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Specific performance in a hot housing market

Over the past year and a half, there has been an increasingly limited supply of homes for sale. The available homes on the market have fetched dramatically increased prices due to aggressive bidding wars. In Thillairajan v. Sivasubramaniam the court contemplated the remedy of specific performance in this hot housing market climate and concluded that it is a relevant factor in granting this remedy.

Editor’s note: Specific performance is a court order to compel the non-compliant party to carry out their obligations under the agreement.

In this case, the buyer, Thillairajan, entered into an Agreement of Purchase and Sale with the seller, Sivasubramaniam, with a closing date of February 24, 2021. On February 16, 2021, the seller’s real estate agent informed the buyers that they no longer wished to sell the property. The next day, the buyer’s lawyer wrote to the sellers that the buyers were ready, willing and able to close the transaction as scheduled. The lawyer confirmed her client’s intention to seek specific performance if the defendant did not comply with the terms of the APS. On the closing date, the buyer’s lawyer again emailed the seller that the buyers were ready willing and able to close in accordance with the terms of the APS. The seller advised that she was not going to sell her house.

On March 4, 2021, the buyers issued their Statement of Claim claiming specific performance. The seller was later noted in default on April 16, 2021.

The three factors in the test for specific performance are:

  1. The nature of the property involved
  2. The related question of the inadequacy of damages as a remedy
  3. The behaviour of the parties, having regard to the equitable nature of the remedy

The Superior Court of Justice evaluated the buyer’s evidence and concluded specific performance was an appropriate remedy in these circumstances.

Most significant in their decision was the court’s conclusion that 1) it was no longer accurate to assume that residential properties are “mass produced”, when the housing market has an increasingly limited supply of homes; and 2) subjective elements of a property are also highly relevant and important in establishing uniqueness.

In this case, the court accepted the buyers’ evidence that the seller’s property was purchased for significantly less money than properties in the same area and that the property was very close to the buyers’ place of employment. These two factors made the property sufficiently unique to the buyers.

The court added that the question of uniqueness did not merely contemplate whether there are other similar homes in the same neighbourhood but whether those homes were “readily available” for the buyers to purchase when the seller breached the APS. Because the prices of the houses in the neighbourhood were going for nearly $100,000 more, damages would not be an adequate remedy. Therefore, specific performance was an appropriate remedy since there were no other homes available on the date of the breach that could have been obtained at a comparable price.

What does this mean for future sellers?

While this case may be considered an outlier to the well-established principles articulated by the Supreme Court of Canada in Semelhago v. Paramadevan, sellers should be aware that in a hot housing market, specific performance is a remedy available to purchasers. In addition, a hot housing market will assist a purchaser’s case because whether a house is unique is not merely contingent on the house itself, but also if there are similar houses readily available at the time a seller has breached the APS.

Christina Wang

Christina Wang is at Boghosian + Allen LLP while completing her J.D. at Queen’s University. During her time at Queen’s, she was president of the Queen’s Environmental Law Club and a student researcher for Pro-Bono Canada.