There are two basic alternative remedies that a seller may be entitled to in the event that a buyer breaches a property purchase contract: general damages and specific performance.
Generally, a breach of a contract is one where a party to the contract no longer wishes to complete the transaction in accordance with the terms of the contract.
Loss of Deposit
When a real estate contract is breached by the buyer, it may result in the loss of the deposit paid to secure the property. In such a situation, the seller can sue the buyer for damages, which are typically calculated on the difference in the contract price and the market value of the property at the time of the breach plus interest from the date of the breach.
While the amount of a deposit can vary depending on the specific sales contract, it is generally non-refundable and cannot be transferred to another party. It can only be released to the innocent party under certain circumstances, such as when a court orders it to be removed from the seller’s attorney escrow account or when both parties agree that it is entitled to be returned due to a breach of the real estate contract.
However, in some cases it is possible for a party to contract around the loss of a deposit by including liquidated damages clauses in the real estate contract. These are provisions that establish in advance how much money a breaching party must pay and can save the parties a great deal of time and expense in establishing the actual damage caused by the breach.
In the case of Tang v Zhang (2013 BCCA 52), for example, the BCCA ruled that a buyer who defaulted on their real estate contract and was ultimately able to re-sell their property at a higher price was entitled to keep their deposit, even though they would have been liable for the full purchase price if they had completed the transaction.
The buyer had put down a $100,000 deposit on the property, but they were not able to complete the transaction. They asked the seller to return their deposit, but the seller was able to sell the property for $93,000 over what they had originally agreed on.
In order for a breach of contract to be valid, the agreement must have been legally binding and had specific terms that were agreed upon by both parties. If the agreement does not meet this requirement, then it is impossible to sue for a breach of the contract.
If a buyer breaches their contract to purchase property in BC, they may be able to recover damages from the seller. These can include the difference between the contract price and the actual sale price, title and escrow expenses, the expense of selling to another buyer, interest, and other costs.
The damages awarded to the buyer can vary from state to state, and depend on whether or not you can prove that you were financially harmed due to the breach of the contract. This can be especially true in cases where the seller does not act in good faith.
You should contact a lawyer to discuss your rights if you are unsure of the best course of action in your case. Your lawyer will be able to assess your situation and advise you on how much damage you can claim for.
In a recent case, the buyer walked away from a contract to buy a house in BC and forfeited their deposit. The seller ended up having to pay the buyer $360,000 in damages.
Traditionally, earnest money paid prior to the completion of the contract (customarily 10 % of the contract price) has been considered a “true deposit,” and should be automatically forfeited by a seller if the buyer breaches their agreement. The issue was recently clarified by a special five judge panel of the British Columbia Court of Appeal in Tang v Zhang.
General damages are often the most common measure of damages, and they are usually calculated by comparing the contract price to the value of the property at the time of the breach. However, this may be difficult to determine in a declining real estate market, so it is important to consult an experienced real estate attorney.
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When a seller breaches their contract, the buyer is entitled to recover the highest one of three possible measures of damages. These are expectancy damages, reliance damages, or restitution damages.
If a buyer in BC decides to pull the trigger on a real estate deal and then backs out at the last minute, they can expect to pay dearly. Not only will they be responsible for paying a good portion of the original purchase price, but they may also have to deal with other issues including the loss of their deposit and legal fees.
In BC, a breach of a contract by a buyer will result in either money damages or a court order to perform. The former is considered the most common of the two, while the latter is generally reserved for more serious breaches.
For example, in a court of law a buyer who fails to perform in accordance with the terms of the contract will be entitled to receive compensation for losses including loss of rent, loss of equity in the property, and reasonable costs incurred in attempting to sell the property.
The court may also order a seller to perform by transferring ownership of the home in question. This is a particularly clever and time-consuming method that only works if the original contract clearly spells out the elements of the sale in unequivocal detail. The most important caveat is that the seller cannot simply decide to hold the home out for a hefty price increase at the last minute. This is a tough pill to swallow, especially when the seller has already been paid the asking price for the property in question.
A court can issue an injunction, a form of temporary restraining order that requires a person to stop doing something that is against the law. This is often used in cases of harassment, stalking, or domestic violence. Injunctions can be issued for a period of time, or for life, depending on the circumstances.
Typically, the process for obtaining an injunction starts with filing a suit or motion and providing evidence to support your request. Next, you will have a hearing, where the judge will consider the facts and decide whether or not to grant your request.
Once a final injunction has been granted, the party who filed the injunction must obey it, or face criminal charges and possible jail time. The party who violated the injunction can also be held liable for damages and a court judgment may be entered against them.
A seller can also seek an injunction against a developer who plans to build nearby if the development would reduce the value of the property. This gives the seller the opportunity to sell their property before construction takes place, as long as the developer complies with the injunction.
The injunction can be permanent, temporary, or interlocutory. An interlocutory injunction usually requires a plaintiff to show that their claim raises a serious question to be tried; that they will suffer irreparable harm without an injunction; and that the balance of convenience favours injunctive relief.
In the case of a contract breach, a plaintiff will need to prove that they have suffered an irreparable injury and that the monetary damage awarded at trial is not enough to repair the harm. A court will also consider whether the parties can agree on a solution that will allow them to move forward with their lives without compromising their rights and interests.
The court in this case found that the sellers did breach their real estate contract. The tribunal rejected their argument that the situation was “out of their control” and that the ongoing housing crisis in B.C. prevented them from fulfilling their obligations under the contract.
Among many other things, David A. Grantham is a contributing author to UmassExtension West Vancouver Blo. He is a renowned expert on real estate in BC.
Born in North Vancouver, Louisiana, Dr. Grantham grew up in Lower Lonsdale. He then went on to complete his business degree at the University British Columbia. As of this writing, Grantham has completed over 100 projects, including the development of a high rise building in Vancouver.
He is a husband, father, son, brother, and friend. He was a dedicated outdoorsman and enjoyed sports such as hunting, fishing, scuba diving, and snow skiing. His wife, Alison Grantham, and their two daughters survived him. He is survived by his wife Alison Martin Grantham and two daughters.