In a falling real estate market, failed completions on pre‑sale contracts can quickly turn into expensive litigation for both buyers and developers. In the recent decision in Rhythm Living Ltd. v. Pereira, 2026 BCSC 555, the BC Supreme Court (the “Court”) confirmed that purchasers cannot easily walk away from a residential deal based on incomplete extras or emerging defect concerns, even where there are legitimate issues at the property shortly before closing.
The decision reinforces that courts will generally enforce real estate contracts and will be reluctant to excuse completion obligations absent either clear contractual termination rights or truly fundamental problems affecting the property.
More broadly, the case provides useful guidance for developers and purchasers on three recurring issues in failed completion disputes, including:
- when unperformed contractual items are merely “terms” rather than true “conditions”;
- when construction deficiencies or moisture issues render a property “unlivable” and the contract terminable; and
- how damages will be assessed following a failed completion in a declining market.
Background: pre‑sale purchase and last‑minute concerns before closing
The case arose from a pre-sale purchase of a new residential strata unit in Sidney, BC. The purchasers agreed to buy the unit for $799,000 and negotiated several additional items into the agreement, including construction of a pergola, an extension of the patio landscaping, installation of an EV charger, and a Samsung “Frame” television.
After multiple extensions of the completion date, the purchasers ultimately refused to close.
Two days before completion, a leak and moisture issue was discovered in the unit. Portions of drywall were removed during investigation and remediation work. At the walkthrough, the purchasers also observed that the pergola and patio extension had not been started, and the TV and EV charger had not been installed.
The purchasers argued they were entitled to walk away from the contract because:
- the unfinished items were “conditions” of the contract; and
- the moisture damage rendered the unit effectively “unlivable”.
The Court rejected both arguments and awarded the developer over $143,000 in damages, in addition to forfeiture of the $75,000 deposit.
Not every deficiency allows a buyer to terminate the deal
One of the more useful aspects of the decision is the Court’s careful distinction between:
- a contractual term (where breach leads to damages); and
- a true condition (where breach permits termination).
The Court emphasized that BC real estate contracts presumptively treat negotiated items as terms only, unless the agreement clearly states otherwise.
Although the pergola, patio extension, TV, and EV charger were important to the purchasers, the contract did not expressly characterize them as conditions. As a result, the purchasers were limited to a damages remedy rather than a right to refuse completion.
Importantly, the Court did not suggest parties are prohibited from creating contractual termination rights tied to specific deficiencies. In fact, the Court expressly reaffirmed the opposite: parties with equal bargaining power are generally free to structure their agreements however they choose, including by making certain obligations so fundamental that non-performance permits cancellation.
The key, however, is clarity. The Court emphasized that if parties intend a particular obligation to create a right of termination, the contract must clearly say so. Ambiguity will generally be resolved in favour of preserving the contract and limiting the non-breaching party to expectation damages instead. This is particularly important for developers and purchasers negotiating pre-sale and custom-build agreements.
In practice, parties often negotiate highly specific features, such as upgraded finishings, amenity components, landscaping, parking, and view protections, without expressly addressing the consequences of non-delivery. This decision highlights that courts are unlikely to infer a termination right merely because a negotiated item was important to one side. If parties truly intend that failure to deliver a particular feature will permit a buyer to walk away, they should say so expressly and unequivocally in the agreement itself.
When is a property “unlivable” enough to justify terminating the contract?
The purchasers argued that the moisture intrusion and ongoing investigation work rendered the unit “unlivable”. The Court confirmed that a buyer may refuse to complete if the seller cannot deliver a “livable” residential property at closing. However, the Court set the bar high.
The relevant question was whether “a reasonable person would be willing to live in it.”
Here, the Court found that only one bathroom was affected, the issue was under investigation and remediation, the unit remained usable overall, and ordinary residents routinely tolerate repair work while occupying homes. Even assuming there was visible mold, the Court concluded the situation was “annoying and unpleasant,” but not enough to render the premises unlivable.
This is an important practical distinction. Many purchasers assume that discovering water ingress, deficiencies, mold concerns, or unfinished work near closing automatically creates a right to terminate. This decision strongly suggests otherwise.
Unless the defect truly deprives the buyer of substantially the whole benefit of the bargain, courts are likely to treat the issue as remediable through damages, holdbacks, warranty claims, or post-closing repairs.
