Who Pays When a Real Estate Deal Falls Apart in Ontario?

What Does It Mean to Repudiate a Real Estate Agreement in Ontario?

Repudiation happens when one party communicates — through words or actions — that they no longer consider themselves bound by a contract. In a real estate context, this often looks like a seller (or buyer) declaring the Agreement of Purchase and Sale cancelled, void, or unenforceable before the closing date arrives.

In Agyarko v Smith, 2026 ONSC 4833 (CanLII), the Ontario Superior Court of Justice found that the sellers repudiated the APS when their lawyer sent two letters on the original closing date declaring the agreement “null and void” and stating that the sellers were “under no obligation” to proceed. The court applied an objective test: what would a reasonable person conclude from those words? The answer was clear — the sellers were walking away.

Can a Seller Declare the Deal Void Because of a Technical Defect?

Generally, no — not if both parties have already been acting as though the deal is valid. In this case, the sellers argued that the agreement was technically void because they had accepted the buyers’ offer a few minutes after the irrevocability period expired. The court rejected this argument.

Both sides had spent months treating the agreement as binding: they negotiated an amendment to extend the closing date, exchanged legal correspondence about closing, and the sellers even signed closing documents. Having acted on the agreement for that long, the sellers could not suddenly rely on a technical timing issue to escape their obligations. Ontario courts have consistently held that a party cannot repudiate a contract based on a defect they have effectively waived through their own conduct.

Does It Matter If the Buyer’s Agent Behaved Badly?

Bad conduct by a buyer’s agent matters — but it does not automatically end the contract. The sellers argued that the buyers’ real estate agent had harassed them, taken dishonest positions about the amendment, and generally acted in bad faith. The court accepted that the agent’s behaviour was unreasonable and possibly opportunistic.

However, the court found two separate reasons why this did not help the sellers. First, the agent’s aggressive stance — insisting the deal close on a certain date without a payment — did not demonstrate that the buyers intended to abandon the contract altogether. The buyers still wanted to close. Second, and more importantly, the sellers never formally accepted any alleged repudiation by the buyers’ side. Instead, they continued to treat the deal as alive (the sellers signed closing documents just before the original closing date). Once a party elects to keep a contract on foot, that election is binding — they cannot later claim the other side had already ended it.

What Damages Can a Buyer Recover When a Seller Walks Away?

When a seller wrongfully repudiates a real estate agreement, the goal of damages is to put the buyer in the position they would have been in had the deal completed. In this case, the court awarded three categories of loss:

• Return of the deposit ($50,000), which had been held in the sellers’ lawyer’s trust account
• Difference in purchase price ($30,000) between the original property and the comparable home the buyers ultimately purchased
• Carrying costs ($9,721.18), including temporary rental accommodation and storage fees while the buyers waited to move into their new home

The total came to $89,721.18, plus over $8,000 in prejudgment interest. This reflects a well-established principle in Ontario: buyers who are forced to find a replacement property are entitled to recover the real financial gap that the seller’s breach created.

What Is the Duty of Honest Performance in Ontario Contracts?

Ontario law requires every party to a contract to act honestly in how they perform their obligations — this is called the duty of honest performance. It does not require perfection or even reasonableness, but it does prohibit outright lies or deliberate misleading of the other side about matters tied to the contract.

The sellers in this case argued that the buyers’ agents had breached this duty by insisting on a version of the amendment that omitted the payment clause. The court dismissed this claim. Taking an aggressive or arguably wrong-headed legal position is not the same as lying. The agents stated their position openly; there was no concealment or misrepresentation of fact. The court also noted that even if bad faith had been established, it would need to rise to the level of a “fundamental breach” — one that deprives the other side of substantially the whole benefit of the contract — before it could justify treating the agreement as ended.

How Does Summary Judgment Work in Ontario Real Estate Disputes?

Summary judgment allows a court to resolve a case without a full trial when there is no genuine issue that actually requires one. It is faster and less expensive, which matters in disputes where the facts are largely documented and the legal questions are well-settled.

This case was governed by Ontario’s Simplified Procedure rules, which place additional limits on the process — including a general bar on cross-examining witnesses on motions. The court navigated this by ordering a focused “mini-trial” on the narrow question of whether the buyers had authorized their agent’s conduct. That targeted approach allowed the judge to resolve all five issues in the case, including the counterclaim, without a full trial. Our Ontario litigation lawyers regularly advise clients on whether summary judgment is a practical option in their circumstances.

Questions and Records to Discuss with a Lawyer

If you are involved in a failed real estate transaction in Ontario, the following points may be relevant to discuss with legal counsel:

• What written communications — letters, emails, text messages — were exchanged between the parties and their agents around the time the deal collapsed?
• Did either side take any steps (such as signing closing documents or continuing negotiations) that could be interpreted as an election to keep the agreement alive?
• Was the deposit paid, and who is currently holding it?
• What costs did you incur finding a replacement property, including temporary housing, storage, or a higher purchase price?
• Were there any amendments to the original agreement, and are all signed versions accounted for?

If you are in the Hamilton, Burlington, or broader Greater Toronto Area and dealing with a real estate dispute, our Burlington litigation lawyers and Hamilton litigation lawyers are familiar with these issues.

If you have questions about a real estate transaction that has gone sideways, you are welcome to reach out to UL Lawyers through /connect to discuss your specific circumstances.

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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.