The good news is that in Ontario a seller is usually entitled to keep the deposit when a buyer fails to close a firm real estate deal.
Why the deposit is forfeited
That is because the deposit is not just a payment toward the purchase price. It is also security for the buyer’s promise to complete the transaction. If the buyer walks away from a firm Agreement of Purchase and Sale (APS) without a valid legal reason, the deposit is generally forfeited to the seller.
The seller does not have to prove that they lost money to keep the deposit. Even if the property is later sold to someone else for the same price, or even for a higher price, the defaulting buyer may still lose the deposit. If the seller does lose money on the resale and later wins damages in court, the deposit is credited against that award rather than added on top of it — so the seller is made whole, not paid twice.
What your buyer will argue — and why it usually fails
If your buyer is fighting to get the deposit back, here are the arguments they are most likely to raise:
- “My financing fell through.” If the buyer made a firm offer with no financing condition, the buyer usually accepted that risk.
- “The agreement did not say the deposit was non-refundable.” A deposit does not need to use the words “non-refundable” to be forfeited. Forfeiture follows from breaching a legally binding APS.
- “I signed for a corporation.” This may affect whether the buyer is personally liable for additional damages, but it does not invalidate the seller’s entitlement to the deposit.
- “The seller breached the agreement.” Not every issue allows a buyer to refuse to close. For minor issues, the buyer may still be required to close and sue later. However, if the seller materially breached the APS, the buyer may be entitled to the return of their deposit and sue the seller for damages.
Why you can’t just take the deposit
Practically, obtaining the deposit is not automatic. Deposits are typically held in the seller’s real estate brokerage’s trust account. The brokerage cannot release the funds unless both parties sign a mutual release or there is a court order.
The seller may also have a claim for more than the deposit. If the property is resold for less, or the seller suffers additional losses because of the failed closing, the seller may be able to sue the buyer for further damages.
A deposit does not need to say “non-refundable” to be forfeited. Forfeiture follows from breaching a binding agreement.
What you should do now
If the buyer of your home did not close, you should act quickly. Depending on the extent of the buyer’s breach, you may either still be required to close or, alternatively, you may have a right to treat the APS as terminated, relist your home and sue for damages, if you sell your home for less.
Because timelines matter here, it is worth getting advice before you relist. Presvelos Law P.C. can walk you through where you stand and what to do next.