Can You Get That Deposit Back?

May 23, 2022

By Brian Babcock

Sometimes real estate deals go sour and do not close. If you are the purchaser, that normally means that you are entitled to the return of the deposit you paid when the agreement was signed.

One of the situations in which you may not get your deposit back is where it does not close because you raised an objection to title after the date set out in the agreement for objections.

You may think that you don’t have to worry about this because between the real estate agent, your lawyer, and title insurance, other people will protect you.

Despite this, it is always important that you understand your rights because you have a role to play in protecting them.

In the case of 2651171 Ontario Inc. v. Brey, the Ontario Court of Appeal reviewed a rather complex clause which was unusual in that it set several different dates that could be the deadline for objections, and some of the dates needed to be calculated in relation to other events.

The buyer contracted to purchase a fourplex. Information from the City of Ottawa indicated that the building was legally a threeplex. A significant difference in value. They objected to this defect. The seller had a choice to either fix the problem (which was likely impossible in time) or end the deal.

Instead, the seller said that they were ready to close, and that the objection was too late. They did nothing to address whether the objection was valid. This left the buyer in a tough spot.

Fortunately, they appear to have had good legal advice both from their real estate lawyer and the lawyer that handled the lawsuit. They persisted, and ultimately were successful.

The Superior Court judge hearing the original motion for the return of the deposit had found against the buyer based upon his interpretation of the time limits clause. The Court of Appeal allowed the appeal and determined that the objections were in time.

In this case, the deposit was $25,000 so it was a significant issue. There was also an issue as to damages relating to the cost of closing or alternatively whether the vendor was entitled to seek damages for the failure to close.

The Court of Appeal emphasized that a contract should be interpreted “as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that could render one or more of its terms ineffective”. This is consistent with the concept that a contract should not result in what is called a “commercial absurdity”. We have written about that before.

The confusion could probably have most easily been avoided if the purchaser, on reading the objection to title clause, had said to the realtor “I don’t understand this – what does it mean?”

Unfortunately, sometimes realtors focus their clients on the price and the closing date and both buyers and sellers may be reluctant to slow down the process by thoroughly reviewing the entire agreement.

Among other things, this case emphasizes the importance of taking the time and care to make sure that you thoroughly understand  your agreement – because it is YOUR agreement after all –  to avoid costly trouble and sleepless nights later.

Although $25,000 is a significant amount of money, the cost of litigation can be even higher.

Another take away from this case is the importance of having a lawyer with the expertise to pick up on a problem and know how to address it. A related point is that not all lawyers structure their real estate practices in a way to conveniently handle deals that become problematic.

The cheapest real estate lawyer is not always the best real estate lawyer. Sometimes, they are cheap because they do such a high volume that every client really is just a number. That is not how we practice law at Weilers Law. Whether your real estate deal is residential or commercial, simple or complex, every transaction is unique and every client is important. We do our best to protect you from surprises and when there are unexpected developments, we have the time and the expertise to help solve them.

If, despite the best efforts of your realtor, your real estate lawyer, and yourself, you find yourself facing litigation, the litigation team at Weilers Law have the experience and knowledge to make sure that is that they obtain the best evidence and make the right legal arguments for your case. We know that peace of mind is important to you and we do our best to get that for you. We also know that it doesn’t hurt to recover money for you at a reasonable cost.

If you want the personal touch on your real estate deal, contact Weilers Law.

If your deal goes sour, and you need litigation, Weiler’s Law will happily work with your real estate lawyer. We take on tough cases so our clients have the minimal amount of stress. Let us have the sleepless nights instead of you.

We always hope everything goes smoothly, but as we like to say “if there were never any problems, no one would need a lawyer.” When you have problems, we are here to help.