Did you know that if you bought a pre-construction condo and you email the developer and say “Mr. Builder, I wasn’t approved for a mortgage and I can’t close”, they can interpret this as an Anticipatory Breach of Contract!

The Legal Definition

In the context of Ontario law, an Anticipatory Breach (also called Anticipatory Repudiation) is when one party clearly communicates-through words or actions-that they cannot or will not fulfill their side of the deal before the actual closing date arrives.

It isn't just a worry or a "maybe." It must be a clear, unequivocal indication that the party intends to abandon their obligations.
The Test: Would a "reasonable person" conclude that the party no longer intends to be bound by the contract?

In today's market, this usually originates from the Buyer's side due to mortgage qualification issues, appraisal gaps, high interest rates, or price drops.

The Innocent Party’s Move:

When you commit an anticipatory breach, you hand the "innocent party" (usually the builder) two distinct legal paths. They do not have to wait until the closing date to choose:

Accept the breach:

They treat the contract as "dead" immediately.
They get to keep your deposit and re-list the unit now while there's still a buyer.

Affirm the Contract

They ignore your "threat" and insist you close on the original date.
They get to hold you liable for the full purchase price and sue you for the "Price Gap" later.

Save Versus Dangerous Language

If you are a buyer who knows they can't close, you must be very careful with your language because the difference between a "request for help" and an "anticipatory breach" is often just a few words. Always have a lawyer craft any communication between yourself and the developer so that they can properly use "Without Prejudice" language. You want to explore options (extensions, credits) without legally jeapordizing the deal.

Dangerous (Repudiation):

I cannot get a mortgage and won't be closing on Friday.
The appraisal is too low, so I'm not paying the remaining balance.""
I'm walking away from this deal; keep the deposit.""

Safe (Inquiry/Negotiation):

We are experiencing a delay in financing and request an extension to finalize our lender's requirements.
We have identified a valuation gap and would like to propose a Vendor Take-Back (VTB) to ensure the deal closes on time.
My client is interested in exploring a Mutual Release where both parties can exit the contract amicably.

NOTE: I am not a lawyer and this does not constitute legal advice. If you are having difficulties closing on a pre-construction condo purchase, please seek professional legal advice.

____

Kyle Dovigi
Real Estate Broker | CondoMillionaire.com
Anyone can become a Condo Millionaire - it all starts with one.