Case snapshot
At a glance
- Case
- Can a Home Seller Sue a Buyer Who Walks Away in Ontario?
- Court / Tribunal
- Ontario Superior Court of Justice
- Citation
- 2026 ONSC 5407 ↗
- Date
- September 25, 2026
- Area of law
- Litigation Law
- Key issue
- Whether a buyer's claim of mistake and pressure from third parties can defeat a seller's motion for summary judgment on a failed real estate closing, and how damages for loss of bargain should be calculated.
- Outcome
- The court granted summary judgment against the buyer for $410,000 in loss-of-bargain damages, plus pre-judgment interest and costs, with enforcement stayed for six months pending the buyer's third-party claim.
- Why it matters
- Ontario home sellers who are left holding a property after a buyer walks away can pursue the full difference between the agreed sale price and the property's market value at the time of breach, but they must take reasonable steps to mitigate their loss.
Legal principle
The rule from this case
When a buyer signs an Agreement of Purchase and Sale and then fails to close, the sellers are entitled to be put in the financial position they would have been in had the deal completed. In practice, that means the sellers can claim the difference between the contract price and the property's fair market value at the time of the breach, plus reasonable out-of-pocket costs caused by the default. A buyer's personal mistake — even one allegedly caused by a dishonest real estate agent or broker — does not automatically void a binding contract. If the sellers played no part in the misrepresentation, the buyer's remedy lies against the third parties who misled them, not against the innocent sellers. The sellers' right to damages remains intact regardless of what the buyer was told by their own representatives.
Important limits
What this does not mean
This decision does not mean sellers can simply name any figure they like and expect a court to award it. Sellers have a legal duty to mitigate — that is, to take reasonable steps to limit their losses. In this case the court found that turning down a market-rate offer shortly after the breach was unreasonable, so damages were capped at the price of that rejected offer rather than the lower value suggested by the sellers' own expert. Sellers who sit on a property without genuinely trying to sell it risk having their damages reduced. The ruling also does not mean that a buyer's third-party claim against a negligent agent or broker is worthless. The court stayed enforcement of the judgment for six months to allow the buyer's separate claim against the alleged wrongdoers to proceed. A buyer who was genuinely misled may still have a viable action against those third parties — that question simply does not affect what the innocent sellers are owed.
What Happens When a Buyer Refuses to Close on a Home in Ontario?
Sellers are entitled to sue for their financial loss when a buyer walks away from a signed Agreement of Purchase and Sale. The core remedy is called “loss of bargain” damages — the difference between what the buyer agreed to pay and what the property was actually worth at the time of the breach. In Bhandari et al v. Bhuyain et al, 2026 ONSC 5407 (CanLII), the Ontario Superior Court of Justice granted summary judgment to the sellers and awarded $410,000 after the buyer failed to close on a $1,550,000 home purchase.
Our Ontario litigation lawyers regularly advise clients on failed real estate transactions, from demand letters through to judgment enforcement.
Can a Buyer Escape Liability by Blaming Their Real Estate Agent?
No — a buyer cannot avoid liability to the sellers simply because their own agent gave them bad advice. In this case, the buyer argued he was misled by his agent and broker, who allegedly told him he could purchase the home with no down payment and failed to explain that the Agreement was not conditional on financing. The court accepted that the buyer may have a legitimate claim against those third parties, but held that this had no bearing on his contractual obligations to the sellers.
The sellers were not involved in any misrepresentations made to the buyer. They signed the Agreement in good faith, agreed to an extension, and were ready to close. Because the sellers played no role in the buyer’s mistake, his unilateral misunderstanding could not set the contract aside. The buyer’s recourse was against the people who allegedly misled him — not against the innocent sellers.
How Are Damages Calculated When a Real Estate Deal Falls Through?
Damages are calculated to put the sellers in the position they would have been in if the buyer had completed the purchase. The starting point is the difference between the contract price and the property’s fair market value at the date of the breach. Sellers can also claim reasonable carrying costs — such as additional mortgage interest — that they incurred because the deal did not close.
