Seller Still in the Home on Closing Day in Ontario: Your Options

You have your financing, your movers are booked, and the keys are meant to change hands today. Then you learn the seller is still living in the home, or has left belongings, garbage or damage behind. It is stressful, and the choices you make in the next few hours can matter a great deal.

This article explains the main rules that apply in Ontario when a seller is not out on time or leaves the home in poor condition. Your agreement of purchase and sale sets the specific promises about possession and condition, so a lawyer should read it with you.

Start with your agreement

What the seller promised about possession, condition and cleaning is found in the agreement of purchase and sale and any attached schedules. Look for the closing date, the time of day for possession, and any term about leaving the home empty and in the same condition as when you saw it.

The registration of the transfer and the delivery of funds are part of the same process. Only authorized Teraview account holders and their registered users, such as lawyers and conveyancers, can submit documents in Ontario's electronic land registration system. So most of what happens on closing day goes through the lawyers, and your lawyer is the right first call.

If the home is damaged or messy

The standard OREA insurance clause keeps the property at the seller's risk until completion, with insurance proceeds held in trust. If there is substantial damage, the buyer may either terminate and recover the money paid, or take the insurance proceeds and complete the purchase. The court also implied that the buyer is entitled to timely notice of damage and a meaningful chance to inspect.

Exception: damage that is not substantial. In one Court of Appeal for Ontario decision, flood damage was not substantial, so the buyers had no right to terminate under the insurance clause, and their attempt to terminate was a repudiation of the agreement. The wording of the insurance clause can differ between versions of the form, so the exact words in your agreement matter.

A mess is not the same as damage. Garbage or leftover furniture may breach a promise in your agreement, but it may not be substantial damage. Whether it justifies refusing to close is a question to ask a lawyer before you act.

Why you should be careful about refusing to close

When a buyer repudiates the agreement and fails to close, the deposit is forfeited to the seller without proof of any damage. A court can grant relief against forfeiture under section 98 of the Courts of Justice Act, but that depends on whether keeping the deposit would be out of all proportion to the seller's damages and unconscionable, and it is not something to count on.

Seller's damages are typically the difference between the agreed price and the property's value on the closing date, though the seller must take reasonable steps to limit the loss, such as reselling.

The same logic applies in the other direction. If the 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 market value equals the contract price there is no loss.

Your realistic options

Uniqueness does not mean one of a kind. It means qualities that make the property especially suitable for the buyer's use and that cannot readily be duplicated, judged from the buyer's point of view when the contract was made. Courts are reluctant to order it for property bought solely as an investment.

What to do next

• Call your lawyer right away and explain what you have found.
• Take dated photos and video of the condition of the home and anything left behind.
• Do not accept keys, move in or sign anything until your lawyer advises you.
• Send any complaint in writing, and keep emails and texts.
• Ask whether your deposit is still held in trust. A brokerage holding it first deducts the commission owing, and the balance may be released to the seller only when the transaction completes or both parties consent in writing.
• Ask your lawyer what a short written extension should say.

A lawyer can tell you whether your facts support delaying, closing under protest or something else.

Frequently asked questions