Real Estate Litigation in Ontario: A Guide for Buyers, Sellers and Lenders
By Greg Weedon, Law Society of Ontario Certified Specialist in Real Estate Law and in Civil Litigation
Most real estate disputes in Ontario start with a transaction that did not go as planned: a buyer who will not close, a builder that cancels, a deposit nobody will release, or a title problem that surfaces on a sale. This guide explains how those disputes are resolved, what the courts look at, and the steps that protect your position. Where it helps, it points to decisions in which our firm acted.
What is real estate litigation?
Real estate litigation covers court and tribunal proceedings about land: failed purchases and sales, deposits, pre-construction and new home agreements, title defects, misrepresentation, mortgage enforcement and urgent orders affecting property. Most of these cases are heard in the Ontario Superior Court of Justice.
These disputes turn on how transactions actually work: the agreement of purchase and sale, requisitions, closing documents, undertakings and the land registration system. Our firm practises both real estate law and real estate litigation, so our litigation is grounded in conveyancing practice, and our transaction work is informed by what goes wrong in court.
What can a seller recover when a buyer won't close?
A buyer who signs a firm agreement and refuses to close without a lawful excuse is in breach. The seller can usually keep the deposit and sue for the further loss.
The seller should be ready, willing and able to close on the closing date, and should confirm that in writing, usually through a formal tender. The seller then decides whether to accept the buyer's repudiation, end the agreement and claim damages. That election should be made clearly and in writing.
Damages aim to put the seller where it would have been had the sale closed. They usually include the shortfall on resale, carrying costs to the resale date, and the added costs of the second sale. The deposit is credited against the total. The seller must take reasonable steps to resell, but a buyer who says the seller should have done better bears the burden of proving it.
Results our firm obtained for sellers include:
Menon v. Simpson, 2025 ONSC 6720: $2,385,000 after a failed waterfront sale, made up of a $1,835,000 resale shortfall and $550,000 in agreed carrying costs.
Darmanin v. Dhiman, 2024 ONSC 233: summary judgment for the resale shortfall and carrying costs, including bridge loan interest, after the buyer demanded a $275,000 price reduction a week before the extended closing date.
Singh and Kaur v. Feneich, 2024 ONSC 5776: $366,513 in damages, including interest on a private loan the sellers needed to buy their next home.
Our article Buyer Won't Close: What Ontario Sellers Can Recover covers this in more detail.
What can a buyer do when a seller or builder won't close?
A buyer whose seller refuses to close is usually entitled to the return of the deposit and to damages for the loss of the bargain. The normal measure is the difference between the contract price and the market value of the property on the scheduled closing date, as the Court of Appeal confirmed in The Rosseau Group Inc. v. 2528061 Ontario Inc., 2023 ONCA 814.
A buyer can also ask the court to order the seller to complete the sale. This remedy, specific performance, is not automatic for land, including a home. Since the Supreme Court of Canada's decision in Semelhago v. Paramadevan, [1996] 2 SCR 415, the buyer must show that the property is unique, in the sense that a substitute is not readily available and damages would not be an adequate remedy.
In 13405176 Canada Inc. v. James Selkirk Custom Homes Ltd., 2026 ONSC 600, the builder terminated two new home agreements and resold the lots at higher prices. The court held that the condition the builder relied on was void under the Tarion Addendum and awarded our clients $440,200. The builder paid the judgment in full. See Builder Terminated New Home Agreements and Resold the Lots.
What happens to the deposit?
As a general rule, a buyer who fails to close without lawful excuse forfeits the deposit, and the seller does not have to prove a loss equal to the deposit to keep it. Relief from forfeiture is available only in exceptional circumstances. Where the seller defaults, the buyer is entitled to the deposit back.
Deposits are often held in trust by the listing brokerage, which will usually not release them without a direction signed by both parties or a court order. A deposit that is never paid does not end the agreement. Late payment or non-payment is itself a default. See What Happens if I Don't Pay the Real Estate Deposit? and Consequences of Failing to Deliver a Deposit.
Pre-construction and new home disputes
Disputes with builders have their own rules, because new home sales are governed by consumer protection legislation and the mandatory Tarion Addendum.
A buyer of a new condominium unit from the builder (the declarant) can rescind the agreement by written notice that the declarant receives within 10 days of the latest of receiving the disclosure statement, the condominium guide and a copy of the agreement signed by both parties (Condominium Act, 1998, s. 73(2)). The deposits are refunded with interest.
A buyer may also rescind for a material change, before accepting a deed, within 10 days of the latest of receiving the builder's revised disclosure statement or notice, becoming aware of an undisclosed material change, or a court determining that the change is material (s. 74(6)). The test is demanding. A material change is one that a reasonable purchaser, on an objective basis, would have regarded as so important that they likely would not have bought, or would have rescinded within the first 10 days (s. 74(2)). See Material Change in a Pre-Construction Condo: Can I Get Out?
