Yes. A home sale in Ontario can fall through at the last minute, even after the buyer and seller have signed an Agreement of Purchase and Sale. However, a signed agreement is legally binding in most circumstances, and neither party can simply walk away because they have changed their mind.
A transaction may fail to close because the buyer cannot obtain mortgage funds, the seller cannot resolve a title issue, the required closing documents are incomplete, or one party refuses to honour the agreement. Sometimes, the problem is temporary and the transaction can still be completed after the parties resolve the issue or agree to extend the closing date.
The important distinction is that a delayed closing is not necessarily a failed sale. If the problem cannot be resolved, or one party fails to meet their contractual obligations, the consequences can be serious. Depending on the circumstances, the party in default may face a claim for financial losses, and a buyer may risk losing their deposit.
A real estate lawyer helps identify and address potential problems before closing, coordinate the legal and financial requirements, and advise the client when a transaction is at risk. If a problem arises on closing day, getting legal advice promptly can help clarify the available options.
Once an Agreement of Purchase and Sale (APS) has been properly accepted, it generally creates a binding contract between the buyer and seller. Both parties are expected to fulfil their obligations according to the agreement.
A buyer cannot usually withdraw simply because they have found another property, changed their mind about the price, or become concerned about market conditions. Similarly, a seller generally cannot cancel the transaction simply because they have received a better offer.
However, the agreement may contain conditions that give a party a contractual right to terminate if the relevant requirements are not met. Other legal circumstances may also affect whether a party can end the agreement.
For example, a buyer may have negotiated a financing condition that allows them to terminate the agreement if financing cannot be obtained, provided they comply with the condition's wording and deadlines. If the condition has been waived or fulfilled and the agreement has become firm, the buyer's position may be very different.
The key question is not simply whether someone wants to back out. It is whether they have a valid contractual or legal basis to do so.
A buyer may believe their mortgage is arranged, only to discover that the lender will not release the funds needed to complete the purchase.
Possible problems include outstanding lender requirements, changes in the buyer's financial circumstances, insufficient funds for closing, or a delay in receiving the mortgage advance.
Mortgage approval and the actual release of mortgage funds are not the same thing. The lender must still be satisfied that its funding requirements have been met.
What this means: If the buyer cannot provide the required closing funds, the transaction may be delayed or the buyer may be unable to close. Whether the buyer can terminate the agreement depends on the contract and the circumstances. A financing problem does not automatically give a buyer the right to walk away from a firm agreement.
Before a real estate transaction closes, the lawyers must address legal issues affecting the property's title, which is the legal record of ownership and registered interests in the property.
For example, the lawyer may discover an outstanding mortgage, lien, or other registered interest that must be dealt with as part of the transaction.
Some issues can be resolved through the closing process. Others may require additional documentation, lender cooperation, or more time.
What this means: A title issue does not automatically mean the sale will fail. The buyer's and seller's lawyers must determine what needs to be corrected and whether it can be resolved within the contractual requirements.
A buyer needs more than a mortgage to complete a purchase. They must also have the remaining funds required for closing, including applicable adjustments and other amounts payable under the agreement.
A seller also needs sufficient funds or an appropriate arrangement to deal with outstanding mortgages and other secured debts that must be paid from the sale proceeds.
Problems can arise if a buyer's funds are delayed, the seller's mortgage payout is higher than expected, or the seller's available proceeds are insufficient to cover the required payments.
What this means: Financial shortfalls can prevent a transaction from completing as planned. They should be identified as early as possible so the lawyer can assess the available options.
Closing involves several parties, including the buyer's lawyer, the seller's lawyer, financial institutions, and sometimes other professionals.
A missing document, an outstanding lender requirement, incorrect information, or a delay in transferring funds can affect the timing of the transaction.
Even when both parties intend to complete the sale, the lawyers may not be able to finish the transaction until the necessary requirements have been satisfied.
What this means: A delay does not automatically cancel the agreement. The lawyers must determine whether the issue can be resolved within the agreed closing arrangements or whether an extension needs to be negotiated.
Sometimes, the problem is not administrative or financial. One party simply refuses to proceed.
A buyer might decide that the property is no longer worth the agreed price. A seller might receive another offer that appears more attractive. Neither reason, by itself, ordinarily gives the party a right to disregard a binding agreement.
If a party refuses to fulfil their obligations without a valid legal basis, they may be in breach of contract.
What this means: The other party may have legal remedies, depending on the agreement and the facts. These can include a claim for damages or, in appropriate cases, a court order requiring the transaction to proceed.
The consequences depend on why the transaction did not close, what the Agreement of Purchase and Sale says, and whether either party was ready and able to fulfil their obligations.
In Ontario, real estate agreements commonly contain a “time is of the essence” clause. In plain language, this means the agreed deadlines are important and must generally be taken seriously.
