When a vendor refuses to close a real estate transaction, the purchaser has the option of commencing legal proceedings for damages, or for specific performance in lieu of damages. In this post, the circumstances under which a Court may order specific performance is discussed.
Where a vendor refuses to close a real estate transaction, the Court may order that the purchaser be entitled to an order for specific performance, whereby the vendor is required to close the transaction pursuant to the terms contained in the agreement of purchase and sale. Until 1996, the remedy of specific performance was granted to purchasers as a matter of course. However, the Supreme Court of Canada’s decision in Semelhago v. Paramadevan imposed strict restrictions on the availability of that remedy.
Under the current state of the law, specific performance will only be ordered where the purchaser demonstrates that the property is unique, such that a substitute property is not readily available. For example, a Court will be required to determine whether the purchaser intends on using the property for a purpose which requires specific zoning, or whether the property was purchased purely for investment purposes. In the latter case, specific performance will rarely be ordered since it would be difficult for the plaintiff to prove that another investment property would not be available.
Based on the limited circumstances under which specific performance may be granted, it is clear that the purchaser of a residential property will rarely succeed in obtaining an order for specific performance. However, the same does not necessarily hold true for purchasers of commercial property. For instance, in Kyriacopoulos v. Peters, a recent case involving the the plaintiff's purchase of a rural lot for the purpose of operating an automobile business at a high traffic intersection, the Court ordered specific performance on the basis that there were no alternative sites in the area for the purchaser to operate its intended business. If a substitute was readily available, the Court would likely have limited the purchaser’s claim to one for damages.
While the remedy of specific performance is beneficial to purchasers in that it has the effect of requiring a transaction to close, it is clear that a purchaser’s right to this remedy is not automatic. Rather, a purchaser will be required to establish that the subject property is unique, and that an award of damages would not adequately compensate the purchaser for the vendor’s breach of the agreement of purchase and sale.
Where a vendor refuses to close a real estate transaction, the Court may order that the purchaser be entitled to an order for specific performance, whereby the vendor is required to close the transaction pursuant to the terms contained in the agreement of purchase and sale. Until 1996, the remedy of specific performance was granted to purchasers as a matter of course. However, the Supreme Court of Canada’s decision in Semelhago v. Paramadevan imposed strict restrictions on the availability of that remedy.
Under the current state of the law, specific performance will only be ordered where the purchaser demonstrates that the property is unique, such that a substitute property is not readily available. For example, a Court will be required to determine whether the purchaser intends on using the property for a purpose which requires specific zoning, or whether the property was purchased purely for investment purposes. In the latter case, specific performance will rarely be ordered since it would be difficult for the plaintiff to prove that another investment property would not be available.
Based on the limited circumstances under which specific performance may be granted, it is clear that the purchaser of a residential property will rarely succeed in obtaining an order for specific performance. However, the same does not necessarily hold true for purchasers of commercial property. For instance, in Kyriacopoulos v. Peters, a recent case involving the the plaintiff's purchase of a rural lot for the purpose of operating an automobile business at a high traffic intersection, the Court ordered specific performance on the basis that there were no alternative sites in the area for the purchaser to operate its intended business. If a substitute was readily available, the Court would likely have limited the purchaser’s claim to one for damages.
While the remedy of specific performance is beneficial to purchasers in that it has the effect of requiring a transaction to close, it is clear that a purchaser’s right to this remedy is not automatic. Rather, a purchaser will be required to establish that the subject property is unique, and that an award of damages would not adequately compensate the purchaser for the vendor’s breach of the agreement of purchase and sale.
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