Case snapshot
At a glance
- Case
- Can a Home Seller Recover Damages When a Buyer Backs Out in Ontario?
- Court / Tribunal
- Court of Appeal for Ontario
- Citation
- 2026 ONCA 453 ↗
- Date
- June 22, 2026
- Area of law
- Employment Law
- Key issue
- Whether a property seller who re-listed and resold after a buyer's anticipatory breach was entitled to damages based on property value at the termination date rather than the actual resale price, and whether the seller met its mitigation obligations.
- Outcome
- The Court of Appeal dismissed the appeal, upholding the motion judge's finding that the seller was entitled to damages measured by the property's appraised value at termination, with no additional damages owing after the deposit was applied.
- Why it matters
- Ontario homeowners and investors who face a buyer walkout need to understand exactly how damages are calculated and who must prove that the seller tried hard enough to find another buyer.
Legal principle
The rule from this case
When a buyer walks away from a signed Agreement of Purchase and Sale before closing, the seller is entitled to be put in the financial position they would have been in had the deal closed. Ontario courts will assess the property's fair market value at the date the contract was terminated — not simply the price the seller later achieves on a resale — especially when appraisal evidence supports a higher value than the eventual sale price. The burden of proving that a seller failed to take reasonable steps to find another buyer falls on the defaulting buyer, not on the seller. A seller is not automatically required to list on MLS or follow any particular marketing script. If the buyer cannot produce clear evidence that the seller's efforts fell short of what was reasonable in the circumstances, the mitigation defence will fail.
Important limits
What this does not mean
This decision does not mean a seller can sit back and do nothing after a buyer defaults and still collect full damages. Sellers still have a legal duty to act reasonably to limit their losses — they simply are not held to a perfect standard, and the buyer carries the evidentiary burden of showing the seller came up short. The case also does not establish that appraised value will always be used instead of resale price when calculating damages. Courts look at the full picture, including the quality of the appraisal evidence and the circumstances of any subsequent sale. Where a resale price fairly reflects market value, it may well be the appropriate measure. Each situation turns on its own facts.
What Happens When a Buyer Backs Out of a Real Estate Deal in Ontario?
When a buyer walks away from a signed Agreement of Purchase and Sale (APS), the seller does not simply lose the deposit and move on — they may be entitled to claim the difference between what the property was worth and what they ultimately received. The Court of Appeal’s decision in Eyelet Investment Corp. v. Zhou, 2026 ONCA 453 (CanLII) clarifies how Ontario courts measure those losses and who must prove what.
How Does Ontario Law Calculate Damages After a Buyer Default?
The starting point is straightforward: the goal is to put the seller in the same financial position they would have occupied if the buyer had completed the purchase. In this case, the seller obtained two appraisals showing the property’s fair market value at the date the contract ended was higher than the price eventually achieved on resale. The motion judge accepted the seller’s appraisal evidence and calculated damages accordingly. The Court of Appeal confirmed that approach was correct.
This matters because sellers sometimes assume courts will simply subtract the resale price from the original contract price. That is not always the rule. If the resale price is dragged down by market conditions, a poor sale process, or other factors unrelated to the buyer’s breach, the appraised value at the termination date can be the fairer measure.
Who Has to Prove the Seller Didn’t Try Hard Enough to Find a New Buyer?
The burden of proving a failure to mitigate rests on the defaulting buyer, not the seller. This is a critical point that is often misunderstood. Once a seller takes steps to re-market and sell the property, it is up to the buyer who broke the contract to demonstrate — with actual evidence — that those steps were unreasonable.
In this case, the buyer pointed to the seller’s failure to list on MLS, delays in completing the resale, and gaps in the seller’s records. The court found those arguments fell short. The buyer did not produce enough evidence to shift the outcome, and the seller’s mitigation efforts were accepted as reasonable in the circumstances.
Does a Seller Have to List on MLS After a Buyer Defaults?
