COVID ate my Agreement of Purchase and Sale!

Image by Mohamed Hassan from Pixabay

If you’ve been closing real estate transactions over the last year, you may have had parties requesting closing date extensions due to the COVID-19 pandemic. So long as the requesting party can demonstrate that they’re willing and able to perform their obligations under the purchase agreement, a reasonable request to extend usually won’t be detrimental to the transaction so long as all parties are agreeable.

But what if a party uses the pandemic as an excuse to straight-up cancel a deal, and not just extend it? In the case of Burrell v. Burrell, 2020 ONSC 3269, the parties were separated spouses and were ordered by the Superior Court of Justice on to sell their matrimonial home as part of their divorce proceedings. After the agreement of purchase and sale had been signed, the separated husband texted his and his separated wife’s real estate agent and proclaimed that he wouldn’t sell the property if the pandemic got worse, and as the closing date neared he ended up refusing to sign the closing documents due to the COVID-19 pandemic.

Now, the “COVID excuse” may be a useful tool to get out of Thanksgiving dinner, but it doesn’t exactly work the same way for a real estate transaction. Here, pandemic or not, it was clear to the vendors’ lawyer that the husband’s refusal to close would give the purchasers a “cause of action…if the transaction fails to close”. It was also made clear to the court that the husband was attempting to create leverage out of thin air to re-negotiate the terms of the family law arrangement, but that is another story for another time.

Now, almost a year into the pandemic, you’ve probably gotten pretty good at figuring out whether parties are being genuine when they use the “COVID excuse”, or whether they may as well have said their dog ate their agreement of purchase and sale. The Superior Court of Justice has gotten rather good at it, too. Given that the husband in the case at hand published Facebook posts noting that he believes the COVID-19 pandemic to be a hoax, it wasn’t very hard for the judge to conclude that the husband was being less than honest in his reasons for wanting to cancel the sale. In the matter at hand, the parties were ordered to complete the sale without the signature of the husband.

The moral of the story is to be honest, and not just because its the nice and Canadian thing to do, either, but because you’re required to! To keep it simple, parties to real estate transactions are bound by the “general duty of honesty” outlined by the much-cited Supreme Court of Canada case of Bhasin v. Hrynew, 2014 SCC 71, which made it abundantly clear that “parties must not lie or otherwise knowingly mislead each other about matters directly linked to the performance of the contract”.

If you have any questions or need advice on an upcoming real estate transaction, contact Zeeshan today.