What Happens If the Buyer Fails to Close a Real Estate Deal in Alberta?

The completion date has come and gone, and your buyer has not closed. You may already have arranged your own move or purchase around that date, so the delay can be costly as well as stressful.

This article explains in plain terms how the deposit is held, what options sellers generally have, and the limits on them. What you can actually do depends on your contract, so a lawyer should look at it before you act.

This article covers the law of Alberta.

First, read what your contract says

A standard contract is used for residential purchases, and it sets out the buyer, seller, property details and financing terms, including the deposit amount. The contract is the starting point for every option below.

Whether the deposit is kept by the seller or returned to the buyer after a failed closing depends on the signed contract and on court decisions. It is not something a brokerage can decide alone. Check for conditions that may not have been properly met or removed, because a buyer who still had a condition may not be in default at all.

How the deposit is held and released

Money received in trust must be deposited within 3 business days of receipt, and for money received with an offer to purchase, the 3 business days run from acceptance of the offer. The brokerage must keep it separate from its own money and on deposit in Alberta, with an exception for licensees with business premises in Lloydminster.

The brokerage may pay trust money out only in accordance with the Rules and the terms of the trust, which must be in writing and agreed to by all parties. So even if you believe the buyer has defaulted, the brokerage generally cannot release the deposit to you without the written terms or a written direction supporting it. Disbursements must be made by cheque or bank transfer with supporting documentation, and a brokerage must not use trust money for its own general office expenses or commissions owed to its brokers or associates.

If an expected deposit was never received or a deposit cheque was not honoured, the brokerage must notify all parties in writing. You can also ask for a statement of receipts and disbursements, which must be provided within a reasonable time after the request, unless otherwise agreed. Interest on the deposit goes to the Alberta Real Estate Foundation, not to you or the buyer.

Your options as a seller

Many sellers do not choose just one. For example, a seller may relist to limit losses while a lawyer deals with the deposit and any claim against the buyer. Because relisting can affect your rights, talk to a lawyer before you take that step.

Limits on your remedies

• Time limit: a claim must be brought within 2 years after the claimant first knew, or ought to have known, of it, or 10 years after the claim arose, whichever expires first.
• Other provisions may also affect a particular contract claim, so check your facts with a lawyer.
• Deposit release: the brokerage cannot pay it out on your say-so alone.
• Unclaimed trust money: if a licensee holds trust money for more than 2 years and cannot locate the owner, it must be paid to the Alberta Real Estate Foundation, which pays it to the rightful owner if entitlement is later established.

For a new condominium unit sold by a developer, special rules apply. The developer must hold the purchaser's money in trust until title is issued. If the developer has not met the conditions for release, the corporation or an interested party may apply to the Court for an order for payment out.

What to do next

• Gather the signed contract, amendments, condition removals and all messages about closing.
• Write down the completion date and every date the buyer or their lawyer communicated about delay.
• Ask your brokerage to confirm the deposit's status and for a statement of receipts and disbursements.
• Do not sign a release of the deposit unless you understand it, as release follows written terms.
• See a real estate lawyer before relisting or sending notices, and keep the time limit in mind.

Frequently asked questions