If you cannot close on your home purchase in Ontario, you face serious financial and legal consequences. At minimum, you will likely lose your deposit, and you may also be sued by the seller for additional damages if the property later sells for less than your agreed price.
An agreement to buy a home is a legally binding contract. Once the buyer and seller have signed the purchase agreement and the conditions have been satisfied, both parties must abide by the contract.
In most Ontario real estate transactions there is no cooling-off period, which means there is no guaranteed cancellation period without penalty if you change your mind. The only safe exits are through unfulfilled conditions, such as a financing condition or a home inspection condition that has not yet been waived. The transaction only becomes firm once a Notice of Fulfillment is signed and delivered. If a party fails to close after this stage, they have breached a firm contract. While failing to meet a condition is a safe exit, failing to close a firm deal triggers immediate legal and financial consequences for the breaching party.
The forfeiture of the deposit is the most immediate consequence of failing to close a real estate transaction. In Ontario, the law is clear: if a buyer cannot complete the purchase as agreed, the deposit is forfeited to the seller. This principle is intended to compensate the seller for the time the property was off the market and serves as a deterrent against non-serious buyers. However, recovering that deposit is not automatic for the seller. The real estate brokerage holding the deposit in trust can only pay it out on the mutual direction of the seller and the buyer, or by court order. This means a buyer who fails to complete a transaction can refuse to direct the release of the deposit and force the seller through the expense and time of going to court for an order compelling payment.
The financial exposure does not end with the deposit. Buyers may find themselves liable for the difference if the property sells for less than the original agreed-upon price. Additionally, sellers can recover costs such as utilities, taxes, and interest incurred while the property remained unsold due to the failed transaction. Legal fees, real estate commissions, and other losses related to the buyer's inability to close can also fall on the buyer's shoulders.
The general principle is to put the seller in the place they otherwise would have been had the buyer completed the transaction. The seller also has a duty to mitigate by making reasonable efforts to resell, such as relisting the property promptly.
If you find yourself unable to close, contact your real estate lawyer immediately. In some cases, it may be possible to negotiate a closing extension or agree to a mutual release of the contract, though this typically still involves giving up your deposit. Prevention is the best strategy. Ensuring your financing is firmly in place, including a satisfactory appraisal, well before closing day is the most reliable way to avoid this situation. Learn more about how conditional offers work in Ontario real estate to understand how conditions can protect you before a deal becomes firm.
