A vendor who says nothing is usually safe. Caveat emptor puts the burden of risk on the buyer. 6751067 Canada Inc. v. 16002731 Canada Inc., 2026 ONSC 4754, released August 18, 2026, marks the limit. The vendor knew its tenant had walked away and stayed quiet until the purchaser had waived its only condition. On a summary judgment motion, the court held that this silence breached the duty of honest performance. It ordered the $150,000 deposit returned to the purchaser. The decision is just as pointed about what the purchaser’s side should have done.

The deal

The property was a commercial building, at 1480-1488 Stittsville Main Street in Ottawa. The purchaser agreed to buy it for $2,710,800 under an agreement dated April 19, 2024, which the parties entered into on April 21 (para. 6). The agreement had one condition, a satisfactory commercial inspection by May 3 (para. 10).  It had no financing condition. The purchaser left that out because it believed the property performed well and hoped to lower the price (para. 62). Schedule A warranted that the listed tenancies in Schedule B were the only leases affecting the property (para. 11).

One of those leases was to a dance studio at $6,500 a month. The studio never took possession, and the unit was empty when the purchaser first viewed the property on April 18 (para. 17). On April 25, the studio told the vendor’s principal it would not honor the lease because it had decided to lease other premises. It confirmed this in writing the same day (paras. 18–19). On April 30 the vendor told the studio it could not change the lease because the property was conditionally sold (para. 20).

The vendor did not pass this on to the purchaser. At the April 29 inspection, the vendor’s agent told the purchaser’s agent only that the studio might want to leave. The court accepted that this was said in uncertain terms that gave the purchaser no reason for concern (para. 67,73).

On May 2 the purchaser delivered a notice of fulfillment waiving its condition. The parties also agreed to an amendment cutting the price by $30,000 and moving closing up. The day after the waiver, the vendor’s agent emailed that the studio wanted to be released from its lease. She did not mention that it had never moved in or that it had leased elsewhere (para. 25). The purchaser declined to release the studio.

The lost tenant represented roughly 30 per cent of the property’s income (para. 48). The purchaser’s financing depended on that income. It could not get a loan from its bank or from alternative lenders, and the deal did not close despite extensions (paras. 26–27). The vendor later resold the property for $85,800 less (para. 27).

Caveat emptor, conceded

Doyle J. gave the vendor much of its argument. The purchaser was a sophisticated investor who could have protected itself by contract and had not (paras. 34, 36, 86). The court listed what a prudent commercial purchaser might have done: requested tenant estoppel certificates, required confirmation that no termination notices had been given, required the leases to stay in good standing until closing, added a material adverse change clause, and made financing conditional on the existing income continuing (para. 35).

The inspection condition could not be used to escape the deal either (paras. 37–39).

The vendor also argued that the $30,000 price reduction reflected the studio’s departure. The court rejected that. The reduction dealt with inspection deficiencies and the earlier closing, and between sophisticated parties, something as significant as a loss of about 30 per cent of gross rent would have been mentioned in the amendment (paras. 77–80). The vendor’s position was also difficult to reconcile. It argued it had no duty to tell the purchaser about the lease, yet it also asserted that the purchaser already knew (paras. 74–75).

Honest performance, applied

What decided the case was C.M. Callow Inc. v. Zollinger, 2020 SCC 45. Drawing on Callow, Doyle J. noted that knowingly misleading a counterparty can include half-truths, omissions and even silence, depending on the circumstances (paras. 43–44). Silence can be dishonest where it knowingly creates or perpetuates a false impression (para. 47).

The court made four findings (para. 48):

• the vendor knew of the termination before the waiver;
• the tenant represented about 30 percent of the income;
• financing depended largely on that income; and
• the vendor knew the purchaser was proceeding on the assumption that the rental income remained substantially intact.

Although caveat emptor remains an important principle in commercial real estate, it does not permit one contracting party to knowingly mislead the other during performance of the contract. (para. 83)

The timing was the problem:

Here, the plaintiff intentionally remained silent until after the waiver of the only condition because disclosure would likely have prevented waiver of the condition. This silence was dishonest and sufficiently serious to justify the defendant’s refusal to complete the agreement. (para. 85)

Two limits are worth noting. First, the court accepted that nothing in the contract required disclosure. It rested the outcome on the common law duty of honest performance instead (para. 84). Second, the court accepted that the vendor would ordinarily have kept the deposit (para. 86). On this reasoning, the case does not create a general duty to disclose. The duty prohibits knowingly misleading the other party about matters directly linked to performance of the contract (para. 46). Silence qualified here because of what the vendor knew and when it chose to speak.

The remedy also deserves attention. In Callow the breach sounded in damages (para. 42). Here the court treated the breach as serious enough to justify the purchaser’s refusal to complete and ordered the deposit returned (paras. 5, 85). How far later courts will extend that reasoning to other failed closings remains to be seen.

Key takeaways for transactional counsel

1. Acting for a vendor, advise disclosure before a condition is waived. Once your client knows of a material change like a departing tenant, holding the news until after waiver is what turned silence into dishonesty here.
2. Make vendor disclosure complete, not hedged. Two partial disclosures did not protect the vendor. One was telling the other side the tenant might want to leave. The other was a later email that omitted that the tenant had never moved in and had leased elsewhere.
3. Acting for a purchaser, bargain for protection rather than relying on honest performance. Use the court’s own list: estoppel certificates, no-termination confirmations, a covenant that leases stay in good standing to closing, a material adverse change clause, and financing tied to existing income. A warranty that the listed leases are the only leases is not a warranty that they are in good standing.
4. Document the advice when a client drops the financing condition. Here it was left out to help lower the price. It left the purchaser exposed the moment the income changed.
5. Write the reason for a price amendment into the amendment. The vendor’s claim that the $30,000 reduction reflected the lost tenant failed in part because the amendment said nothing about it.
6. Treat a vacant unit on a walk-through as a question to put in writing. The purchaser saw the unit empty before offering (para. 35). The vendor’s agent orally assured the purchaser’s agent during an April 19 walkthrough that the listed income was accurate (para. 59). The agreement contained no representation that the leases would remain in force (para. 34).