A post-closing dispute between a buyer and a seller of a property can happen for numerous reasons—but buyer withdrawals are the most common reason. These housing disputes can be drawn-out and costly, and almost always lead to a cloud of ambiguity over the closing purchase price. Here’s what you need to know about buyer withdrawals.
The Case of Basketball Player Shai Gilgeous-Alexander vs. Crypto King Pleterski
In the spring of 2023, NBA player Shai Gilgeous-Alexander purchased an $8.4 million lakefront mansion in Burlington where Ontario’s self-proclaimed Crypto King Aiden Pleterski used to live. Now, he’s filed a lawsuit to void the sale claiming that Pleterski fraudulently misrepresented the property.
In March 2021, Pleterski signed a lease-to-own agreement with Sunray Group which legally owns the property in question. At the time, Pleterski operated AP Private Equity Limited, which invested in cryptocurrency and foreign exchange. It was later discovered that he was accused of fraud by investors of his company and received threatening visits to his property. According to allegations in court documents, Pleterski left the Burlington mansion for personal safety reasons in July 2022.
Gilgeous-Alexander alleges that when he was sold the property, Sunray Group failed to disclose the alleged series of threatening visits to the property. According to filed documents, Sunray Group had an employee move into the mansion while it was vacant after Pleterski’s departure. In the ensuing days and weeks, people arrived at the house looking for former President Pleterski.
While Sunray Group claims there was no threat of violence by these visitors, Gilgeous-Alexander’s lawsuit claims a visitor did threaten his family shortly after he and his girlfriend moved in. After a phone call to the local police uncovered numerous reports of threats at the address, the couple decided to move immediately for their safety and well-being.
Shortly afterwards, Gilgeous-Alexander’s lawyers filed a lawsuit that the Agreement of Purchase and Sale should be cancelled for fraudulent misrepresentation.
Sunray Group has responded to Gilgeous-Alexander’s claim by stating the history of the previous owner and subsequent visitors’ appearances has no bearing on the sale. Their defence states that these incidents do not make the property unfit to live in and the sale is legal.
Insights from John Zinati: Can Buyers Legally Withdraw from Home Sales?
On November 27th, Ontario Superior Court Justice Robert Centa ruled in favour of Gilgeous-Alexander, determining that there had been fraudulent misrepresentation in the sale. Not only did he void Gilgeous-Alexander’s purchase of the home, but he awarded him damages for mortgage and insurance payments he’s had to pay since starting the lawsuit.
Toronto real estate lawyer John Zinati has been practicing law for more than 27 years in the GTA and has never known a seller to be ordered by the court to buy back their property for any reason. This ruling is precedent-setting.
In speaking to the CBC, Zinati said, “I’m pretty shocked by this. Anybody who is thinking about not disclosing something about a house should think twice because of this decision. From my perspective, it expands what you have to disclose about a house.”
Consequences: What Occurs When a Buyer Withdraws from a Real Estate Deal?
While it may seem to be an unusual occurrence, more buyers are looking to halt a home sale mainly due in part to difficulties in arranging financing which they may not have expected.
A signed Agreement of Purchase and Sale is a legally binding contract between the buyer and the seller. Changes in the market, interest rates, and the inability to secure financing do not entitle a buyer to “walk away” from such an agreement.
In fact, by reneging on a purchase agreement, the buyer is liable for any cost difference in the sale of the home to another buyer or for the market value if the home does not sell. Additional costs incurred by the seller can also be charged against the buyer.
The buyer is also not entitled to have the deposit returned to them under the same circumstances.
Buyer’s Closing Day Checklist: Essential Steps for a Smooth Transition
Learn What You Can About Your Home or Neighborhood
For the buyers in this case, they may have been able to find out a little bit more about the property by simply doing some research online. If you are considering buying a home do the simple step of doing a Google search on the address and the street or even the neighbourhood in general just in case there is something that you might wish to know about before going ahead. This is a simple step which could save you a lot of headaches.
A home closing checklist should be prepared long before the date approaches the calendar. In working with a reputable real estate lawyer, the buyer will be given clear details on what to expect on the closing day.
Review Your Documents
Review all documents carefully to ensure there are no errors that could delay or halt the sale. Misspelled names, incorrect addresses, inaccurate loan amounts, and vague terms of the agreement can be costly. The buyer may need to pay more for the corrections or see the sale fail.
Check Your Finances
One of the common reasons a house sale fails is the buyer’s inability to secure financing on the home. Several factors can lead to this type of situation including sudden job loss, an unapproved pre-mortgage, or excessive spending in preparation for the move. Even with a pre-approved mortgage, buyers can sometimes find their finances are inadequate to pay the closing costs.
Have a Pre-Close Inspection
Regular home inspections by a professional assessor will often uncover any potential issues such as structural defects. Taking the time and effort to “walk through” the home before the closing date with your realtor can be an extra layer of protection.
Be Prepared for Any Final Fees
Final fees can involve closing costs your real estate lawyer has for their time and preparation of the sale. These costs can include fees for the application, title search, mortgage brokerage, appraisal, property tax, and title insurance, just to name a few. Ask in advance about the expected closing costs you are responsible for, and any extras not included in such costs.
Meet Your Real Estate Lawyer Beforehand
To ensure all documentation and other closing-related materials are secured, make an appointment to see your legal representation a few days before the closing date. Any amendment or adjustment documents can be signed at this time to save steps on the closing day as it can be overwhelming to finalize everything at once.
Seek Legal Advice on Your Real Estate Transaction Before It’s Too Late
To avoid a potential post-closing dispute, talk to the legal experts at Zinati Kay – Real Estate Lawyers. We are a full-service residential real estate law firm that provides fixed closing costs when you refinance, buy, sell, mortgage, or make a title transfer. Contact us at (416) 321-8766 for more information about our services.