Real Estate Litigation Articles

Property deposits are forfeited, even if sale doesn’t go through

By Bob Aaron
Toronto Star contributing columnist.

Bob Aaron

What happens to the buyers’ deposit when they renege on the purchase agreement for a house and the owners resell for a higher price?

That was the case in a 2016 sale of a house on Ravensbourne Cr., in Toronto. Davood and Hakimeh Shabestari agreed to purchase the house from Sirish and Irwatti Sinha for $1,202,000. The vendors are both in their 80s.

The purchasers paid a deposit of $60,000. Based on their sale, the vendors signed an agreement to buy another property, and both deals were set to close August 3, 2016.

One month before closing, the purchasers informed the vendors that they were unable to research paper topics for business management close as they could not arrange financing. The purchasers had returned to their home in Iran and discovered that their home there had not sold. They advised the vendors that there could be some delay in securing funds for their purchase in Toronto due to “very bad economy conditions” there.

When it became clear that the purchasers were not going to close, the vendors re-listed the property and it sold on Aug. 31, 2016 for $1,273,000 — $71,000 more than the original sale price.

With the $60,000 deposit tied up in the trust account of the real estate brokerage, the vendors applied to court for a declaration that the deposit would be forfeited and paid to them. The purchasers counterclaimed for return of their money.

Bob Aaron is a Toronto real estate lawyer. He is Certified by the Law Society of Ontario as a Specialist in Real Estate Law.

He can be reached by email at, phone 416-364-9366. Visit his website