Lockhart v. Glidden, 2026 NBCA 66
One of the most common misconceptions in real estate law is that a Seller can only keep a Buyer’s deposit if the Seller suffers damages equal to or greater than the amount of the deposit.
A recent decision from the New Brunswick Court of Appeal provides a useful reminder that this is not the law.
In Lockhart v. Glidden, 2026 NBCA 66, the Court confirmed that where a purchaser wrongfully refuses to complete a real estate transaction, a true deposit is generally forfeited to the Seller even if the Seller’s actual losses are substantially less than the deposit amount.
The Facts
David and Cathy Lockhart agreed to sell their home for $875,000. The purchasers, Curtis and Tracy Glidden, provided a $50,000 deposit under a standard Agreement of Purchase and Sale.
On the scheduled closing date, the purchasers raised objections concerning title and refused the Sellers’ request for an extension to address those concerns. As a result, the transaction did not close.
The Sellers subsequently relisted the property and sold it for a lower price, resulting in losses of approximately $18,294.
The Motion Judge ultimately found that the purchasers had wrongfully repudiated the agreement. That finding was not appealed.
The dispute before the Court of Appeal concerned what should happen to the $50,000 deposit.
The Motion Judge’s Decision
The Motion Judge concluded that because the Sellers’ actual damages were only approximately $18,294, they should be entitled to retain only that amount from the deposit.
The balance of the deposit more than $31,000 was ordered returned to the purchasers. The Sellers appealed.
The Court of Appeal Reverses the Decision
The Court of Appeal allowed the appeal and awarded the Sellers the entire $50,000 deposit.
In doing so, the Court reviewed the long-established common law principles governing deposits in real estate transactions and concluded that the Motion Judge had misunderstood the legal nature of a deposit.
Why Deposits Are Different
The Court emphasized that a true deposit is not simply a prepayment of the purchase price.
Rather, a deposit serves two important purposes:
- It is credited toward the purchase price if the transaction closes; and
- It acts as security for the purchaser’s performance of the contract.
For centuries, Courts have recognized that the risk of losing a deposit provides a powerful incentive for purchasers to honour their contractual obligations.
As the Court noted, a deposit is an “earnest of performance” and has traditionally been treated differently from ordinary damages.
The Seller Does Not Need to Prove Damages
One of the most significant principles reaffirmed in this case is that a Seller does not need to prove any damages in order to retain a true deposit.
If a purchaser defaults, the deposit is generally forfeited.
In some cases, Sellers have been permitted to retain deposits even when they later resold the property for more than the original purchase price. The deposit is forfeited because it secures performance, not because it compensates for loss.
The Rule Against Double Recovery
The Court also clarified an important limitation. A Seller cannot retain the deposit and then recover the full amount of damages without accounting for the deposit.
If the Seller’s damages exceed the deposit amount, the Seller may claim the difference.
For example:
- If the deposit is $50,000 and damages are $80,000, the Seller may keep the deposit and seek an additional $30,000.
- If the deposit is $50,000 and damages are only $18,294, the Seller keeps the entire deposit, but is not entitled to further compensation.
The deposit is effectively credited against any damages claim.
In this case, because the Sellers’ losses were less than the amount of the deposit, they were entitled to keep the entire deposit and recover nothing further.
What About the “Liquidated Damages” Clause?
The Agreement of Purchase and Sale stated that if the buyer defaulted, any money paid would be forfeited to the Seller “by way of liquidated damages.”
The purchasers argued that this wording meant the Sellers should only receive compensation equal to their actual losses.
The Court rejected that argument.
The Court held that describing a deposit as “liquidated damages” does not alter its essential character as a true deposit.
Unless the agreement clearly indicates otherwise, deposits continue to be treated under the traditional common law rules.
Acceptance of Breach Does Not Void the Contract
The purchasers also argued that because the Sellers accepted the repudiation and sold the property to someone else, the Agreement became “null and void,” requiring the return of the deposit. Again, the Court disagreed.
Accepting a purchaser’s breach does not erase rights that have already accrued under the contract. One of those rights is the Seller’s entitlement to a forfeited deposit following a purchaser’s default.
Significance
Although this case arose in New Brunswick, the Court relied heavily upon leading decisions from Ontario, British Columbia, and the Supreme Court of Canada.
The decision is therefore consistent with the approach taken by Canadian Courts generally, including Ontario Courts.
For Buyers, the case serves as a warning that a deposit is not merely an advance payment that can be recovered if a deal falls apart. Once a purchaser wrongfully refuses to close, the deposit may be lost entirely.
For Sellers, the decision confirms that a properly drafted deposit clause remains a valuable form of protection when a purchaser defaults.
Considerations
The decision in Lockhart v. Glidden, reinforces a fundamental principle of real estate law:
a true deposit is security for performance and is generally forfeited when a purchaser wrongfully repudiates an Agreement of Purchase and Sale.
The Court made it clear that the amount of the seller’s actual damages does not determine whether the deposit is forfeited. Rather, the deposit stands on its own as a powerful contractual mechanism designed to ensure that parties honour their bargains.
For anyone entering into a real estate transaction, this case is an important reminder that walking away from a firm deal can be an expensive decision. There are many Ontario decisions which emphasize this point.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com