The deposit is stuck with the Trustee until BOTH parties direct the Trustee to send it somewhere. Usually, that would follow a Mutual Release. But, the key component is the Direction, not the Release.
The other route would be the Courts. One way or the other there is going to have to be a Court Order. There is a rather expeditious remedy available to get in front of a Judge and have a quick decision made. That is a Motion brought by one of the parties. If the Judge decides that there is a triable issue, then the matter will have to be decided at trial.
So, if the deposit is sufficiently large, it would warrant such a Motion.
If it’s small, then who cares! No one is going to bother. The legal costs of the trial would be 5 to 10 times the cost of a motion, in many cases. This would be the route the Seller should take if there is a sizeable deposit.
Frequently, the Motions Court Judge will order that the deposit be transferred to the Seller and then order a trial with respect to any additional damages. If they are sizeable, then there may be a trial a year or two later.
The actual transfer of the deposit is undertaken without proof of damages. The transfer would not be made if the Buyer can prove that there was a sufficient reason for not closing.
Brian Madigan LL.B., Broker