B.C.’s Supreme Court has ordered three prospective homebuyers to pay more than $350,000 after backing out of a contract signed during a hot housing market.

The defendants, Navdeep Singh Mahli, Wai Ming Fong and Xiao Li Liu, had agreed to purchase a home in Kelowna, B.C. for $1,115,000 but canceled their purchase after failing to secure financing.

“When the defendants failed to complete the Contract, the plaintiff found himself in a real estate market that was falling sharply,” Justice Dennis K. Hori wrote in his decision, first reported by CTV. The home was eventually resold for $740,000 in January 2023.

A bank found the value was “significantly lower” than what the defendants had agreed to, leading to a refusal, the ruling says. Other banks likewise refused the deal, leading the defendants to miss the purchase deadline on July 18, 2022. Mahli “specifically waived the right to have a subject to financing clause,” the ruling notes.

The seller, Jeffrey Anton Mandl, sued the defendants for breach of contract and was counter-sued for “fraudulent or negligent misrepresentations.” Mahli’s realtor had the home inspected and had determined it was uninhabitable, but evidence was not provided, the judge said.

Even if evidence were provided, the defendants refused their right to a property disclosure statement, “accepting the property ‘as is,’ and specifically relinquishing any claims of liability and responsibility against the seller,” the judge explained.

The judge also rejected the defendants’ argument that the property owner could have extended the contract deadline, lessened the cost of damages, or lowered the purchase price of the home.

“The defendants did not supply any information that they would be able to complete under these proposed conditions,” the judge wrote.

Mandl re-sold the home rather than incurring mortgage and maintenance cost, a decision that “satisfied his obligation to mitigate his loss,” he added.

The ruling found the defendants were liable for the difference between what the home was sold for and what the buyers had agreed to pay, minus a $50,000 deposit. The final cost of $362,920 also includes additional damages such as the legal fees for the original contract, cost of utilities, mortgage, property taxes and repairs.

“In a falling market the court should award the vendor damages equal to the difference between the contract price and the highest price obtainable within a reasonable time after the purchaser’s breach of contract,” the judge concluded.

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