In this case, the sellers claimed a difference of roughly $490,000 based on their expert’s valuation, plus over $79,000 in carrying costs. The court took a different approach to both figures, as explained below.
What Is a Seller’s Duty to Mitigate After a Failed Closing?
Sellers must take reasonable steps to reduce their losses after a buyer defaults — they cannot simply hold the property indefinitely and accumulate damages. Within weeks of the buyer’s default, the sellers received a conditional offer of $1,080,000. They turned it down and never sold the house, instead continuing to rent it out.
The court found this was unreasonable. In a sharply declining market, rejecting an offer that was actually $20,000 higher than the sellers’ own expert said the property was worth could not be justified. As a result, the court used the $1,080,000 offer — rather than the lower expert valuation — as the benchmark for calculating the loss of bargain. The lesson: sellers who decline reasonable offers after a breach risk having their recoverable damages capped at the price they turned down.
Can a Seller Get Summary Judgment in a Real Estate Breach Case?
Yes, in many cases a seller can obtain summary judgment without a full trial. Under Ontario’s Rules of Civil Procedure, a court can resolve a dispute on a motion if there is no genuine issue requiring a trial. The leading case, Hryniak v. Mauldin, 2014 SCC 7, directs courts to use summary judgment where the process allows for a fair and just determination in a proportionate and cost-effective way.
Here, liability was clear: the buyer admitted he did not close. The court found no credibility issues that required live testimony, and the damages question — while contested — could be resolved on the written record. Summary judgment was granted on both liability and quantum, saving the parties the time and expense of a full trial.
What Happens to a Judgment If the Buyer Has a Third-Party Claim?
A court has discretion to temporarily pause enforcement of a judgment while a related third-party claim is resolved. The buyer in this case had sued his real estate agent, broker, and mortgage broker for the misrepresentations he alleged they made. He asked the court to stay enforcement of the judgment against him until that claim was decided.
The court granted a partial stay. Enforcement of the $410,000 judgment was paused for six months — or until the third-party claim is resolved, whichever comes first. However, the $60,000 deposit was released to the sellers immediately. The court balanced the buyer’s interest in pursuing his claim against the sellers’ interest in not being kept waiting indefinitely, particularly given that the buyer was self-represented and living in another province. If you are navigating a complex real estate dispute in the Greater Toronto Area, our Mississauga litigation lawyers and Toronto litigation lawyers are familiar with these procedural steps.
Questions and Records to Discuss with a Lawyer
If you are involved in a failed real estate transaction — whether as a seller pursuing damages or a buyer facing a claim — here are some points worth gathering before speaking with a lawyer:
- The Agreement of Purchase and Sale and any amendments, including deposit receipts and extension agreements
- All communications with real estate agents, brokers, and mortgage professionals around the time the deal was signed and when it fell apart
- Evidence of steps taken to re-list or sell the property after the default, including any offers received and the reasons they were accepted or declined
- Records of carrying costs such as mortgage statements, property tax bills, and rental income received after the default date
- Any complaints filed with regulatory bodies such as RECO, and any responses received
If you are dealing with a real estate transaction that has gone sideways, the circumstances matter enormously — from how the contract was structured to what happened after the default. Reach out to UL Lawyers through /connect to discuss your situation with a member of our team.
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
Only if the Agreement of Purchase and Sale includes a financing condition. If the contract is firm — meaning no conditions were included — the buyer is generally bound to close regardless of whether they can obtain a mortgage, and failure to do so can result in a damages claim by the sellers.
Ontario's basic limitation period is two years from the date the seller knew or ought to have known they had a claim, which is typically the missed closing date. Limitation periods can be affected by the specific facts, so it is important to get legal advice promptly after a default.
In most cases, yes — when a buyer defaults on a firm Agreement of Purchase and Sale, the deposit is forfeited to the sellers. The sellers may also be entitled to additional damages if their actual loss exceeds the deposit amount.