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ARTICLE · 01 JULY 2026

Lost Development Profits in Failed Real Estate Deals: ONCA Clarifies Damages and Mitigation

McCarthy Tétrault
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The Ontario Court of Appeal examines whether lost development profits can be recovered when a commercial real estate transaction fails, and what evidence is required to establish that damages should be reduced through mitigation. The decision provides critical guidance on when courts will award damages beyond traditional market-value measures in real estate disputes.

CanadaLitigation, Mediation & Arbitration
The Lay Of The Land Blog
The Lay Of The Land Blog
Emily Strike
Emily Strike
Eli Mogil
Eli Mogil
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When can a party recover lost-profit damages following a failed commercial real estate transaction?

In Block Developments Inc. v. Brewers Retail Inc., 2026 ONCA 431, the Ontario Court of Appeal provides important guidance on when lost-profit damages may be awarded following a failed commercial real estate transaction and on the evidentiary burden required to establish a mitigation defence.

Why It Matters

The Court upheld an award of lost development profits arising from the loss of a specific and well-defined development opportunity that was known to both parties at the time of contracting.

The decision highlights that sometimes lost profits may be awarded as the true measure of damages where they best capture the plaintiff’s loss, notwithstanding the traditional market-value measure of damages . Transacting parties about to terminate an agreement of purchase and sale (APS) or have their APS terminated should bear this in mind.

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