No — there is no legal requirement to list on MLS specifically. What the law requires is that the seller take reasonable steps to find another buyer, and what counts as “reasonable” depends on the specific facts. A seller who markets the property through other channels, engages a real estate agent, or pursues known interested buyers may satisfy the mitigation obligation without ever listing on MLS.
That said, sellers who take an unusual or limited approach to re-marketing should be prepared to explain and document their reasoning. Gaps in records or unexplained delays can give a defaulting buyer ammunition to argue the seller did not try hard enough.
Was Summary Judgment the Right Process for This Dispute?
Yes, and both sides agreed it was. When parties consent to have a dispute resolved by summary judgment, they are expected to put their full evidentiary case before the judge. They cannot later complain that the record was incomplete if they had the opportunity to file more evidence and chose not to. The Court of Appeal followed established authority confirming that a judge is entitled to decide the matter on the record presented when both sides agreed the process was appropriate.
This is a useful reminder for anyone involved in a real estate dispute: the procedural choices made early in litigation can have lasting consequences.
What Role Did the Deposit Play in the Final Damages Calculation?
The deposit was applied against the damages owing, and after that deduction, no further amount was payable to the seller. This illustrates why the deposit alone is rarely a complete remedy for a seller when a buyer defaults. If the property’s value has declined since the contract was signed, or if carrying costs and re-marketing expenses have mounted, the deposit may not cover the full loss — and the seller will need to pursue a damages claim to make up the difference.
Conversely, where the property value at termination is close to or exceeds the original contract price, the deposit may wipe out any remaining damages, as happened here.
Practical Takeaways for Property Sellers Facing a Buyer Default
- Document your re-marketing efforts from day one. Keep records of every listing, showing, agent communication, and offer received after the buyer defaults. Gaps in documentation can be used against you.
- Get an independent appraisal promptly. If you believe the property’s fair market value at the termination date is higher than what you can achieve on resale, an appraisal obtained close to that date will be your most important piece of evidence.
- Do not assume the deposit is enough. Depending on the gap between the contract price and current market value, you may have a claim beyond the deposit — or the deposit may fully cover the loss. Get legal advice before deciding whether to pursue further damages.
- Understand that mitigation is your obligation, but proof is theirs. You must act reasonably to find a new buyer, but the defaulting buyer must prove you fell short. Keep records so you can respond to any mitigation challenge.
- Agree to a process carefully. If you consent to summary judgment, make sure your full evidentiary record is in front of the court. You will not get a second chance to fill gaps later.
If you are navigating a real estate contract dispute or need advice on your rights after a buyer walkout, our Ontario employment law lawyers — and more broadly our litigation team — can help you understand your options. We also assist clients in Burlington and the surrounding region; visit our Burlington employment law page for local information, or our Toronto office page if you are based in the GTA.
UL Lawyers offers a free initial consultation from our Burlington office and serves clients across Ontario. If you have questions about a contract dispute or want to understand your rights, reach out to our team to get started.
This article is automated commentary on a public court decision and is for general information only — not legal advice. Decisions rely on facts unique to each case. If you are affected by a similar issue, contact a lawyer for advice specific to your situation.
FAQ
Frequently asked questions
Yes, in most cases the seller is entitled to keep the deposit when a buyer defaults on a signed Agreement of Purchase and Sale. However, the deposit may not fully cover the seller's losses, and the seller may be able to sue for additional damages if the property's value has dropped since the contract was signed.
Mitigation means the seller must take reasonable steps to limit their financial loss after a buyer defaults — for example, by re-listing and actively trying to sell the property. The defaulting buyer bears the burden of proving the seller failed to mitigate, not the other way around.
Ontario's basic limitation period is two years from the date you knew or ought to have known about your claim. In a real estate context, that clock typically starts running around the time the buyer repudiates the contract or fails to close. Getting legal advice promptly helps protect your rights.