This article was originally published on Law360TM Canada (www.law360.ca), part of LexisNexis Canada Inc.
This case is a clear example of a failed commercial real estate transaction affirming that “time is the essence” clause must be complied with even if it is amidst pandemic challenges and that COVID-19 does not constitute an excuse for non-performance of contractual obligations. It is a reminder that strict compliance of the terms of the Agreement of Purchase and Sale is necessary and failure to do so would lead to significant legal and financial repercussions. The case, Gil Shcolyar v. Bensher Holdings Limited, 2025 ONSC 2205, was heard before the Ontario Superior Court of Justice, where the plaintiff, Gil Shcolyar, action against the defendant, Bensher Holdings Limited for specific performance compelling the defendant to complete the real estate transaction.
According to the facts of this case, the parties entered into an Agreement of Purchase and Sale on December 5, 2019, for commercial property with a purchase price of $2.95 million. All conditions were waived by the plaintiff. The closing date was set for January 29, 2020. The closing date was amended to February 28, 2020. Mid-January, the plaintiff’s lender, DUCA provided a letter of intent to the plaintiff. In February, DUCA advised the plaintiff that there will be a delay in advancing the mortgage, requesting that the closing date be extended until late March to finalize the loan. To be on the safer side the plaintiff requested the defendant to extend the closing to April 27. The defendant agreed to extend the closing provided that the plaintiff releases the given deposit of $100,000.00 and to give an additional non-refundable deposit of $100,000.00. The total deposit being paid by the plaintiff is $200,000.00.
So far so good…until COVID-19 gripped the world. On March 20, 2020, the province declared COVID-19 pandemic and emergency. This affected everyone and every business with DUCA being no exception. On April 22, DUCA emailed the plaintiff requesting another two weeks extension to process the loan. The plaintiff’s lawyer requested another extension to defendant’s lawyer. The defendant did not agree to the extension and wished to close as scheduled on April 27. Since time is the essence, the defendant on April 27 tendered the necessary documents to close the deal. Plaintiff did not tender the closing funds or the documents. The plaintiff accepts that he was unable to tender. He was ‘ready and willing but not able to tender due to the inability on the part of DUCA to advance funds on closing. On April 28,(the day after the closing) DUCA sent a commitment letter for $2,000,000.00 to the plaintiff’s lawyer. Commitment letter was not unconditional. Conditions like, an appraisal of no less than $3,880,000.00, environmental assessment, inspections and so on. The plaintiff had to come up with $750,000.00 to close the transaction over and above the deposit of $200,000.00 and loan amount from DUCA. There was no evidence from the plaintiff as to how and from what source the plaintiff is obtaining the remaining balance of the purchase price. The plaintiff’s lawyer requested to set a new closing date for May 11 which was rejected by the defendant. The defendant’s lawyer confirmed that the defendant was “ready, willing and able to close the transaction” the plaintiff defaulted leading the deposits to be forfeited and holding the plaintiff responsible for any damages. The defendant concedes that the property was unique and that the damages would not be an adequate remedy for the plaintiff should it be found that specific performance is otherwise an appropriate remedy. The defendant never sold the property and still owns it.
Issues before the court are (1) was the defendant ready willing and able to close, such that both parties were unable to close and a new closing date should be set and (2) in the face of COVID -19, was the defendant unreasonable in not agreeing to extend and if so, should the court award specific performance.
On the first issue, the defendant’s relied on the clause of “time is the essence” to assert that he was ready, willing and able to close the transaction. The plaintiff relies on a 1973 Court of Appeal decision in King et al v. Urban & Country Transport Ltd. (1973) O.J. No. 2181 that held that a party cannot rely on a “time of essence” clause to defeat a transaction when that party was itself not ready, willing and able to close. The plaintiff submits that although the defendant tendered all the necessary documents on closing, he intended to retain the building, did not want to sell (certain email communications between defendant and his counsel infers this) and the defendant only tendered knowing that the plaintiff could not close. The court did not accept this as defendant’s counsel had received clear instructions on April 17 to close and further that if the plaintiff tendered the funds and the closing documents, the defendant would close. The defendant tendered with the intention to conclude the transaction in accordance with the APS and was ready, willing and able to close on April 27.
On the second issue, the plaintiff asserts that DUCA was unable to complete the loan because of COVID-19 and relied on two cases where the courts excused contractual non-performance because of the exigent circumstances arising from COVID-19. These cases do not assist the plaintiff. The plaintiff and DUCA had months to work on the financing. The APS was signed in December 2019, and the provincial emergency order was not invoked until March 20, 2020. DUCA was silent until April 22, commitment letter that was done after the closing date came with conditions which were hard to complete. There was no evidence that the plaintiff had the additional $750,000.00 to close the deal. Not only this, COVID-19 does not create a blanket excuse for non-performance. Although an exceptional circumstance, COVID-19 does not excuse contractual non-performance. Court rejected plaintiff’s argument that COVID-19 created an independent legal justification to excuse the failure to close on April 27. Claim for specific performance was dismissed and the defendant granted a declaration that the deposits have been forfeited.
Moral of the story: There exists no contractual, legal or equitable basis to excuse a non-performance of the contract and that the contract terminates when one party fails to fulfil its contractual obligation and does not tender.
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