Ayuba v. Erhunmwun, 2025 ONSC 3639
The Facts
In Ayuba v. Erhunmwun, Justice Charney dealt with a situation that has become all too familiar in Ontario’s real estate market: what happens when a builder goes into receivership and leaves assignment purchasers holding the bag? The nuanced decision distributed the losses in a common sense manner among the various parties involved.
The defendant, Bello Erhunmwun, had entered into an agreement of purchase and sale with Stateview Homes for a new home in Barrie for $949,990. He later decided to assign this agreement and listed it with Hometon Inc. for $1,280,000. The plaintiffs, Mary and Audu Ayuba, agreed to purchase the assignment, paying Bello a total of $256,000 in deposits (with the balance of $1,280,000 to be paid to Stateview at closing).
Before the home was ever built, Stateview Homes went into receivership in June 2023, and all purchase agreements were terminated. The Ayubas sought the return of their $256,000 deposit from Bello. Bello argued he should be able to keep it, or at least deduct his expenses, including the $65,088 commission he had paid to Hometon.
The Key Legal Issues
The court dealt with four main questions, all turning on contract interpretation:
- Must the deposit be returned?
The Assignment Agreement contained a clear provision at paragraph 17 stating that if the agreement could not be completed due to the Stateview’s default, “all monies paid by the Assignee under this Assignment Agreement shall be returned to the Assignee in full without interest.”
Bello argued that paragraph 6 of the Vendor’s Consent Agreement (signed later with Stateview) nullified this provision through its indemnification clause. Justice Charney rejected this argument for two reasons: First, the Vendor’s Consent Agreement expressly incorporated the financial terms of the Assignment Agreement. Second, the indemnification clause only applied to breaches by the assignee and there was no such breach here.
- Can expenses be deducted?
Bello had paid Stateview’s assignment fees ($7,500 plus HST and $950 in legal fees) and Hometon’s commission ($65,088 total). He argued these should be set off against the refund owed to the Ayubas.
Justice Charney found no basis for Bello’s claim. His payments arose from separate contracts to which the Ayubas were not parties, and nothing in either the Assignment Agreement or Vendor’s Consent Agreement obligated the Ayubas to reimburse these expenses. Rather, the Assignment Agreement expressly stated that the deposit must be returned “in full.”
The court found that the contracts must be read as a whole, giving words their ordinary meaning. The phrase “in full” means exactly that. The entire deposit must be returned, not the deposit minus expenses.
- What about the Tarion payment?
The Ayubas had received $94,999 from Tarion Warranty Corporation. The court agreed with the plaintiffs’ calculation that 72% of this payment related to the $80,000 deposit originally paid to Stateview, with the remaining 28% relating to upgrade deposits paid directly by the Ayubas. Accordingly, $68,399.28 was deducted from the $256,000 refund, leaving a judgment of $187,600.72.
- Must the real estate brokerage return its commission?
This may be the most significant takeaway for practitioners. Hometon argued it had completed its services by bringing the assignment to closing and had incurred significant expenses. Justice Charney disagreed.
The court looked at the definition of “property” in the Listing Agreement (“Lot 2 project – Hampton Heights in Barrie by Stateview Homes”) and noted that the commission was calculated on the full $1,280,000 purchase price, not just the assignment value. The Assignment Agreement itself contemplated a final payment to Bello only when Stateview transferred title to the Ayubas.
Reading the contract as a whole, Justice Charney concluded that “the transaction contemplated” was the purchase of the actual property, not just the assignment. Citing Green v. Shamash, 2018 ONSC 1810, the court confirmed that real estate agents are paid on a contingency basis. They get paid when the deal closes, or if failure to close is due to the seller’s default or neglect. Since the transaction failed due to the builder’s bankruptcy (not Bello’s fault), Hometon had no contractual right to retain the commission.
Practice Points
For transactional lawyers, this case offers several important reminders:
- Draft clear default provisions: Paragraph 17 of the Assignment Agreement was decisive because it clearly addressed what would happen if the underlying sale failed.
- Define your terms carefully: The definition of “property” and “transaction” in the Listing Agreement was critical to determining whether Hometon earned its commission.
- Beware of conflicting provisions: When using multiple standard forms (OREA Form 145 for the Assignment Agreement, OREA Form 200 for the Listing Agreement, and a custom Vendor’s Consent), ensure they work together harmoniously.
- Consider recovery from warranty payments: When negotiating refund provisions in assignment agreements, consider how any recovery from warranty payments should be allocated between deposits paid to the assignor versus deposits paid directly to the builder.
- Real estate commissions are contingent: Brokerages and their clients should understand that absent seller default, no closing means no commission. This holds true even if the agent did significant work and the assignment itself closed.
In an era where builder insolvencies remain a risk, careful drafting of assignment agreements can help your clients avoid expensive litigation over who bears the loss when a project fails.
