AZ Real Estate Partners
Your House Burns Down Between Offer and Closing
Buyer Rights Under Ontario Law
Sounds like a horror scenario, but OREA’s standard form has explicit clauses for it. Understanding “risk allocation” and “substantial damage” determines whether you walk away with your money or take possession of damaged property.
Who’s responsible if a house burns down between offer firm and closing?
Under Ontario’s OREA Standard Form of Agreement of Purchase and Sale, damage occurring between offer firm and closing — fire, flood, leaks, structural failure — is at the seller’s risk. The seller must hold all insurance policies and proceeds in trust until closing. If the damage is substantial, the buyer has two legal options: (1) terminate the agreement and recover all deposit money paid (without interest); or (2) complete the purchase and receive the insurance proceeds. If damage isn’t substantial, the buyer typically must complete but can require seller to fund repairs from insurance or accept a price adjustment. All decisions and notices must flow through lawyers, in writing, on tight timelines.
Five steps a buyer must take in order after damage
Three scenarios — three reasonable choices
Substantial damage + market dropped: terminate
If damage is severe and the market dropped 10%+ since signing, terminate and recover deposit. Buy a comparable home at lower cost without rebuilding hassle.
Minor damage + market rose: complete + adjustment
Single-room damage and rising market — completing is better. $50K insurance credit puts cash in your pocket; finding a replacement home is harder and more expensive.
Insurance shortfall: negotiate or terminate
If seller’s insurance is limited (co-insurance, low caps, excluded perils), proceeds may not cover repairs. Lawyers negotiate seller covering the gap, buyer accepting partial cost, or terminating.
My five rules for between-firm-and-closing damage
- Get your own insurance binder at firm—OREA covers seller’s trust, but a $50-150 binder doubles your protection.
- Communicate only through lawyers—direct contact with seller can hurt your legal standing.
- Get independent damage assessment—don’t accept the seller’s repair-cost estimate at face value.
- The decision window is tight—5-15 days typical; missing it can forfeit termination rights.
- Preserve all written evidence—policy, repair estimates, emails, municipal reports — for potential litigation.
Five common buyer pitfalls in damage situations
- Assuming the seller pays automatically—OREA gives you trust over insurance, not seller’s cash.
- Verbal repair agreements—non-written, non-lawyer-signed agreements are legally void.
- Waiting for insurance to settle—claims can take 2-6 months — beyond your decision window.
- “Looks fine after repair” isn’t compliance—substantial damage carries lifetime disclosure obligation.
- Settling for partial deposit return—OREA returns “all monies paid without interest or deduction”.
Frequently Asked Questions
Contact Arthur Zhao
Worried about the 45 days from firm to closing?
I’ve helped clients navigate between-closing damage scenarios — from damage assessment through lawyer/insurer coordination to terminate-or-complete decisions. Don’t DIY this — a professional team is your safety net.
🌐 arthurzhao.realtor · ✉️ arthurzhaorealtor@gmail.com
Arthur Zhao · Real Estate Broker · FRI · ABR · SRS · PSA · MCNE · E-PRO · GUILD Elite
VP & Branch Manager, Bay Street Group Inc.
Discover more from GTA Real Estate Broker | Arthur Zhao
Subscribe to get the latest posts sent to your email.
