Many Ontario homebuyers assume that once their real estate offer is accepted, the property will remain in the same condition until closing. Unfortunately, that is not always the case. The property was pristine when you first viewed it — clean, undamaged, move-in ready. Then, on closing day, you walk through the door to find scratches across the hardwood floors, holes punched in the walls, and water stains spreading across the ceiling.
Because the Offer did not specifically include clauses to address property damage, you now face two unappealing choices: spend time and money suing the sellers, or accept the damaged property as-is. This is exactly what happened to our client Jimmy. In the end, he took the property as it is and is now going to spend a lot of money fixing up the place. This outcome is entirely preventable with the right wording in the Agreement of Purchase and Sale (APS).
Why Property Damage Before Closing Creates Legal Problems in Ontario
Between an accepted offer and the closing date, properties can suffer flood damage, fire damage, appliance failures, water leaks, storm damage, or have fixtures unexpectedly removed by the sellers. Most buyers focus heavily on the purchase price, mortgage approval, home inspection, and closing date — but many never consider what happens if the property deteriorates before they receive possession.
Problems become especially acute when damage occurs close to the closing date, because by then most buyers have already:
- Sold their current home and have nowhere to return to
- Arranged financing that is contingent on closing
- Booked movers and transferred utilities
- Committed to a closing deadline, they cannot easily shift
At that stage, legal leverage becomes complicated — and the outcome depends almost entirely on what your Agreement of Purchase and Sale says.
In Ontario, sellers are generally required to maintain the property in substantially the same condition until closing. However, the legal outcome when this obligation is breached depends on:
- The specific wording of the Agreement of Purchase and Sale
- The severity of the damage
- Whether the seller’s insurance applies
- Whether repairs can realistically be completed before closing
Minor issues may not justify delaying or cancelling the transaction. More serious damage may create disputes involving repair obligations, insurance proceeds, price adjustments, holdbacks, delayed closings, or termination rights. This is why proper drafting at the offer stage is so important.
Why the Agreement of Purchase and Sale (APS) Matters
The Agreement of Purchase and Sale is not just a formality. It is the legal contract that determines the rights and obligations of both parties throughout the entire transaction, including what happens if something goes wrong before closing.
Many Ontario buyers rely entirely on standard clauses without considering whether additional protection should be added based on the property’s condition, renovation status, or specific transaction risk. Well-drafted additional clauses can address:
- Damage that occurs before closing
- Repair obligations and standards
- Inspection rights and timelines
- Appliance and fixture conditions
- Renovation completion requirements
- Insurance responsibilities
Clear wording reduces ambiguity and helps prevent the disputes that derail closings and end up in court.
What should be included in the Agreement of Purchase and Sale to Protect You From Getting Damaged Property?
To protect yourself from receiving damaged property at closing, your Agreement of Purchase and Sale should always include: (1) a property inspection clause and (2) a specific remedy clause — ideally a purchase price reduction equal to the inspector’s repair estimate. You should also conduct a final walkthrough close to closing. Without these protections, your legal options on closing day are extremely limited.
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ALWAYS include a property inspection clause
Most buyers are not professional property inspectors. What looks like a beautifully staged home during a viewing can conceal water damage, structural issues, broken windows, and hidden mould. A property inspection clause should be included in every real estate offer — without exception. A few hundred bucks spent on the inspection can easily save thousands or even tens of thousands of dollars in repairs later.
Any damages noted during the inspection can be written into the Offer to be fixed. Or the buyer can simply back out of the Offer after the inspection and get their full deposit back.
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ALWAYS include the specific solution to any property damages
When there is property damage, both sides will likely begin long and costly negotiations between their lawyers. To avoid this pain, it’s best to pre-emptively write the solution into the Offer. There are typical 3 solutions available when there is property damage:
- The seller must fix the damage before the closing date. This is my least favourite option because, depending on the type of damage, there may not be enough time for the seller to fix it. And the buyer and the seller can get into a long argument about what is considered “fixed”.
- The seller needs to lower the purchase price in consideration of the amount of money needed to fix the damage. This is a much easier solution and likely what your real estate lawyer will recommend. The debate then becomes how much money would it take to fix the damage? Both sides usually try to get their own renovation company to provide a quote, then argue over it. It’s much easier if a preset amount can be entered into the Offer after the property inspection is complete and before the property inspector provides an estimate of how much it would cost to fix their noted damages, if you ask them.
- The buyer can back out of the deal – this option is unnecessary if you have the property inspection clause in the Offer, which already allows you to back out of the deal.
The Prevention vs. the Solution
When it comes to property damage in your newly purchased home, prevention is always better than a solution.
Ensure there is a property inspection clause in your Offer. After you conduct the inspection, an amendment to the Offer should be made by your realtor, which would contain the price reduction on account of the property damage.
For example, when I bought my current home, the inspector estimated it would cost $5000 to fix all the broken windows in the house. The seller lowered the purchase price by $5k in the updated Offer we signed. The deal closed smoothly without any further arguments.
In contrast, if the Offer did not anticipate or address any property damage issues, then it’s very difficult to resolve. On the closing date, our client Jimmy found several holes in the ceiling, scratch marks on the floor, and damaged walls due to the TV being removed. But because there was no clause in the Offer addressing this, and the sellers insisted that those damages existed during the 1st viewing of the property, Jimmy does not have many options.
Since those damages did not result in a substantial or major breach of the Offer, Jimmy must complete the purchase (click HERE to learn more about substantial breach). Perhaps he could hire lawyers to file a Small Claims Court case against the seller, but the additional time and money required to do so are not worth it. He might as well just use those funds to repair the damage himself.
Conclusion
Property damage can easily cost thousands or tens of thousands of dollars to fix. To protect yourself as a buyer, always include a property inspection clause in the Offer. If the inspection reveals damage, specify a solution in the updated Offer.
If possible, always choose a price reduction rather than seller repairs as a solution. Because buyers and sellers often have different expectations on what is considered “fully repaired”.
If you have any questions regarding your real estate purchase or sale, please click HERE for a 1st free consultation.
