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When an Unconditional Offer Leads to Costly Consequences
During periods of intense real estate activity, buyers often feel pressure to act quickly to secure a property. Competitive markets can encourage offers that contain few or no conditions, particularly when sellers favour clean agreements without financing or inspection clauses. While this strategy may increase the chances of an offer being accepted, it also exposes buyers to significant legal and financial risks if complications arise after the agreement is signed. A recent Ontario court decision highlights how failing to conduct proper due diligence before making an unconditional offer can result in substantial liability.
In this case, a buyer submitted an offer of $557,000 for a property during the peak of the real estate market in 2022. The offer was well above other bids and was accepted, creating a binding agreement of purchase and sale. Importantly, the agreement was not conditional on financing and included a clause confirming that the seller made no guarantees about whether the buyer’s future intended use of the property would be lawful unless specifically stated in the contract. The property had been used as a single detached home, and the agreement confirmed that the current residential use could continue.
The dispute arose when the buyer later attempted to withdraw from the transaction shortly before the scheduled closing date. She claimed the property had been misrepresented in the listing as having residential zoning, when the municipality had adopted a comprehensive zoning by-law the previous year that categorized the property under a different designation. Although the zoning permitted the continued residential use of the home, the buyer argued that the designation could affect her renovation plans and the terms of her mortgage financing. As a result, she refused to complete the purchase.
After the buyer failed to close, the sellers were forced to place the property back on the market. Several months later, they sold it for $329,000, significantly less than the original purchase price. The sellers then commenced legal action seeking damages for the financial losses caused by the failed transaction, including the difference in sale price and additional carrying costs. During the court proceedings, evidence was presented showing that the buyer had already investigated the property’s zoning before submitting her offer. Text messages demonstrated that she had discovered the correct zoning designation on the day she viewed the property and before she entered into the agreement.
The court concluded that although the listing contained an incorrect description of the zoning, the buyer did not rely on that statement when making her offer because she already knew the property’s true zoning status. Given this finding, her attempt to withdraw from the contract was not justified. The court therefore ruled in favour of the sellers and ordered the buyer to pay more than $213,000 in damages after accounting for the deposit. The decision underscores the importance of conducting thorough investigations into zoning, financing, and other key issues before submitting a binding offer, particularly when choosing to proceed without protective conditions.