By Anna Sekunova and Cameron Fox

Parties negotiating agreements for sale of real estate always hope that closing day goes smoothly – but it is important to ensure that agreements are structured to protect your legal rights in the event things don’t go as planned. The recent decision in Sandhu v Uppal Farms & Greenhouses Ltd, 2022 BCSC 1373 is an example of a collapsing deal that was saved by a court’s determination that the tender (ie payment) by the purchaser of the purchase funds was sufficient.

In Sandhu, the parties entered into a contract for the sale of an Abbotsford farm property. The parties agreed that:

• The buyer would deposit all documents needed to transfer title with the Land Title Office (the “LTO”) by 4pm on the closing date.
• The buyer would provide the purchase price “on or before” the closing date.

As the scheduled closing date approached, things started to go sideways. The buyers had difficulty obtaining the insurance required for their mortgage, and the parties agreed to a brief extension of the closing date. On the new closing date, the insurance was still being finalized and the buyers requested another extension to the next day. This time, the sellers refused, and at 5:03 PM wrote to the buyers claiming the purchase price has not been paid on time, and the Contract was therefore cancelled.

Miraculously, the buyers were able to obtain their insurance at around the same time, filed the necessary transfer forms with the LTO before it closed for the day, and at 7:42 PM emailed the sellers to say that all required documents, including payment by a solicitor’s trust cheque, were available for immediate delivery. This email also requested that the cheque not be cashed until the following morning, since the funds from the new mortgage could not be deposited until then. The sellers insisted that the Contract was terminated and refused to accept the cheque. However, since the buyers already filed the transfer forms with the LTO, the property was transferred without the seller ever receiving their payment. They sued, seeking an order that the subject property be transferred back to them.

The sellers did not succeed. The court found that the buyer’s tender of purchase price was proper and the title was properly transferred to them:

• First, the Court concluded that the buyers’ failure to file the documents with the LTO prior to 4:00 PM on the closing date was only a “technical” breach and did not allow the sellers to claim that the Contract had been cancelled.[1]
• Second, the Court found that the Contract did not require the buyers to pay the seller before the end of business hours on the closing date.[2]
• Finally, the Court agreed that the buyers’ offer to deliver the trust cheque on the closing date – even with a request that it not be cashed until the next morning – was sufficient tender of the purchase price to satisfy the buyers’ obligations under the Contract.

On this final point, the Court reviewed the law applicable to payment of the purchase price, legally known as “tender”:

In this type of contract the promise to pay and the promise to convey are mutually dependent and conditional. Tender under such circumstances may be proof that the party tendering is ready, willing and able to complete his part of the contract, but tender itself is not essential. What is essential is that the paying party show both his ability to perform and an indication of that ability to the other party. [3]

Here, the buyers had made it clear in their late-evening email that they were able to pay before the end of that day. Although it was likely that there were insufficient funds in the trust account to honour the buyers’ trust cheque when the email was sent, trust cheques were a valid form of payment under the Contract and the system of real estate transactions in BC could not function if trust cheques were not accepted as a guaranteed form of payment.[4] Therefore, the buyers’ last-minute actions constituted proper tender of the purchase price under the Contract which ensured that the transaction completed.

This decision emphasizes the importance of understanding the mechanics of proper tender to ensure that real estate transactions proceed as smoothly as possible. If you have any questions about tender obligations or real estate transactions in general, please contact the writer.

[1] At para 31.

[2] At paras 41-42.

[3] At para 49, quoting from Hundley v. Garnier, 2012 BCCA 199 at paras 75-76.

[4] At paras 53 and 59.