Understanding Deposit Forfeiture in Ontario Real Estate Transactions (2023)

When a real estate transaction in Ontario fails to materialize due to a buyer's inability to close, the matter of deposit forfeiture becomes pivotal. Legal precedents, such as Azzarello v. Shawqi (2019 ONCA 820), Redstone Enterprises Ltd. v. Simple Technology Inc. (2017 ONCA 282), and Liu v. Coal Harbour Properties Partnership (2006 BCCA 385), establish clear guidelines for this scenario.

Deposit Forfeiture: Legal Framework in Ontario

According to Justice Feldman's elucidation in Azzarello v. Shawqi, it's firmly established in case law that a purchaser's failure to close results in deposit forfeiture without the vendor having to prove any incurred damages. This principle, upheld in various cases, accentuates the vendor's right to retain the deposit even if they suffer no evident loss.

Damages and Mitigation Efforts

The calculation of damages in such cases involves various factors, as highlighted in Dobson v. Winton & Robbins Ltd. (1959 CanLII 19). Recent jurisprudence emphasizes that costs incurred by the vendor in reselling the property should be factored in to restore the vendor to their expected position post the failed transaction.

Judicial Stance on Mitigation and Market Conditions

While buyers may attempt to argue that vendors didn’t mitigate their damages adequately, courts generally demand reasonable, not perfect, mitigation efforts. Recent cases like Malatinszky v. Miri (2020 ONSC 16) and Forest Hill Homes v Ou (2019 ONSC 4332) underscore this aspect.

Impact of Pandemic on Real Estate Transactions

The onset of the Coronavirus pandemic has introduced a new layer of complexity. Buyers anticipating market decline due to unforeseen circumstances have sought defenses based on force majeure. However, courts have consistently held that market fluctuations, even during crises, do not typically qualify as unforeseen events altering the nature of the contract, as evident in Forest Hill Homes v Ou and Paradise Homes North West Inc. v Sidhu (2019 ONSC 1600).

Precedent and Case Analyses

Cases such as Forest Hill Homes (Cornell Rouge) Limited v. Wang (2020 ONSC 556) provide clear instances where courts held buyers accountable for substantial damages due to failure to close. Justice Perell's meticulous assessment in Forest Hill Homes (Cornell Rouge) Limited v. Wang details the extent of liabilities encompassing various costs incurred post the failed transaction.


In conclusion, the legal landscape in Ontario concerning failed real estate transactions emphasizes the importance of understanding contractual obligations, the forfeiture of deposits, mitigation efforts, and the impact of external events such as the pandemic. As established through significant judicial precedents, buyers failing to close transactions due to reasons including market decline attributable to the Coronavirus may face substantial liabilities encompassing various costs and damages incurred by the vendor.

Final Thoughts

The nuances and complexities within Ontario's legal framework surrounding failed real estate transactions highlight the necessity for comprehensive understanding and adherence to contractual obligations. The precedents set by significant cases underscore the importance of diligence and accountability for both buyers and vendors in ensuring a fair and just resolution in such scenarios.

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