The Supreme Court of British Columbia has ordered a buyer who walked away from a real estate deal in Surrey last summer to pay the sellers more than $360,000, or six times his original deposit.
The ruling makes the would-be purchaser liable to meet the difference between the contract price ($1,260,000), and what it eventually sold for after the homeowners failed to find another buyer to match the initial high offer.
The original deal was struck in May 2016, a month that witnessed record-breaking prices in the Vancouver-area real estate market.
The sellers, who were downsizing to a condo, accepted a no-subjects offer with a $60,000 deposit to buy their single-storey rancher in the Newton neighbourhood in Surrey, according to the court ruling. However, by the closing date on September 1, 2016, the buyer had backed out.
Court documents don’t reveal why the deal wasn’t completed, and the buyer’s lawyer won’t disclose his client’s reasons. However, during that summer, a key factor had changed in Metro Vancouver’s real estate market: the provincial government had introduced a 15% property transfer tax on foreign nationals buying real estate in the region, and the sellers’ realtor blames the new levy for the reduced sale price.
The day after the botched closing date, the sellers filed a lawsuit against the would-be buyer and eventually listed their property again. However, their new real estate agent said it wasn’t likely they would get another offer similar to the deal struck in May.
“The real estate market in the Lower Mainland had changed significantly since [the seller] entered into the contract with [the buyer], in particular because the B.C. government had passed the foreign buyers’ tax,” the lawyer said to his client, according to Master Leslie J. Muir's judgment.
It took five months for the property to sell again, and for the much-reduced price of $910,000. “Although this offer was less than I had expected when I listed the property for sale, the market remained soft,” the sellers’ agent said in an affidavit.
The precise impact of the foreign buyers’ tax remains unclear. While sales slowed immediately following the levy’s introduction in August 2016, benchmark prices never saw anything approaching the 28% drop seen on this property.
The default judgement awards the sellers the $350,000 price difference, plus about $10,000 in carrying costs for the property over the five-month period it took to find another buyer, including utilities, property taxes, and hot tub chemicals.
The sellers’ lawyer said the experience has been difficult for his clients, an elderly couple trying to downsize from the family home. Even if the legal case is settled, the lawyer said collecting a payment as substantial as $300,000 could drag on for years.
He hopes that other would-be buyers learn from this case: as soon as a real estate contract is signed, they are liable for the deposit regardless of whether the seller can get more or less than the agreed upon price at a later date.
If the seller gets less, the would-be buyer could be on the hook for the difference and any damages incurred.