When Every Minute Counts in a Real Estate Transaction

In real estate transactions, you must pay attention to time-sensitive clauses in the Agreement of Purchase and Sale, such as the ‘time is of the essence’ clause. To avoid any costly pitfalls, it is advisable to have your real estate lawyers review the agreement before signing. In a recent case in Oakville, Ontario, the buyers’ failure to meet the payment deadline cost them dearly. It doesn’t matter that you missed the deadline by only a few minutes; the ‘time is of the essence’ clause will allow the seller to terminate the agreement. 

What is a ‘time is of the essence’ clause? 

Most contracts typically include this clause to emphasize that the parties involved must fulfill their obligations within the stipulated time. If either party violates this clause, the contract will terminate. There will be a provision for extending the contract if both parties can agree. When this fails, it leads to legal disputes. In real estate transactions, this can be an expensive mistake to make. Under Canadian law, it is possible to appeal against the termination if there are some extenuating circumstances. However, this principle applies only to rare situations like the recent COVID-19 epidemic.  

How did the ‘time is of the essence’ clause affect the Oakville purchase? 

The ‘time is of the essence’ clause in the agreement between Ivy and Alvin Correa and the seller, Valstar Homes, states as follows: 

Time shall be of the essence of this Agreement in all respects, and any waiver, extension, abridgement or other modification of any time provisions shall not be effective unless made in writing and signed by the parties hereto or by their respective solicitors who are hereby expressly authorized in that regard. 

The Correas signed the agreement in February 2020 for the $1,440,000 under-construction home in Oakville. The ‘time is of the essence’ clause in it required the Correas to make the full payment by 5 p.m. on January 27, 2021. Both parties later amended this deadline to April 20, 2021. The Correas ran into problems when trying to arrange the funding and approached Valstar Homes through their real estate lawyers for yet another extension. This was denied. The Correas somehow managed funding from alternate sources and wired the money to the seller’s attorney at 4:52 p.m. However, the money reached the account only at 5:09 p.m.  

Valstar Homes determined that the Correas had breached the ‘time is of the essence’ clause, leading to the termination of the agreement. However, their real estate lawyers later reached out to the buyers with an offer to revive the deal at an additional amount of $100,000 plus $13,000 for HST. The seller asserted that the property’s price had risen by at least $600,000 since the signing of the agreement. The Correas agreed to this and closed the deal by paying this ‘revival fee’ of $113,000.  

The Correas suit against VALSTAR Homes 

After more than a year, the Correas decided to approach the Ontario Superior Court, demanding that the seller return the additional $113,000 they had to pay for the delay. The plaintiffs in Correa v. Valstar Homes (Oakville Sixth Line) Inc., 2024 ONSC 3616 (CanLII), contended that the seller had acted in bad faith, and they deserved the return of the additional $113,000 they had paid. Despite their attorney’s letter at the time not mentioning protest, the plaintiffs claimed they had closed the deal in protest. 

However, Judge Marvin Kurz did not agree with this line of argument and relied on the ‘time is of the essence’ clause in the agreement to dismiss the suit. The seller was not required to extend the deadline and had acted within their rights under the agreement, the ruling stated. Also, there were no extenuating economic circumstances that prevented the buyers from paying the additional amount. In addition, the court ruled that the Correas must pay the seller $30,000 for the costs.  

Key Takeaway 

In this case, the buyers pointed to the precedent set by the Ontario Court of Appeal ruling in More v. 1362279 Ontario Ltd. (Seiko Homes), 2023 ONCA 527, where the buyers failed to meet the 5:00 p.m. deadline because of administrative delays at the bank during the COVID-19 pandemic. The ruling was in favour of the buyers, as it was a clear case of extenuating circumstances beyond their control. In this case, the judge stated that the same principle did not apply.   

How can our Real Estate Lawyer Mississauga help you in such cases? 

This case demonstrates the importance of adhering to the agreement’s terms and conditions and paying particular attention to the fine print. If you are undertaking a similar purchase of property, you need to get guidance from a real estate lawyer Mississauga early on to protect your interests in the deal. A knowledgeable real estate lawyer will warn you about such time-sensitive clauses in the agreement and protect you from costly mistakes. Reach out to us at 905-405-0199 for legal counsel in such real estate disputes to safeguard your rights.