Offer Containing a Pre-agreed Direction for the Deposit


There are quite a few deals that are not closing these days. What can the industry do to protect the clients that are being left holding the bag when one party doesn’t close? Are we able to put in offers for example if one party fails to close they agree to forgo the deposit?

There are some that say, “if the deal fails, then the deposit automatically goes to the Seller”.

There are others which say the exact opposite: “if the deal fails, then the deposit automatically goes to the Buyer”.


The deposit clause is already part of the Agreement. The issue is “how do you know whether or not a particular party is in default”. Basically, you don’t; hence the parties either agree or the Court will make the decision for them.

The only way a deposit coud automatically transfer is simply if there were a date. When that date is reached, the deposit is automatically transferred to the credit of the Seller. That could be 30 days prior to closing, 5 days prior to closing or even at 10:00 am on the closing date.

It’s easy to know what time it is and therefore whether the deposit must be transferred.

Brian Madigan LL.B., Broker

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