Builders cannot simply walk away. A condominium declarant is not entitled to terminate an agreement only because the condominium was not registered by a date in the agreement, unless the purchaser consents in writing (s. 79(2)). Without that consent, it can terminate on that ground only by applying to the court, on at least 15 days' written notice to the purchasers (s. 79(3)). For freehold and condominium homes alike, the Tarion Addendum, which every new home agreement must include, limits the conditions a builder can use to end an agreement early, and limits the closing adjustments a builder can charge. The agreement itself may also limit the builder's charges. In Dhaliwal v. Midland Homes, 2023 ONSC 1620, on a Vendors and Purchasers Act application, the court held that the agreement's cost adjustment clause did not allow the builder to add $152,640 to the price for increased construction costs. See Builder Closing Adjustments in Ontario: What the Tarion Addendum Allows.
Purchasers who are worried that they cannot close have more options before the closing date than after it, including assignment, alternative financing, an extension or a negotiated release. See Can't Close Your Pre-Construction Condo? Your Options.
Title defects and errors on the register
Title problems often surface years after the error was made, typically on a sale or refinance. Common examples include a mortgage that was paid off but never discharged, a document registered against the wrong property, and an inadvertent merger of adjoining parcels.
Many errors can be fixed by registering a corrective document with the consent of everyone involved. The Land Titles Act also allows the land registrar to correct errors on sufficient evidence (s. 158), and allows the Superior Court to order the register rectified (ss. 159 and 160). Where a lawyer made the error, that lawyer's insurer or the owner's title insurer may be responsible. A person wrongfully deprived of land or an interest in land by a fraudulent registration or a registry error, who cannot otherwise recover, may claim compensation from the Land Titles Assurance Fund by applying to the Director of Titles within six years of the loss (s. 57). See Fixing Title Errors in Ontario and My Mortgage Was Paid Off Years Ago. Why Is It Still on Title?
Misrepresentation and defects after closing
Ontario still applies the principle of buyer beware to defects a reasonable inspection would reveal. A seller can, however, be liable for misrepresenting the property, for actively concealing a defect, and for failing to disclose a known latent defect that makes the home dangerous or unfit to live in. Claims may also lie against agents and brokerages who misstate material facts. The listing, the seller property information statement if one was given, the agreement's warranties and the inspection report are usually central evidence.
Mortgage enforcement and power of sale disputes
When a borrower defaults, a lender usually enforces by power of sale. Where the mortgage contains a power of sale, notice cannot be given until the default has continued for at least 15 days, and the sale cannot take place until at least 35 days after notice, or longer if the mortgage requires (Mortgages Act, ss. 32 and 37). Until the sale, the borrower can generally put the mortgage back in good standing by curing the default and paying the lender's necessary expenses.
The selling lender must take reasonable care to obtain fair market value and must account for any surplus. Errors in the notice, in the amounts claimed or in the sale process are the usual grounds for a challenge. See Power of Sale in Ontario: A Private Lender's Guide.
Our firm has acted for homeowners targeted by fraudulent notices of security interest (NOSIs) and related lending schemes. In Rabuka, 2023 ONSC 6022, a senior homeowner who alleged he was the victim of a door-to-door HVAC, renovation and financing scheme obtained orders allowing the NOSIs registered on his property to be removed so that it could be sold. In Shinkarev v. Surovova, 2025 ONSC 243, the court found fraud and awarded our clients $50,000 in punitive damages against a defendant who had misrepresented herself as a mortgage broker and used funds they gave her to pay down their debts for her own purposes.
Urgent remedies: CPLs and injunctions
A certificate of pending litigation (CPL) is registered on title to give notice that a lawsuit claims an interest in the property (Courts of Justice Act, s. 103). It can be issued only under a court order, and the claim for it must be included in the originating process, whether a statement of claim or a notice of application, with a description of the land (rule 42.01). The motion can be brought without notice, in which case the moving party must make full and fair disclosure of all material facts. The party seeking the CPL must show a reasonable claim to an interest in the land, and the court also weighs equitable factors, such as whether the property is unique, whether damages would be an adequate remedy, and the harm to each side.
The court may discharge a CPL where the claimant claims money in place of or as an alternative to the land, does not have a reasonable claim to the interest claimed, or has not prosecuted the case with reasonable diligence; where the claimant can be adequately protected by other security; or on any other just ground (s. 103(6)). A party who registers a CPL without a reasonable claim to an interest in the land is liable for the resulting damages (s. 103(4)). In Ahmad v. Marques, 2023 ONSC 6007, the court refused a purchaser's request for a CPL against our client's property.
