Buyer Defaults in
Ontario Real Estate?
Once you sign an Agreement of Purchase and Sale (APS) in Ontario and waive all conditions, you have a binding legal contract. Walking away is not simply a matter of “losing your deposit.” In a declining market, a buyer’s total financial exposure can reach hundreds of thousands of dollars — sometimes well over a million. Here is exactly what the law says, step by step.
A conditional offer where the buyer exercises a legitimate condition = deposit returned, no default. A firm offer (or conditions already waived) where the buyer walks away = breach of contract, full consequences apply.
In the GTA, the standard deposit is 5% of the purchase price, due within 24 hours of acceptance and held in trust by the listing brokerage.
When a buyer defaults, courts treat the deposit as liquidated damages — a pre-agreed compensation, not a penalty. The seller keeps the entire deposit even if they suffer no actual loss.
Courts do have discretion to grant “relief from forfeiture” in unconscionable cases, but a 5% deposit has never been found unconscionable in Ontario jurisprudence. For all practical purposes, deposit forfeiture is automatic.
Purchase price $1,000,000 → Deposit $50,000. Default = instant loss of $50,000, no exceptions.
If the seller re-lists and sells at a lower price, the defaulting buyer is liable for the shortfall. The damages formula works like this:
+ Carrying costs during re-listing period
(mortgage interest, property tax, insurance, utilities, maintenance)
+ New selling costs
(staging, photography, commissions, legal fees)
− Deposit already forfeited (credited against damages)
In a falling market, the additional liability beyond the deposit can easily reach $100,000 to $500,000 or more.
Mattamy Homes v. Ishola (2024)
A buyer defaulted on a pre-construction unit. The court ordered: $60,000 deposit forfeited plus an additional $190,000 in damages. Total exposure: $250,000.
Menon v. Simpson (December 2025)
A Mississauga luxury property. Original APS: $8,385,000. Resale price after buyer default: $6,550,000. The price gap alone was $1,835,000 — before carrying costs and legal fees were added.
Ontario law requires the seller to take reasonable steps to minimize their losses: re-list promptly, price the property reasonably, and accept reasonable offers.
However, the seller does not have to accept a below-market price, sell to the defaulting buyer at a discount, or wait indefinitely for the market to recover.
The burden of proving the seller failed to mitigate falls on the defaulting buyer — a very difficult argument to win in court.
Specific Performance — a court order forcing the buyer to complete the purchase. Rarely granted in Ontario because courts are reluctant to compel someone to buy property.
Injunction — to freeze the buyer’s assets before judgment if there is a risk the buyer will dissipate funds to avoid paying damages. Courts can move quickly on this.
If you have any doubt about a property or your financing, keep a financing condition and a home inspection condition. The condition period is your legal exit window. Once conditions are waived, you are fully bound. In competitive markets, the pressure to submit firm offers can be intense — but the financial risk of defaulting far outweighs any perceived edge you gain by going firm.
#deposit forfeiture
#real estate breach of contract
#APS Ontario
#buyer tips
#Arthur Zhao
#GTA real estate law
Discover more from GTA Real Estate Broker | Arthur Zhao
Subscribe to get the latest posts sent to your email.
