What If the Buyer Misses the Closing Date in Ontario?

A closing date feels fixed, and when a buyer cannot close on it, both sides worry. The buyer fears losing the deposit and the home. The seller fears being stuck with a property they have already planned to leave.

What happens next depends on your agreement of purchase and sale and on what each side does in the days after the missed date. This article explains the main ideas Ontario courts use, so you can ask better questions of a lawyer.

Is a missed closing date automatically a default?

Not always. If time is of the essence and neither party is ready to close on the agreed date, the agreement stays in effect. In that situation, nobody is simply in default and the contract continues.

Either party can restore time of the essence by setting a new closing date and giving the other party reasonable notice. That notice matters. A seller who wants to be able to treat a later failure to close as a serious breach generally needs to set the new date properly, so keep written records of what was sent and when.

Many closings are moved by agreement between the buyer and the seller. Setting a new closing date with reasonable notice is one way to restore time of the essence. How any change is documented depends on your agreement and the facts, so it is worth having a lawyer review it so it does not accidentally change other terms.

What happens to the deposit?

When a buyer repudiates the agreement and fails to close, the deposit is forfeited to the seller without proof of any damage. The deposit is security for performance, not damages.

Where a brokerage holds the deposit in trust, it first deducts the commission owing. The balance owing to the seller may be released only when the transaction is completed or with the mutual written consent of both parties. How this plays out when a closing date is missed depends on your agreement and the facts, so it is worth confirming with a lawyer.

There is an exception. Section 98 of the Courts of Justice Act lets a court grant relief against penalties and forfeitures. For real estate deposits, courts have asked whether the forfeited deposit is out of all proportion to the seller's damages and whether it would be unconscionable for the seller to keep it.

Can the seller claim more than the deposit?

Yes, in some cases. A seller's damages when a buyer fails to close are typically the difference between the agreed price and the property's value on the date set for closing. A court may choose a later date, taking into account the seller's duty to take reasonable steps, such as reselling. In one Court of Appeal case, the award included the resale shortfall and carrying costs.

The duty to mitigate cuts both ways. A plaintiff cannot recover losses that reasonable steps could have avoided, and the defendant must prove both that the plaintiff failed to mitigate and that mitigation was possible.

• A seller who relists promptly and documents the efforts is better placed to show reasonable steps were taken.
• A buyer who says the seller did too little generally has to prove it, not just assert it.
• If the market rose after the closing date, the damages picture can look quite different from a falling market.

Can the seller force the buyer to close?

An order forcing the sale to close, called specific performance, is not granted as a matter of course. The party asking must show the property is unique, meaning a substitute is not readily available, and that damages would be inadequate. Courts weigh the nature of the property, the adequacy of damages and the parties' conduct.

Uniqueness does not mean one of a kind. It means the property has qualities making it especially suitable for the buyer's use that cannot readily be duplicated, judged from the buyer's point of view when the contract was made, and a rising market can support this. Courts should be reluctant to order specific performance of a property bought solely as an investment.

Whether a court would order a sale to close in a particular case depends on those factors and the facts, so it is worth confirming with a lawyer. Separately, if a seller fails to close, the buyer's damages are presumptively the difference between the contract price and the market value on the closing date, and if the two are equal there is no loss.

New builds and what to do next

New homes have an additional layer. If a builder misses the firm closing date (freehold) or firm occupancy date (condo) without a mutual extension or an unavoidable delay, the buyer gets delayed closing compensation of up to $7,500, including $150 per day for living expenses with no receipts needed. Those rules apply to builders, not to a buyer who is late.

• Tell the other side, in writing, as early as you know there is a problem.
• Check whether your agreement makes time of the essence and what notice it requires.
• Do not sign a new closing date or a release of the deposit before a lawyer has read it.
• Keep records of financing efforts, relisting efforts and all messages.
• Ask a lawyer whether relief from forfeiture or a negotiated extension is realistic on your facts.

Frequently asked questions