COVID-19 has been and continues to be a stressful time for all, including those who were or are engaged in a sale or purchase of a home before the arrival and during the COVID-19 pandemic. COVID-19 has created stress and financial hardship for many and some may be struggling to close on their purchase(s). The reality is this struggle can cause a cascading effect on other deals that were or are contingent on the sale of properties. It is normal to be concerned. This article will attempt to make you better informed so you can protect yourself and your client’s interests.
Here are a few circumstances we are seeing in the market:
These buyers may no longer qualify for a mortgage if they have lost their job
These buyers may have suffered losses in the stock market erasing funds allocated for down payments
They may not be able to sell their existing home and therefore lacking funds to close their purchase
They may be quarantined and cannot complete their mortgage application as they do not have access to essential documentation.
You or your client may be affected by these unique market factors. Legally, contract law does not allow for the cancellation of an executed contract and the courts will not allow a buyer to walk away from that contract because of COVID-19.
Currently, the only way an agreement can be cancelled is if the Provincial Government Land Registration System and/or the financial institutions completely close down and the contract cannot possibly be completed because of 3rd parties, not the parties themselves. It is very unlikely that either the financial institutions and/or the land registration system will ever be deemed non-essential.
The situation we are currently facing is similar to the mini-market crash of 2017, when prices fell almost 20% overnight, resulting in buyers not being able to close. In 2017, the buyers who were sued had to pay the total loss the seller suffered as a result of having to sell the home to a different buyer. Based on this precedent the courts will likely rule that a buyer cannot cancel their purchase because of COVID-19. Some people are scared and are looking for a quick way out of their obligations despite having a firm deal. They should be reminded that when the dust settles they could be faced with a huge financial cost if they do not honour their contractual obligations. I advise everyone to do everything they can to close the deals they are contractually bound to close, rather than cancel the deal. Advise your client to look for assistance from the banks or family to ensure they are not exposed to worse case consequences down the road.