- If the buyer defaults, a seller's damages are generally the difference between the agreed price and the later resale price.
- You must take reasonable steps to limit your losses, but you do not have to accept a lower offer from the buyer who defaulted.
- A claim generally must be started within two years of when you discovered it.
A buyer who will not close on the agreed date leaves you with a home you thought was sold, possibly your own purchase pending, and a lot of stress. What you do in the first days can affect your options later.
This article explains in general terms how Ontario courts approach a buyer's failure to close: damages, resale, the deposit and time limits. It does not replace advice on your agreement, so speak to a real estate lawyer quickly.
First steps when the buyer won't close
Contact your lawyer before you do anything else, ideally before closing day if the buyer is already signalling a problem. Your lawyer can tell you what the agreement requires of you, what steps to take to show you were ready to close, and what written notices to send. Those steps depend on your agreement, so confirm them rather than guessing.
- Keep the signed agreement, amendments and all messages with the buyer and agents.
- Write down dates, times and who said what.
- Do not agree to a new price or a new date without advice.
- Have your own documents ready, including mortgage payout information.
Resale and your damages
When a buyer fails to close, the seller's damages are measured as the difference between the agreed price and the price on the later resale (Azzarello v. Shawqi, 2019 ONCA 820). In Lucijanic v. Hashmi, the sellers had no duty to mitigate until the buyers breached, and after the failed closing they could re-list the property. The court upheld damages and forfeiture of the deposit on summary judgment.
If the resale price is lower, that gap is the heart of the claim. If you resell for the same or more, there may be little or no loss to recover. Your lawyer can also tell you what other costs may be claimed, which depends on the facts.
Your duty to limit your losses
A seller cannot recover losses that could reasonably have been avoided. This is the duty to mitigate. However, you are not required to accept a lower offer from the buyer who defaulted. In practice, relisting at a sensible price and in a reasonable time is generally the safer approach, and keeping records of your marketing helps if the matter goes to court.
What happens to the deposit
Deposits are normally held by the brokerage. Where the seller has a resale loss, the buyer's forfeited deposit is treated as part payment of the damages and is deducted from the award; in Azzarello the $75,000 deposit was deducted. So the deposit does not come on top of your damages.
If buyer and seller disagree over who gets the deposit, the brokerage can pay it out only under a mutual consent or release signed by both sides, or under a court order. If a brokerage has held a disputed deposit for two years with no determination, it is transferred to RECO, which holds it in trust. Do not assume the brokerage can simply release it to you.
Can you force the buyer to close?
Usually the answer is no. Money damages will often be adequate for a seller, and to obtain specific performance, an order forcing the buyer to complete, the seller must show a fair, real and substantial justification, and the equities must favour the order. That is a harder test than the one buyers face when a seller refuses to close, where uniqueness of the property is one factor among several.
Time limits and what to do next
There are time limits for suing. Under the Limitations Act, 2002 a claim generally must be started within two years from the day it was discovered, meaning the earlier of the day you knew, or a reasonable person ought to have known, of the injury, its cause, who caused it, and that a lawsuit would be appropriate. There is also an ultimate limit of 15 years from the act or omission, with exceptions such as wilful concealment. A limitation period applies despite an agreement to vary or exclude it, with limited exceptions for business agreements where no party is a consumer.
- Get legal advice as soon as the buyer signals a problem.
- Keep every document and message.
- Relist promptly and record what you do.
- Do not release or accept a share of the deposit without advice.
- Note the date you discovered the default and diarize the two-year deadline.
Frequently asked questions
Do I keep the buyer's deposit?
Often a buyer's deposit is forfeited, but where the seller has a resale loss it is treated as part payment of the damages and deducted from the award. If the sides disagree, the brokerage can pay it out only under a signed mutual release or a court order.
Can I sell to someone else right away?
After the buyer breaches, you can re-list the property. Get advice first so the steps you take do not hurt your claim.
Can I make the buyer buy the house?
It is difficult. A seller must show a fair, real and substantial justification, and the equities must favour the order.
How long do I have to sue?
Generally two years from the day you discovered the claim. Ask a lawyer to work out the date for your situation.
Sources
- RECO – Consumer deposit insurance FAQ — reco.on.ca
- Court of Appeal for Ontario – Azzarello v. Shawqi, 2019 ONCA 820 — ontariocourts.ca
- Court of Appeal for Ontario – Lucijanic v. Hashmi, 2019 ONCA 97 — ontariocourts.ca
- Court of Appeal for Ontario – Dhatt v. Beer, 2021 ONCA 137 — ontariocourts.ca
- Court of Appeal for Ontario – Matthew Brady Self Storage Corp. v. InStorage LP, 2014 ONCA 858 — ontariocourts.ca
- Limitations Act, 2002, S.O. 2002, c. 24, Sched. B (e-Laws) — Ontario e-Laws
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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