A buyer who cannot complete a home purchase may face financial consequences beyond losing the deposit. In Azzarello v. Shawqi, the Ontario Court of Appeal considered the damages payable after a failed residential real estate transaction.

The purchaser agreed to buy a Mississauga home for $1,555,000 and paid a $75,000 deposit. Despite receiving several extensions, he failed to close. The sellers eventually resold the property for $275,000 less than the original purchase price.

The sellers obtained a damages award of $308,688.31, including the resale shortfall and additional losses. The motion judge also ordered forfeiture of the deposit without crediting it against those damages.

The Court of Appeal upheld the findings concerning the purchaser’s breach and the sellers’ reasonable efforts to reduce their losses. However, it corrected the treatment of the deposit: the $75,000 had to be credited against the damages award.

The decision illustrates two important points. A deposit does not necessarily cap a defaulting buyer’s liability. Equally, where the seller establishes compensable losses, the deposit must be properly accounted for rather than simply added to the full damages award.

What this could look like in practice

Imagine agreeing to purchase a house for $1 million and paying a $50,000 deposit. Your financing later falls through, and the seller resells for $900,000.

It would be unsafe to assume that walking away costs only $50,000. A proper assessment would examine the agreement, the reason for the failed closing, the resale process, and the losses claimed.

For the seller, useful records would include listing history, offers received, carrying expenses, and communications about extensions. For the buyer, financing documents and closing correspondence would help explain what happened.

The takeaway

Before refusing to close, obtain advice about the potential exposure. After a failed transaction, both parties should assess the claimed losses, reasonable mitigation efforts, and treatment of the deposit.

Contact JY Law to discuss your circumstances and how we may assist you.

The information on this page is provided for general educational purposes only and does not constitute legal advice. These summaries highlight selected principles and do not address every issue or subsequent legal development. Examples are hypothetical and do not predict outcomes. Rights and obligations depend on the agreement, applicable legislation, relevant dates, and particular circumstances. Reading this page or contacting our firm does not, by itself, create a lawyer-client relationship. If you have further questions or require advice about your situation, please contact us.