How a Larger Deposit Clause Protected a Mississauga Sale

The situation

Kasia had spent three decades building and eventually selling her share in a franchise business before retiring. Running a franchised location had taught her to read a contract carefully, to notice when a term that looked routine actually carried real risk, and to plan for the scenario where a deal did not go the way everyone assumed it would. She carried that habit into her personal investments. Part of what she and her husband Marek, a dentist who owns his own practice, had done with the proceeds over the years was buy a townhouse in Mississauga as a rental property, held for close to a decade with the same tenants for most of that time.

By the time they decided to sell it, the property had appreciated considerably, and they expected the sale to be straightforward: list it, accept a good offer, close in about sixty days, and move the proceeds into their next investment. Neither of them had been through a failed closing before, and neither expected to be starting one now.

An offer came in quickly, from a buyer named Min-ji, at a price of roughly $1,250,000. The buyer's agent proposed a standard five percent deposit of about $62,500, financing conditional on mortgage approval, and a closing date about two months out. Kasia and Marek's real estate agent recommended they accept and sign, and asked our team to review the agreement before it went final, as they do for most of their clients before a firm deal is struck.

What the review found

A standard deposit and a standard financing condition are common in Ontario real estate deals, and most of the time they cause no trouble at all. But a few details in this file stood out enough to flag before anyone signed.

The financing condition period was longer than typical, giving the buyer several weeks to firm up the deal rather than the shorter window most agreements use. The deposit, while standard in percentage terms, was small relative to the size of the transaction — meaning that if the deal fell apart close to closing, a $62,500 deposit would not come close to covering what Kasia and Marek stood to lose if the market softened even slightly before they could resell. On a property near $1,250,000, even a modest dip in resale value could easily exceed a five percent cushion once carrying costs were added on top.

An Agreement of Purchase and Sale in Ontario is a binding contract once signed and conditions are satisfied or waived. If a buyer fails to close without a valid legal reason, the seller's usual remedies are to keep the deposit and, separately, to sue for any further damages — the gap between the failed sale price and whatever the property eventually resells for, plus carrying costs like mortgage interest, property tax, and utilities during the delay. Suing for that gap means going to the Superior Court, and it means the seller has to prove their loss, wait for a hearing, and collect on a judgment against someone who has already shown they may not follow through on a contractual obligation. None of that is fast, and none of it is guaranteed to result in actual payment even after a court agrees the seller is owed money — a judgment is only as good as the defendant's ability or willingness to pay it.

The safer position, where it can be negotiated, is to make sure the deposit itself is large enough that the seller does not need to rely on a lawsuit at all. That is a negotiation that has to happen before the ink is dry, not after a buyer has already failed to show up at closing.

What we did

1. Recommended increasing the deposit before signing. Rather than accepting the offer as drafted, we advised Kasia and Marek to counter with a deposit of ten percent, roughly $125,000, due within a few business days of acceptance. A meaningful deposit does two things: it signals that the buyer is serious and financially capable, and it gives the seller a real cushion if the deal collapses.
2. Tightened the financing condition. We shortened the financing condition window and required written confirmation of a mortgage commitment, not just a pre-approval, before the condition could be waived. A pre-approval is a lender's general estimate; a mortgage commitment is tied to the specific property and is what actually confirms a buyer can close.
3. Reviewed the resale and mitigation language. We made sure the agreement was clear that if the buyer failed to close, the sellers were entitled to retain the deposit as reflected under Ontario law, while preserving their right to pursue any further shortfall if the deposit did not cover it. This kept every option open rather than narrowing it.
4. Advised the sellers to keep the property market-ready. We suggested Kasia and Marek avoid making any commitments — like buying their next investment or releasing tenants early — until the financing condition had been satisfied and the deal was firm, so they would not be doubly exposed if the sale did not proceed.
5. Monitored the file through to the scheduled closing. The buyer satisfied the financing condition on paper within the shortened window, and the deal proceeded to a firm agreement with the increased deposit in trust. As closing approached, the buyer's lender ultimately declined to fund, and days before closing, the buyer's lawyer advised that the deal would not close.

The outcome

Because the deposit was already in trust at ten percent rather than five, Kasia and Marek were not left waiting on a court process to recover money that might never come. Their real estate lawyer confirmed the buyer's default, and the deposit of roughly $125,000 was released to the sellers in accordance with the agreement, without needing to start a claim or wait for a hearing date.

The property went back on the market about three weeks later and sold for approximately $1,150,000 — about $100,000 below the original agreed price, reflecting a softer market over the intervening months. Between the shortfall and roughly $18,000 in carrying costs and resale expenses during the delay, including mortgage interest, property tax, and utilities on a vacant unit, the sellers' total loss on the second sale came to about $118,000. The retained deposit of $125,000 covered that loss with a small amount to spare, meaning Kasia and Marek did not need to pursue the original buyer for any further damages through the Superior Court.

Had the deposit stayed at the originally proposed five percent, roughly $62,500, it would have covered barely half of the actual loss, leaving the sellers to decide whether a lawsuit against a buyer who had already defaulted once was worth the time, cost, and uncertainty of pursuing it — and whether that buyer would have had the means to pay a judgment even after winning one. Because the risk was addressed before the agreement was signed, that decision never had to be made.

Kasia later said the file reminded her of negotiating franchise renewal terms years earlier — the moment that mattered most was not the crisis itself, but the clause written months before anyone knew a crisis was coming.

What you can learn from this