Can a buyer back out of a real estate deal in Alberta after conditions are removed?

Can a buyer back out after conditions are removed alberta?

Short answer

Usually, no. Once the buyer’s conditions have been satisfied or waived, the agreement is generally binding, and the buyer is expected to complete the purchase according to the contract. A buyer who refuses to close may be in breach and could lose the deposit or face a claim for additional damages. (Bowlen v. Digger Excavating (1983) Ltd., 2001 ABCA 214 (CanLII), [26], [32])

Removing conditions does not necessarily mean the contract was previously non-binding. A condition precedent can suspend performance while the contract remains binding. (Dynamic Transport Ltd. v. O.K. Detailing Ltd., 1978 CanLII 215 (SCC), [1978] 2 SCR 1072, [at 1082]; Castledowns Law Office Management Ltd. v. FastTrack Technologies Inc., 2009 ABCA 148 (CanLII), [65], [69])

What does removing conditions mean?

Real estate agreements commonly include conditions relating to financing, inspections, title, condominium documents, or other matters.

If a condition is removed, the buyer generally loses the contractual right to rely on that condition to terminate the deal. The exact result depends on the wording of the purchase contract and whether the condition was satisfied, waived, or continued to operate until a later date.

For example, in one Alberta case, a financing condition remained operative through the closing date because the agreement’s conditions provisions had been modified but not fully removed. The seller could not terminate when the buyer had not yet tendered the funds because the seller had also failed to provide required documents. (1613185 Alberta Ltd v 837757 Alberta Ltd, 2015 ABQB 224 (CanLII), [46], [61], [66])

Can the buyer simply change their mind?

Changing one’s mind, losing interest in the property, or discovering that the purchase is no longer financially attractive will not, by itself, usually provide a contractual right to walk away after conditions have been removed.

A buyer who fails to tender the purchase funds or otherwise complete on time may be unable to obtain specific performance. In Bowlen v. Digger Excavating (1983) Ltd., the buyer had not tendered the required funds or shown that it was ready, willing, and able to complete by the closing date. The Court of Appeal held that the seller was entitled to terminate while time remained of the essence. (Bowlen v. Digger Excavating (1983) Ltd., [13], [26])

What happens to the deposit?

The deposit may be forfeited if the contract permits forfeiture after the buyer’s conditions have been satisfied or waived and the buyer fails to complete. In Bowlen v. Digger Excavating (1983) Ltd., the agreement allowed the seller to retain the deposits and claim additional damages, and the court denied relief from forfeiture. (Bowlen v. Digger Excavating (1983) Ltd., [29], [32], [39])

However, the deposit is not automatically the seller’s complete remedy. In Lozcal Holdings Ltd. v. Brassos Developments Ltd., 1980 ABCA 72 (CanLII), the Alberta Court of Appeal held that wording describing a deposit as “liquidated damages” did not, on its own, limit the seller’s recovery to the deposit. The seller could pursue actual damages, subject to credit for the deposit. (Lozcal Holdings Ltd. v. Brassos Developments Ltd., [23], [44])

The contract must be reviewed carefully. In Telsec Developments Ltd v Abstak Holdings Inc, 2020 ABCA 40 (CanLII), the deposit was credited against damages because the contractual provision required the vendor’s condition to be satisfied before the purchaser’s failure to close could trigger forfeiture—and that condition had not been satisfied. (Telsec Developments Ltd v Abstak Holdings Inc, [89])

Could the seller claim more than the deposit?

Potentially. Depending on the contract and the circumstances, the seller may claim losses arising from the buyer’s breach, such as a resale shortfall or certain carrying costs.

In Lozcal Holdings Ltd. v. Brassos Developments Ltd., the seller recovered the loss associated with a lower resale price and interest during the resale period, while other claimed costs were not allowed because the seller ultimately benefited from the related work. (Lozcal Holdings Ltd. v. Brassos Developments Ltd., [44])

A seller’s damages are not necessarily calculated at the time of trial. In a sale-of-land case, damages are ordinarily assessed at the date of breach unless special circumstances make another date appropriate. (Telsec Developments Ltd v Abstak Holdings Inc, [86])

Could the seller force the buyer to complete?

A seller may pursue remedies for breach, which can include damages and, in appropriate cases, specific performance. The availability of specific performance depends on the circumstances and whether damages would provide an adequate remedy.

The modern approach is that real estate is not automatically treated as unique. Specific performance generally requires evidence that the property has a special or peculiar value and that a readily available substitute would not provide an adequate remedy. (Semelhago v. Paramadevan, [1996] 2 SCR 415, 1996 CanLII 209 (SCC), [paras 21–22]; Southcott Estates Inc. v. Toronto Catholic District School Board, [2012] 2 SCR 675, 2012 SCC 51 (CanLII), [paras 35–41])

Are there situations where a buyer may still have a right to terminate?

The answer may be different where, for example:

• The contract contains another condition or contingency that has not been satisfied. (Telsec Developments Ltd v Abstak Holdings Inc, [89])

• The seller has failed to perform an important contractual obligation, such as providing required documents or being ready to complete. A seller that has not done what is required to close may be unable to rely on a time-of-the-essence clause against the buyer. (1613185 Alberta Ltd v 837757 Alberta Ltd, [52])

• The seller made a material misrepresentation that induced the buyer to enter the contract. The provided materials describe fraudulent misrepresentation as potentially supporting cancellation and damages, subject to the buyer acting within a reasonable time after discovering it. (co-117)

• Performance has become legally or factually impossible in a way that fundamentally changes the contract, without either party’s default. Frustration is not established merely because performance has become inconvenient or less profitable. (Royal West Homes Inc. v. Webster, 2010 ABQB 446 (CanLII), [100], [150])

• The parties mutually agree to terminate or the contract itself gives the buyer a termination right.

What should a buyer do before refusing to close?

Before attempting to back out, the buyer should review:

• Whether each condition was waived, satisfied, or still operative.

• Whether the contract includes additional contingencies.

• The deposit and default provisions.

• The closing date and any time-of-the-essence wording.

• Whether the seller has complied with all obligations required before closing.

• Whether there are title, misrepresentation, or other contractual issues affecting completion.

The wording of the agreement and the parties’ conduct leading up to closing can determine whether the buyer has a right to terminate or is instead exposed to deposit forfeiture and a damages claim.