RESOURCES

There is an all-too-common misconception by some Buyers and even by some Buyers’ professional, licenced realtors that the time period for the delivery of a Deposit pursuant to a resale Agreement of Purchase and Sale (APS) effectively provides the Buyer with a cooling-off period. The mistaken belief is that the Buyer has until the time and date specified in the APS for the delivery of the Deposit to have Buyer’s remorse for whatever reason and therefore elect to terminate the APS by not delivering the Deposit.

The misconception surrounding Deposits in real estate transactions is that a Buyer could believe that failing to deliver a Deposit cheque to a Seller of a property  means that no consideration  was given in the transaction.  And without consideration, that Buyer can claim that there is no effective contract to buy real estate.  That is FALSE!  Licensed realtors and professional real estate lawyers should be advising said Buyer that by signing the APS with a seal by their signature means that the Buyer has in fact given the consideration in the contract.  So by not delivering a Deposit cheque when due, a defaulting Buyer cannot simply unilaterally terminate a real estate transaction.

In Ontario, Buyers of new-build condominiums enjoy a 10-day cooling-off period pursuant to the provisions of the Condominium Act. On June 6, 2024 the Ontario government passed the Homeowner Protection Act, 2024 (Bill 200) which introduced a new 10-day cooling-off period for Buyers of new-build freehold homes, however that cooling-off period will not come into effect until proclamation at a later date. However, there is no legislation in Ontario that provides for any cooling-off period for resale transactions.

A typical resale APS will require delivery of the Deposit either with the signed APS, or “upon Acceptance” which is defined to mean that the Buyer is required to deliver the Deposit to the defined “Deposit Holder” within 24 hours of the acceptance of the APS. That 24 hour period is not a cooling off period. It is generally just the first of many legal contractual obligations that the Buyer is required to perform under the APS. Failure by the Buyer to deliver the Deposit within that 24 hour period will constitute a breach by the Buyer of the contractual terms of the APS which will result in the Seller having certain rights and remedies available to it.  The Seller could try to enforce the completion of the APS by the Buyer. Another remedy that becomes available to the Seller, but not to the Buyer, is for the Seller to terminate the APS. The Seller could terminate the APS and release the Buyer, or the Seller could terminate the APS and reserve its rights to claim damages against the Buyer once the damages are determined.

In order to avoid such costly misconceptions Kormans LLP provides sound and timely legal advice  through our experience and understanding of the rights of the parties, and our availability to provide such advice to our clients and their realtors.

For more information about this topic, please feel free to contact one of our lawyers! Email us at [email protected] or call (905) 270-6660.

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David H. Korman is the Managing Partner at Kormans LLP. His practice areas include residential and commercial real estate transactions, commercial leasing and private and institutional lending. You can reach David at [email protected].

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