Tenant Refuses to Leave Before Closing Ontario

What Happens If Tenants Refuse to Leave Before Closing? Key Legal Insights for Buyers and Sellers

If a tenant refuses to leave before closing in Ontario, it can create serious legal and financial challenges for both buyers and sellers. Under Ontario law, the seller’s responsibility depends on the Agreement of Purchase and Sale (APS) terms, but the buyer may also have legal remedies. This article explores what happens when a tenant refuses to vacate before closing in Ontario, reviewing seller liability, buyer rights, and case law insights. The recent Ontario case Lees v. Ahmadi (2022 ONSC 1114) offers critical lessons for navigating these situations.

What Happens When Tenants Refuse to Leave?

When tenants refuse to vacate a property before the agreed-upon closing date, several legal and financial questions arise:

1. Can the Seller Be Held Liable?
2. What Remedies Does the Buyer Have?
3. Who Covers Temporary Accommodation Costs for the Buyer?
4. Are There Circumstances Where the Seller Is Not at Fault?

Understanding these issues is crucial for avoiding disputes and ensuring smoother transactions.

Seller’s Liability for Tenants’ Actions

The seller’s liability largely depends on the language in the APS. In Lees v. Ahmadi, the APS required the seller to serve the requisite notices to tenants to vacate but did not explicitly mandate that the seller guarantee vacant possession by the closing date.

Key Details of Lees v. Ahmadi:

• The buyer, Ms. Lees, refused to close when tenants failed to vacate by the agreed date, asserting that the seller, Mr. Ahmadi, breached the APS.
• The court ruled that Mr. Ahmadi fulfilled his contractual obligations by serving proper notices under the Residential Tenancies Act, 2006.
• The court emphasized that the seller’s responsibility ended with serving notices, not ensuring vacant possession.

This case highlights the importance of clear contract language and demonstrates that a seller may not be liable for tenants’ refusal to leave if they have fulfilled their obligations as outlined in the APS.

Seller’s Liability for Buyer’s Temporary Accommodation Costs

When a seller is contractually obligated to deliver vacant possession but fails to do so due to a tenant’s refusal to vacate, the buyer may incur additional expenses, such as temporary housing costs. In such cases, the buyer can seek damages to cover these unforeseen expenses.

Case Illustration: Sivasubramaniam v. Mohammad (2018 ONSC 277)

In Sivasubramaniam v. Mohammad, the Ontario Superior Court of Justice addressed a scenario where the seller failed to ensure that tenants vacated the property by the agreed-upon date, breaching the APS and leading to additional costs for the buyer.

Key Facts of the Case:

• Agreement Terms: The APS required the seller to provide vacant possession by the closing date.
• Seller’s Actions: While the seller served notice to the tenants as required under the Residential Tenancies Act, they failed to take further necessary steps to enforce the notice or ensure the tenants vacated. This included a lack of follow-up legal actions when tenants did not comply within the notice period.
• Buyer’s Situation: As a result of the delay, the buyer was unable to take possession of the property and incurred temporary accommodation costs and other financial losses.

Court’s Findings:

• Breach of Contract: The court found the seller liable for failing to deliver vacant possession, emphasizing that simply serving notice without ensuring compliance was insufficient.
• Entitlement to Damages: The buyer was awarded damages for the additional costs incurred, including temporary accommodation and related expenses.

This case highlights the importance of not only meeting contractual obligations but also ensuring that actions taken are sufficient to fulfill the intended purpose of those obligations, such as delivering vacant possession.

Buyer’s Remedies When Tenants Refuse to Leave

If tenants do not vacate the property, buyers have several potential remedies:

1. Affirm the Contract and Seek Damages: Buyers may choose to close the transaction and later sue for damages resulting from the seller’s inability to provide vacant possession.
2. Terminate the APS: If the breach is significant, buyers may terminate the agreement, tender on closing, and pursue a claim for their deposit and any damages incurred.
3. Renegotiate Closing Terms: Both parties may agree to extend the closing date, allowing time to resolve the tenancy issue.

Who Covers Temporary Accommodation Costs?

If buyers incur costs for temporary accommodations due to tenants’ refusal to leave, these may form part of a damages claim. However, as seen in Lees v. Ahmadi, the seller’s liability hinges on whether they fulfilled their contractual duties. If the APS does not explicitly require the seller to ensure vacant possession, they may not be responsible for such costs. Conversely, as demonstrated in Sivasubramaniam v. Mohammad, sellers who breach the APS may be required to cover these additional expenses.

Instances Where the Seller May Not Be at Fault

Sellers may not be at fault if:

• They have served proper notices to tenants within the required timelines under the Residential Tenancies Act.
• The APS language limits their obligations to serving notices and does not mandate vacant possession.

In Lees v. Ahmadi, the court ruled that the seller was not at fault because the APS only required notice to tenants, which the seller had served. The buyer’s choice of a closing date that did not allow sufficient time for tenants to vacate was a contributing factor.

Importance of Contract Language

The Lees v. Ahmadi case underscores how the language of APS clauses directly impacts a seller’s responsibilities. Clearly defined terms can prevent disputes by specifying whether the seller’s obligation ends with serving notices or extends to providing vacant possession. Buyers and sellers should work with legal professionals to draft agreements that reflect their expectations and address potential complications.

Current LTB Timelines and Challenges

The delays at the Landlord and Tenant Board (LTB) further complicate these scenarios. As of January 2025, hearing wait times for non-payment and eviction applications average five to eight months. These delays mean that obtaining vacant possession through legal channels may not align with typical closing timelines.

Visit the Landlord and Tenant Board for more information.

Final Thoughts

Navigating the sale of a tenanted property requires careful planning and a clear understanding of legal obligations. The Lees v. Ahmadi and Sivasubramaniam v. Mohammad cases demonstrate the importance of precise APS language, the limits of a seller’s liability, and the need for buyers to consider statutory notice periods when setting closing dates.

Read our guide on What Happens When a Real Estate Transaction Doesn’t Close on Time for more insights.

Every case has its own unique variables, and the best course of action will depend on the specific circumstances. For personalized guidance and representation, trust Bozai Law to help you navigate these challenges and protect your interests.

Disclaimer

The information provided in this article is for general informational purposes only and does not constitute legal advice. Reading this article does not create a lawyer-client relationship between you and Bozai Law. Every legal situation is unique, and the application of law varies depending on specific circumstances.

If you require legal advice tailored to your situation, you should consult a qualified lawyer before taking any action. Bozai Law expressly disclaims all liability for any reliance placed on the information contained herein.

For legal assistance, please contact Bozai Law at [email protected] to schedule a consultation.