A recent civil court case highlights the drastic dip in Kelowna's real estate market in the spring and summer of 2022, with a group of potential buyers being ordered to pay more than $400,000 after they were unable to secure financing on a home despite signing a purchasing contract.
In a recent decision, BC Supreme Court Justice Dennis Hori ordered Wai Ming Fong, Xiao Li Liu and Navdeep Singh Mahli to pay Jeffrey Mandl nearly $363,000, in addition to the $50,000 deposit they had already paid, for breaching their contract of purchase and sale.
The three people had agreed to purchase a home on Kelowna's Ethel Street from Mandl for $1,115,000, which was $116,000 more than the listing price of the property. Mahli signed the contract on the very same day Mandl listed the home, and Liu and Fong were added to the contract eight days later.
The buyers paid a $30,000 deposit and the completion date for the contract was initially set for May 31, 2022.
But when Mahli began to seek financing for the home, the Royal Bank of Canada sought their own appraisal of the home and determined the value of it was significantly lower than the agreed upon purchase price. As such, the bank refused to finance the purchase and Mahli was unable to find financing through any other institutions.
Mandl gave the buyers two extensions on the closing date, on the condition that they provide an additional $20,000 non-refundable deposit. The buyers did so, and the closing date was eventually pushed to July 18, 2022.
But after Mandl refused to lower the purchase price of the property, the buyers were unable to come up with the funds, and on July 19, Mandl's counsel advised them that they were in breach of their contract and that Mandl would re-list the property.
But by this time, the market had slowed considerably. The original re-listed sale price was set at $949,000, but Mandl managed to sell the home a little more than five months later for $740,000.
Justice Hori noted that Mandl made “reasonable efforts to re-sell the property” by reducing the listing price multiple times to generate interest, making repairs to the home and trying to “maximize his recovery by negotiating for higher sale prices.”
As such, Justice Hori ruled the damages suffered by Mandl as a result of Mahli, Fong and Liu's breach of contract was the difference between their agreed upon sale price and the price Mandl was eventually able to sell at.
“I also find it unreasonable to require [Mandl] to retain the Property until the market recovered and real estate prices increased,”Justice Hori added.
“If the market would increase and, if so, when, are questions that no one could answer without the benefit of hindsight. In the meantime, [Mandl] would be required to delay any plans he had for the sale proceeds and would incur the cost of maintaining the property and paying the mortgage.”
Justice Hori also ruled that the buyers should pay the $29,000 to replace the home's roof and air conditioner, a repair that was required to make the subsequent sale. Justice Hori found that Mandl would not have been stuck with this bill if the first sale had gone through.
During the civil proceedings, Mahli tried to argue that the condition of the home had been misrepresented to him, and therefore the contract should be void. But Justice Hori said the evidence did not show that any claims made on the Property Disclosure Statement had been untrue.
With the $375,000 loss on the resale of the property, along with the roof and A/C/ bill, legal fees and interest, Justice Hori ruled Mahli, Fong and Liu owe Mandl nearly $413,000. Taking into account the $50,000 deposit, the damages awarded totalled nearly $363,000.
