18 A U G U S T 2 0 1 8 w w w . C A N A D I A N L a w y e r m a g . c o m
n real estate sales, the doctrine of caveat
emptor rules. And although the onus is
on the buyer to beware to ensure they
know what it is they are buying, the
risks for both the buyer and seller in
a volatile market can be very real and
some just want to get out of the deal.
A flurry of residential real estate
activity erupted in communities across
the country last year, resulting in com-
peting offers, bidding wars and often
astronomical prices. Fearing home pric-
es would continue to escalate, eventu-
ally pricing them out of the market, many
buyers jumped in, often presenting offers
above asking and without conditions.
At the same time, the Bank of Cana-
da, concerned that household debt was
reaching a crisis stage and threatening the
country's overall economy, tightened up
mortgage lending rules, imposing stress
tests on borrowers. Consumers were also
facing higher mortgage rates from lenders.
That all meant that Canadians couldn't
borrow as much as they would have been
able to borrow just a few months earlier.
"We were getting calls from people
who were either looking to get out of
their agreements of purchase and sale
or sellers who were asking about their
rights and terms of enforcing them," says
Gregory Sidlofsky, a certified specialist in
civil litigation with Wagner Sidlofsky LLP
in Toronto.
Buyers knew the risks they were
taking by waiving conditions on their
offers, he says, but that presented a
problem for some when it came time to
confirm financing. Some buyers saw the
market soften after they presented their
offers to purchase but before they sold
their own house. For others, the new
stress test rules had come into play at
the closing date, meaning they couldn't
qualify for as large a mortgage as they
would have had earlier.
For some, it ended up in disas-
ter. In Toronto, a couple fearing they
would lose out on their dream house
that was listed at $2 million offered
$2.25 million only to realize they had
overextended their ability to finance
the home. At the end of the day, not
being able to close cost the Hu family
$500,000, leaving them with absolutely
nothing to show for it. In Gamoff v.
Hu, the would-be purchasers lost their
R E A L E S TAT E
By Marg. Bruineman
ALEXI
VELLA
Backing out of a deal
Purchasers may regret making an offer on a house,
but reneging can be costly
I