If a party fails to complete the transaction as required, the other party may have legal options. Depending on the circumstances, these may include treating the agreement as terminated, pursuing damages, or seeking specific performance—a court order requiring a party to carry out the contract.
The outcome is not automatic. A party's own conduct, readiness to close, communications, and the precise terms of the agreement can all matter. A party should not assume they can cancel the deal or claim a breach simply because the other side has encountered a delay.
For this reason, neither buyer nor seller should unilaterally declare the agreement cancelled without obtaining legal advice.
Yes. The buyer and seller can agree to extend the closing date, where appropriate, but neither party should assume that an extension will be granted.
For example, the parties may agree to a new date if mortgage funds are delayed or a document needs additional time to be completed. Depending on the circumstances, they may also agree on how additional costs or other consequences will be handled.
Any change to the closing date should be properly documented in writing. The parties should not rely on an informal conversation or an assumption that the other side will be flexible.
An extension can give the parties time to resolve a problem and complete the transaction. However, it is not guaranteed, and the legal consequences of changing the date should be considered before the parties proceed.
The deposit is an important part of an Ontario real estate transaction. It is generally paid according to the terms of the agreement and provides security for the buyer's contractual obligations.
If a buyer defaults on a binding agreement, the seller may be entitled to retain the deposit, subject to the contract and applicable law. The seller may also have a claim for additional losses in appropriate circumstances.
For example, if a buyer wrongfully refuses to close and the seller later resells the property for less than the original agreed price, the seller may seek to recover certain losses resulting from the breach. Whether any amount is recoverable depends on the facts, the applicable law, and the evidence.
On the other hand, if the seller is the party in breach, the buyer may have remedies of their own. The deposit's release or return may depend on the agreement, the nature of the dispute, and the parties' legal rights.
A failed transaction does not mean the deposit is automatically returned to the buyer or automatically paid to the seller in every case. If the parties dispute entitlement to the deposit, it may remain in trust until the dispute is resolved through an agreed process or other appropriate legal steps.
Before making decisions about a deposit, the parties should have a lawyer review the agreement and the circumstances surrounding the failed closing.
A real estate lawyer does more than arrange signatures on closing documents. The lawyer helps coordinate the legal requirements that must be satisfied for the transfer of ownership to be completed.
For a buyer, this can include reviewing the agreement, examining title, addressing relevant title concerns, reviewing lender instructions, coordinating mortgage funds, and confirming the funds required to close.
For a seller, this can include reviewing the agreement, obtaining mortgage payout information, addressing registered interests that must be dealt with, preparing transfer documents, and calculating the amounts needed to pay outstanding obligations and the net sale proceeds.
The lawyer also communicates with the other side's lawyer to address outstanding requirements and identify issues that could affect closing.
If a problem emerges, the lawyer can assess the agreement, explain the legal implications, communicate with the other party, and advise on possible next steps. Depending on the situation, those steps may involve resolving the issue, negotiating a written extension, or considering legal remedies.
Early communication matters. Buyers and sellers should tell their lawyers promptly if financing is uncertain, funds may be delayed, documents are missing, or they believe the other party may not complete the transaction.
A lawyer cannot guarantee that every closing will proceed without complications, but timely legal work and communication can help identify risks and address issues before they become more serious.
If you are buying or selling a home in Ontario and believe the transaction may not close on time, take the following steps.
1. Contact your real estate lawyer immediately. Explain the problem and provide any relevant messages or documents. Do not wait until the closing date has passed.
2. Identify exactly what is preventing closing. Is the issue related to financing, closing funds, title, missing documents, or the other party's refusal to proceed? The cause will affect the available options.
3. Do not assume you can cancel the agreement. Review the APS with your lawyer before taking action, particularly if you are considering refusing to close or treating the agreement as terminated.
4. Ask whether a written extension is possible. If the problem is temporary, your lawyer can communicate with the other side about whether an extension and any related terms can be negotiated.
5. Keep records of communications and costs. Save relevant emails, messages, lender communications, and documents relating to the problem. These may help your lawyer assess what happened and determine whether a legal claim or defence may be available.
Acting promptly can help preserve options. Once a closing deadline is missed, the parties' rights and potential financial exposure may become more complicated.
A home sale in Ontario can encounter serious problems shortly before closing, but a delay does not necessarily mean the transaction has failed. Some problems can be resolved, and the parties may be able to agree on a revised closing date.
The risk becomes more serious when a buyer or seller cannot meet their contractual obligations or refuses to complete the transaction without a valid legal basis. The consequences may include a dispute over the deposit, a claim for damages, or other legal proceedings.
If you are buying or selling a home, contact Khan Law early in the transaction and speak with your lawyer as soon as a closing problem arises. Understanding your obligations and options before taking action can help you make informed decisions about the next steps.
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Khan Law is a boutique law practice that has been providing legal services to the Greater Toronto Area since the year 2000.
