Buying a property can be an exciting time. After what seemed like a never-ending search, you finally found the home of your dreams. You eagerly entered into an Agreement for Sale and paid your deposit to secure that property.
Then oops! Life happened! Maybe you lost your job or came across a better property and now you want out. Can you get back your deposit? It all depends on the terms of the Agreement for Sale.
You may lose your deposit if there is a Forfeiture Clause
If you signed an Agreement with a Forfeiture clause, you may lose your entire deposit, and truth be told, most Agreements now include this type of clause. Simply put, a forfeiture clause outlines the circumstances under which the buyer will forfeit/lose their deposit. For example, a forfeiture clause may state that the buyer loses their deposit if they fail to meet a particular deadline set out in the Agreement. Below is a common example of this type of clause:
“Time is of the essence of this agreement as it relates to the obligations of the Purchaser hereunder and on the failure of the Purchaser to pay the balance purchase price and/or any other sums payable or to fulfil any of his obligations hereunder within the time stipulated herein the Vendor shall be entitled to cancel this agreement and to forfeit the deposit herein by serving fourteen (14) days’ notice in writing on the Purchaser.”
The reason for cancellation of the purchase matters
In the typical Agreement for Sale, a forfeiture clause usually comes into effect, only if the cancellation is the Purchaser’s fault and no fault of the Seller. If, for example, the Surveyor’s Report reveals a breach, a Purchaser is normally able to cancel and receive a full refund of their deposit, since the reason for cancellation is the fault of the seller. While this is the norm, it is important to note that Agreements vary widely. Therefore, whether you can recover your deposit in full, depends heavily on the specific terms of the Agreement you have signed.
Without a Forfeiture Clause, you may still lose when you cancel
Even without a forfeiture clause, there are some fees other than the deposit, that you will not recover. For instance, the legal fee for the Preparation of the Agreement for Sale, which is paid to the Seller’s Attorney, is non-refundable. Similarly, there may be a fixed fee which becomes due to Seller’s Attorney if the purchaser cancels, due to no fault of Seller and this sum will be deducted from the deposit before the buyer is refunded.
Key Takeaways
When your hard-earned money is on the line, do not sign any Agreement for Sale or make a deposit on any property, before seeking the advice of a competent Attorney who can explain your rights and the risks involved.
When your hard-earned money is on the line, do not sign any Agreement for Sale or make a deposit on any property, before seeking the advice of a competent Attorney who can explain your rights and the risks involved.
Do not enter in Agreements for Sale lightly. Ensure that it is a purchase that you are ready to commit to, and you are not still wavering between other options.
Remember, even if you do not lose your entire deposit, more often than not, you will suffer some degree of financial loss upon cancellation of a purchase. So…be wise!