An injunction may be sought to stop a sale to a third party, the removal of assets or other conduct that would defeat the claim. The court applies the three-part test from RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 SCR 311: a serious issue to be tried, irreparable harm, and a balance of convenience favouring the order.
How a real estate case proceeds
Many disputes resolve after a demand letter or early negotiation. If not, a case is usually started by a statement of claim. Some cases proceed by notice of application instead, either because a statute authorizes it, as with rectification of title or a Vendors and Purchasers Act application about a requisition, or because no material facts are likely to be in dispute (rule 14.05).
Smaller cases must proceed under the simplified procedure in Rule 76, which limits discovery and shortens the trial. It applies where the claim is exclusively for money, real property or personal property, and the total, including the fair market value of any property claimed as at the date the action is started, is $200,000 or less, excluding interest and costs (rule 76.02). Because the value of the property counts, a claim to the land itself usually proceeds under the ordinary procedure.
Most actions started in Toronto, Ottawa and Essex County (Windsor) are subject to mandatory mediation, which must take place within 180 days after the first defence is filed unless the court orders otherwise (Rule 24.1). Mortgage actions under Rule 64 and Commercial List cases are excluded.
Where the evidence is largely in the documents, a party can move for summary judgment. Under rule 20.04(2)(a), the court shall grant summary judgment if there is no genuine issue requiring a trial. Each side must put its best evidence forward. Several of the results described in this guide, including Menon, Darmanin, Singh and Kaur and Selkirk, were obtained on summary judgment motions, which are usually much faster and less costly than a trial.
Costs and limitation periods
The successful party in Ontario litigation usually recovers part of its legal costs from the other side, most often on a partial indemnity scale. Formal offers to settle under Rule 49 shift those costs. A plaintiff who makes an offer and then does as well or better at the hearing is generally entitled to substantial indemnity costs from the date of the offer. A plaintiff who rejects a defendant's offer and then obtains a judgment no more favourable generally recovers partial indemnity costs only to the date the offer was served, and pays the defendant's partial indemnity costs after that. These rules apply to offers made at least seven days before the hearing that remain open. A well-timed offer is often the most effective settlement tool in a real estate case.
Under the Limitations Act, 2002, the basic limitation period is two years from the day the claim was discovered (s. 4), and a claim is presumed discovered on the day of the act or omission it is based on unless the contrary is proved (s. 5(2)). Subject to limited exceptions, no claim can be started more than 15 years after that act or omission (s. 15(2)). Claims to recover land, and claims on mortgages, fall under a separate statute, the Real Property Limitations Act, with different periods. Never assume you have time: get advice well before any deadline.
What to do if your transaction is failing
Keep everything: the agreement, every amendment and waiver, deposit receipts, and all emails and letters.
Do not sign a mutual release, accept a termination or take back a deposit before getting advice.
If you intend to close, confirm in writing, through your lawyer, that you are ready, willing and able to do so.
Diarize the closing date and any condition, requisition or rescission deadlines.
Speak to a real estate litigation lawyer before the closing date if possible. Many options narrow or disappear once it passes.
Frequently asked questions
Can I force the other side to close?
Sometimes. A court can order specific performance, but the buyer must show the property is unique, in the sense that a substitute is not readily available and damages would not be adequate. Most failed closings are resolved by damages and the deposit.
Will I get my deposit back?
If the seller or builder defaulted, generally yes, with damages where you suffered a loss. If you defaulted, the deposit is usually forfeited, and the seller can claim any further loss.
How long does real estate litigation take?
It depends on the court and the complexity of the case. Urgent motions can be heard quickly. Cases decided on summary judgment usually resolve much sooner than those that go to trial.
What is a certificate of pending litigation?
A court-ordered notice registered on title that a lawsuit claims an interest in the property. It makes the property very difficult to sell or refinance until the case is resolved, so the party seeking it must show a reasonable claim to an interest in the land, and the court also weighs the equities.
How long do I have to sue?
Generally two years from when the claim was discovered. For a failed closing, assume the period runs from the scheduled closing date.
Do you act outside Toronto?
Yes. We act throughout Ontario and regularly appear in the Superior Court of Justice in Toronto, Brampton, Milton, Newmarket, Barrie, Oshawa, Hamilton, Ottawa and Napanee.
How we can help
Greg Weedon is certified by the Law Society of Ontario as a Specialist in Real Estate Law and in Civil Litigation, and has acted as counsel in several dozen reported decisions of the Superior Court of Justice and the Court of Appeal for Ontario. If your transaction is in trouble, contact us early so the steps you take now support your position later. Learn more about our Real Estate Litigation practice or contact us.
General information only, not legal advice. Every matter turns on its own facts. Past results do not guarantee a particular outcome.
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