Help! the homebuyer failed to deliver the deposit

In Ontario, deposits are due 24 hours following the acceptance of an Agreement of Purchase and Sale, unless otherwise agreed to or specified within the Agreement. 

During the pandemic, however, offers have been made and accepted via email. This practice has led to a recent trend where buyers are not providing the deposit for accepted offers. This is likely because purchasers provide offers on multiple properties simultaneously and then only follow through with one, leaving the remaining sellers high and dry. 

What should you do if you are a stiffed seller?

If the transaction isn’t closed: legal matters.

In Canada, deposits fall under contract law. Contract law is generally based around the idea of damages – upon contract breach, the aggravated party is typically compensated for damages they suffer. But deposits work differently. As stipulated in the contract or the Agreement of Purchase and Sale, if the purchaser refuses to close the transaction, the deposit is forfeited (unless the parties bargained otherwise). The buyer may also have their deposit returned if the deposit is so large that a court would consider it “unconscionable” for the buyer not to get the money back. Of course, this is also dependent on the circumstances around why the contract went unfulfilled.

 

But if the buyer is the one who fails to provide the rest of the funds required by the purchase, in effect failing to close the transaction, the buyer usually is out of luck. This is true even if there are no actual damages to the seller – for example, if the seller decides to sell the property to someone else instead. 


The BC Court case Tang v. Zhang has been relied upon as a precedent case by other provincial courts. The BC Court of Appeal affirmed that the seller is entitled to keep the deposit if the buyer is at fault, even if they haven’t suffered any damages. The deposit itself is technically not part of the Agreement of Purchase and Sale (although the funds count towards the purchase price).

What are your rights, as a seller?

As the law concerning real estate deposits doesn’t favour the buyer, we can see why this unsavoury trend of buyers withholding the deposit has emerged. However, sellers are not totally without legal recourse in this situation. The seller can sell to someone else and then bring a claim against the buyer for a breach of contract – although the legal costs may prove this to be not worthwhile. However, given that a failure to provide a deposit is becoming more common, sellers choose to protect themselves by including stricter terms in the Agreement of Purchase and Sale.

Find out more about our mobile signing services!

Drafting Real Estate Agreements of Purchase and Sale

Other warranties and obligations are imposed on buyers by including additional contractual terms in their agreements if they fail to provide a deposit after making a firm offer. This has become a popular choice for sellers to ensure that buyers follow through with their agreement offer.


It is always a good idea to consult with a lawyer for any real estate transaction, regardless of whether you are a buyer or a seller, before signing the agreement. Usually, a real estate lawyer is only consulted once the deal is in place after the damage is done. To avoid time-consuming and expensive legal issues in real estate transaction, both buyers and sellers should seek the advice of an experienced real estate lawyer

RealEstateLawyers.ca LLP is a Real Estate Law Firm that serves all of Ontario. We simplify real estate transactions by using innovative technologies and well-established relationships with real estate agents, institutional lenders, private lenders and title insurance companies, among many other relevant real estate industry participants. Our team strives to deliver the highest personalized service at competitive rates. Our remote video signing service operates from 7am-midnight (EST) 7 days a week to sign your closing documentation, and our staff are very knowledgeable and accessible. We provide flat-rate retainers which allow us to offer our lowest price guarantee and not to take any legal fees up-front. 

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