Practical takeaways for buyers and developers
1. Be explicit about what gives rise to a right to terminate
One of the clearest lessons from Rhythm Living is that courts will not lightly infer a right to terminate a contract. If the parties intend that failure to complete a particular obligation (whether construction-related, aesthetic, financial, or occupancy-related) will permit cancellation of the contract, the agreement should say so expressly.
That is particularly important in purchases involving pre-sales, upgrades and customizations, landscaping or amenity commitments, phased completion obligations, or negotiated extras added after the standard form contract is signed.
Absent clear language creating a true “condition” or express termination right, courts are likely to treat deficiencies as issues that can be addressed through damages, holdbacks, or post-closing remediation instead.
2. Distinguish between ordinary defects and true livability issues
This decision reinforces that not every defect, delay, or construction issue justifies refusing completion.
For ordinary contractual deficiencies or failure to deliver on certain contractual obligations, the question is whether the breach deprives the buyer of “substantially the whole benefit of the bargain.” Missing upgrades, incomplete landscaping, delayed finishing work, or other non-essential deficiencies may not meet that standard.
Separate from that analysis is the issue of whether the seller can deliver vacant possession of a “livable” residential property at closing. In that context, the Court framed the test as whether a reasonable person would be willing to live in the unit despite the deficiency or repair issue.
The legal threshold remains high in either case. The issue is not whether the property is imperfect, inconvenient, or temporarily damaged. Many problems, including water ingress, incomplete repairs, unfinished deficiency items, or ongoing remediation work, may still leave a unit legally livable and capable of completion.
Before taking a position that completion can be refused, parties should carefully assess:
- the actual extent and impact of the issue;
- whether the buyer has truly lost substantially the whole benefit of the bargain;
- whether the property remains reasonably livable;
- whether the issue can be remediated post-closing; and
- whether contractual protections already exist through warranties, holdbacks, or deficiency obligations.
3. Consider practical solutions before treating the deal as dead
When issues arise close to closing, parties should assess whether there is a workable path to completion that addresses the outstanding concerns without immediately abandoning the transaction.
In some cases, that may include holdbacks, escrow arrangements, short extensions of the completion date, agreed remediation plans, price adjustments, or other mechanisms that allocate risk while preserving the closing. Exploring structured, practical solutions at an early stage can significantly reduce the time, cost, and complexity of resolving the dispute, particularly where the underlying issues may not justify full-scale litigation.
With that said, care is required in how these discussions are framed and documented. Depending on the circumstances, proposals that proceed on the basis that completion will occur may later be relied on as inconsistent with a position that the buyer is entitled to terminate the contract. Parties should therefore ensure that any interim discussions are approached deliberately and with appropriate legal advice.
4. Document deficiencies and communications carefully
This case also highlights the importance of maintaining clear records when disputes emerge near closing. Photographs, deficiency lists, investigative reports, remediation timelines, walkthrough records, and written communications may all become critical evidence if the transaction later results in litigation.
That is especially true in fast-moving closing disputes where parties later disagree about:
- the seriousness of deficiencies;
- what was communicated;
- whether remediation was underway; or
- whether proposed solutions were reasonable.
5. Remember the financial exposure in a falling market
The decision is also a reminder that failed completion claims can carry significant financial consequences in a declining market.
A party who wrongly refuses to complete may face forfeiture of the deposit, liability for the difference between the contract price and resale price, and responsibility for additional carrying costs and other consequential damages.
Where market conditions have shifted materially between contract formation and closing, that exposure can be substantial. Parties should consider obtaining legal advice early when a dispute emerges that may affect the decision whether or not to proceed to completion, both to understand the available remedies and to assess the potential financial consequences of the position being taken.
Final thoughts
Rhythm Living Ltd. v. Pereira reinforces a familiar but important principle: in BC, real estate contracts are meant to provide certainty, especially in volatile markets. Absent clear contractual language or truly fundamental defects, courts are unlikely to let buyers treat ordinary or remediable deficiencies as a reason to walk away from a deal.
For developers and sellers, the decision confirms that courts will enforce completion obligations and are prepared to award meaningful market-loss damages where purchasers improperly refuse to close without a solid legal basis.
For buyers, it is a reminder that declining to complete carries significant risk, and will generally only be justified where the contractual entitlement or factual basis for doing so is clearly established.
If you are facing a disputed completion or potential failed real estate transaction in BC, a lawyer from Miller Thomson’s Commercial Litigation Group can help you assess your contractual rights, the strength of any termination position, and the financial exposure associated with proceeding, or not proceeding, to closing.
