Buying a property can be an exciting time!  After what seemed like a never-ending search, you finally found the home of your dreams and eagerly 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 or the Agreement for Sale.

You may lose your deposit if there is a Forfeiture 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 termination matters

In the typical Agreement for Sale, even where there is a forfeiture clause, it only comes into effect if the cancellation is the Purchaser’s choice and due to no fault of the Seller.  If, for example, the Surveyor’s Report reveals a breach, in a well drafter Agreement, a Purchaser is able to cancel and receive a refund of their deposit in full, 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 you have signed to.  

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, will not be refunded.  Similarly, there may be a fixed fee which becomes due to Seller’s Attorney if the purchaser cancels due to no fault of Seller.  These terms are clearly outlined in a standard Agreement.

Key Takeaway

Even if you do not lose your entire deposit, more often than not, you will suffer some degree of financial loss upon cancelling a purchase, after signing an Agreement.  So be wise! 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 deposit in is on the line.