Deposits and Defaulted Deals

Cardboard box with percent sign on a white background.


What happens if the buyer doesn’t show up with the Deposit. There were no conditions. The deposit was never, ever paid.


I have been involved in hundreds of cases like this. The law hasn’t changed. It’s been much the same for over a century, and confirmed recently again by the Ontario Court of Appeal. A deposit is forfeited in these circumstances, assuming an otherwise firm deal. The deposit is not consideration. It is not even required for the deal. But, if there is a deposit and it’s not paid on time, then the Buyer is in breach. No need for any documents from the defaulted Buyer. Just get it back on the market and resell it to someone else.

The Seller is entitled to the deficiency on resale, extra carrying charges and extra expenses. Those are the provable damages. The minimum amount that the Seller gets is the amount of the deposit even if they sell and actually make a profit.

Don’t oversee a Mutual Release. You are now practicing law. Leave this to the two lawyers to sort out. Don’t give advice to both sides in such a contentious situation. If you do, one side or the other will sue you in about 6 months.

Also, there are people who will buy the lawsuit from the Seller and proceed with the litigation at their expense if the Seller doesn’t have the funds.

Brian Madigan LL.B., Broker

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