With breathtaking landscapes and vibrant cities, British Columbia is a popular real estate destination among investors, individuals, and families. However, unforeseen circumstances can arise amid the excitement of buying or selling property, resulting in contract breaches and failed transactions. The journey from signing a contract of purchase and sale to handing over the keys can be fraught with challenges. Parties may be unable or unwilling to fulfill their obligations, turning the dream of property ownership into a legal nightmare. Moreover, real estate agents and brokers may be found liable for negligence or misrepresentations throughout a transaction, which can result in additional disputes.
This comprehensive blog series will delve deep into the intricacies of purchasers breaching real estate contracts in British Columbia. From understanding the fundamental aspects of real estate contracts to exploring the consequences and remedies for breach, we will equip you with the knowledge needed to navigate this complex terrain.
Parties make an offer to purchase property
In the case of Morden v. Pasternak, the appellant and her husband, Mr. and Mrs. Morden, had purchased over 10 properties for both rental properties and personal use and had engaged the services of the third-party respondent and realtor, “GH,” for several of these purchases. Mr. Morden often located possible purchase opportunities, made decisions, and regularly communicated with realtors.
The respondents, “AP” and “JD,” had listed their home (the “property”) for sale on June 13, 2016, and Mr. Morden viewed the property on June 18, 2016. The following day, Mr. and Mrs. Morden visited the house and offered to purchase the property. GH prepared a contract of purchase and sale in both of their names. However, Mr. Morden’s name was removed from the contract as he would be out of town when the documents were to be signed. Despite this, they intended to have Mr. Morden’s name registered on the title following the closing of the purchase.
Prospective purchaser terminates contract
Ms. Morden’s first offer to purchase the property was for $920,000 and contemplated a $20,000 deposit, which was presented to the respondents’ realtor on June 20, 2016. The respondents proposed a counteroffer for $935,000 with a $50,000 deposit, which Mrs. Morden accepted. The following day, Mrs. Morden was presented with a fully executed contract (the “contract”) by GH, and Mrs. Morden provided a $50,000 deposit cheque.
Later that same day, Mr. Morden decided to terminate the contract. He provided GH with instructions to do so by voicemail the following morning. Despite depositing funds into their joint account, Mr. Morden transferred funds out of the account before speaking with GH in order to ensure the account would have insufficient funds to fulfill the deposit.
Sellers accept sale price $100,000 lower than original contract price
The respondents were advised by their realtor on June 22, 2016, that Ms. Morden intended to do something other than complete the transaction. They continued listing their house for sale for $915,000, and after receiving no further offers, they reduced their asking price to $850,000. They accepted the highest offer at $850,000 on July 5, 2016. However, following a home inspection, the price was renegotiated to $835,000 on July 28, 2016.
As a result, the respondents claimed damages of $100,000, the difference between the original contract price and the actual sale price, from the appellant.
Realtor left purchasers with a “false sense of security”
At trial, Ms. Morden argued that GH had no authority to rely on instructions from Mr. Morden as he was not her agent for the property purchase. However, the trial judge concluded that Mr. Morden did have actual authority to act on Ms. Morden’s behalf as this was intended to be a joint purchase, and Ms. Morden had intended for Mr. Morden to manage the transaction.
Ms. Morden also argued that the respondents owed her a duty of care and fiduciary duty, which they claimed they had fulfilled. However, the trial judge focused on the claim of negligence and considered that GH “displayed significant failures” and that “a reasonable realtor receiving instructions from a client to collapse the contract unilaterally would have provided basic advice concerning the impact of that decision on their legal rights and would have informed a client to seek independent legal advice immediately.” He determined that GH left the Mordens with a “false sense of security” about the consequences of their contract breach.
Trial judge finds in favour of vendors
The respondents also contended their negligence had not caused the appellant’s loss and that the Mordens had no intention of completing the transaction, regardless of whether they received legal advice. The trial judge agreed with this and stated that “the absence of advice directly to Ms. Morden would not satisfy the but-for test when it comes to establishing Ms. Halinda’s failures as causing Ms. Morden’s loss.” The trial judge also found that GH had emailed Mr. Morden on June 28, 2016, recommending that he obtain legal advice, and the Mordens met with a lawyer that same day.
Throughout examinations for discovery and trial, the Mordens claimed solicitor-client privilege over the legal advice they obtained from their lawyer. Ms. Morden’s lawyer confirmed he had “confirmed he had instructions to waive the privilege she had claimed throughout.” However, the trial judge found that “Mr. Morden’s refusal to waive solicitor-client privilege concerning his meeting with Mr. Riddell leads me to infer that the advice he received would have been unhelpful to the defendant.”
The respondents also asserted that it remained open to Ms. Morden to remedy her contract breach between June 22 and July 5, 2016. The trial judge also agreed with this point, noting that she could have “remedied her default regarding the deposit.
Purchaser appeals trial judge’s decision
On appeal, the appellant argued that the trial judge had made an error of fact when he drew an adverse inference based on a misapprehension of facts and made an error of law and fact by finding the plaintiff vendors had not accepted the repudiation of the contract until the property had been resold.
With respect to the issue of waiver of privilege, their trial counsel had conceded that they had likely waived privilege. This was later confirmed, and disclosure of the file ensued. On review, the Court of Appeal acknowledged that the trial judge had made a palpable mistake, resulting in a tainted analysis by misapprehending whether the Mordens had waived privilege to their legal advice and the inferences he drew. However, the Court was satisfied that “the judge made numerous findings divorced from and independent of that misapprehension.”
Remarketing a property may constitute acceptance of repudiation
Concerning the issue of repudiation, Ms. Morden highlighted that the vendors re-listed their property and that their evidence suggested that they knew the contract was “dead.” She further asserted that the trial judge erred in finding that the remarketing of the property did not amount to acceptance of the breach and that acceptance of a repudiation must be communicated.
The Court of Appeal noted that the trial judge found that “in the circumstances of this case,” it was reasonable for the vendors to assess their circumstances over time and rejected the argument that the vendors’ open house equated to acceptance of the appellant’s repudiation. The Court of Appeal also indicated that they do not understand the trial judge to have found that remarketing a property will never amount to acceptance of a defaulting purchaser’s repudiation; however, this did not constitute acceptance in this particular case.
The Court ultimately dismissed the appeal.
Contact the Lawyers at Meridian Law Group in Vancouver for Advice on Real Estate Disputes
The trusted real estate litigation lawyers at Meridian Law Group frequently represent sellers and purchasers in various residential and commercial real estate disputes. We explore all opportunities for early dispute settlement and work hard to ensure clients’ concerns are eased throughout the dispute resolution process.
Meridian Law Group provides clients with exceptional and client-driven legal services throughout British Columbia. Conveniently located in downtown Vancouver, our firm provides services to clients throughout West Vancouver, North Vancouver, Coquitlam, Penticton, Kelowna, Richmond, New Westminster, Burnaby, Surrey, Langley, and White Rock. To learn how we can assist you with your real estate dispute, please call us at (604) 687-2277 or contact us online to schedule a confidential consultation.