the Defendant, the real estate fee would have been greater on the transaction with the Defendant. Accordingly, the Plaintiff would have received 2.5% less if she had sold the Property to the Defendant ($12,250). Plaintiff’s counsel does not dispute that the Plaintiff saved fees by not selling the house to the Defendant. I will reduce the difference by this amount. This leaves a difference of $77,750."

"….from June 30, 2017, the Plaintiff incurred various costs, charges, expenses and fees in relation to the Property up until the Property was sold on September 8, 2017, including:
1)Property taxes in the amount of $639.94, calculated at a per diem amount of $9.14 for the 70 days from July 1, 2017 to September 8, 2017.
2)Legal fees thrown away of $450 in relation to the failed transaction.
3)Any other interest payments and or fees associated with carrying the Property beyond the scheduled closing date less the $1,766 that was paid.

These amounts are to be paid by the Defendant.
In addition to these amounts, the Plaintiff seeks the expenses outlined above flowing from the Plaintiff’s default on the First and the Second Mortgages.

The Defendant resists the payment of these amounts. He takes the position that these expenses were the result of the Plaintiff’s precarious financial position. While these expenses may have been saved if the purchase went through, these expenses were not “caused” by the breach of contract.

Apart from the $175 fee for discharge statement of August 28, 2017 (which had been obtained unnecessarily on June 28, 2017), I would agree. I will not add these amounts to the amounts to be paid by the Defendant."

Disposition
"The Defendant is ordered to pay the Plaintiff damages totaling $79,014.94…. I will not deduct the deposit paid from this amount. In my view, that deposit ($15,000) was consideration paid by the Defendant to obtain the extension and the reduction in purchase price. It was properly forfeited when the Defendant failed to close on July 31, 2017."

https://www.canlii.org/en/on/onsc/doc/2019/2019onsc715/2019onsc715.html?searchUrlHash=AAAAAQALcmVhbCBlc3RhdGUAAAAAAQ

DISCLAIMER

Ricky Rathore., BComm., LL.B (Hons.), ABR®, SRS, FRI, Broker of Record – RE/MAX EMPIRE REALTY, BROKERAGE is a licensed Barrister and Solicitor.

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