Financing Condition: What If You Cannot Get a Mortgage in Alberta?

You signed an offer to buy a home, and the contract was conditional on you getting a mortgage. Now the lender has said no, or the approval is not coming in time. You are probably worried about the deal and about your deposit.

This article explains in general terms how a financing condition fits into an Alberta purchase, what steps usually matter when financing falls through, and why the contract wording and timing decide most of the answers.

This article covers the law of Alberta.

What a financing condition is

A financing condition makes the deal depend on you arranging a mortgage. In Alberta, residential purchases use a standard contract that sets out the buyer, the seller, the property details and the financing terms, including the deposit amount.

The condition, its deadline and how it is satisfied or ended are all matters of what your signed contract says. Government guidance also notes that buyers may have a lawyer review the agreement before signing. If you have already signed, reading the condition word for word is the first step.

What to do if your mortgage falls through

Act quickly and keep everything in writing. The deadline in your contract matters, and missing it can change your position. How a financing condition is ended or waived is a contract-wording question, so confirm it against your own document rather than assuming.

• Find the financing condition and note its exact deadline.
• Get the lender's refusal or the missing-approval explanation in writing.
• Tell your agent right away so notice can be given the way the contract requires.
• Keep copies of every application, lender email and document you submit.
• Do not sign any waiver or release until you understand what it ends.
• Ask a lawyer to read the contract and any notice before it is sent.

Is the deposit returned?

Whether a deposit comes back depends on the contract and on whether the condition was properly handled in time. The Real Estate Act and its regulation do not set out who keeps a deposit on default, so that question turns on the signed contract and on court decisions.

What the law does control is how the money is handled in the meantime. A licensee may pay out trust money only in accordance with the Rules and the terms of the trust, and those terms must be in writing and agreed to by the licensee and all other parties. In practice, a brokerage holding your deposit cannot simply hand it to you or the seller on its own say-so; release follows the written terms, such as the purchase contract or a written direction.

Who holds the deposit and what happens to it

• Money received in trust must be deposited within 3 business days of receipt, and for money received with an offer, the 3 days run from acceptance of the offer.
• The brokerage must keep it in a designated trust account and separate from its own money.
• Interest earned in a brokerage trust account is paid to the Alberta Real Estate Foundation, not to the buyer or seller.
• If an expected deposit is not received or a deposit cheque is not honoured, the brokerage must notify all parties in writing.

If you bought a new home from a builder and paid the builder a deposit, you may be able to register a caveat on the land title to protect it.

What to do next

Gather your contract, any amendments, the lender correspondence and proof of the deposit. Time limits also apply to disputes: a claim, such as one over return of a deposit or breach of a purchase contract, must generally be brought within 2 years after you first knew or ought to have known of it, or 10 years after it arose, whichever expires first. Other provisions may also affect a contract claim, so a lawyer can confirm how this applies to your facts.

If the condition deadline is close, get advice before it passes. Your options are usually narrowest once the date has gone.

Frequently asked questions