The Deposit Is Not a Condition

There's a misconception in our industry:

A deal is not binding until the deposit is paid.

And it's wrong.

A condition decides whether the deal goes ahead.

Financing, inspection, status certificate. These condition clauses are written so the agreement comes to an end if they aren't satisfied or waived.

The deposit is not that.

It's a term of the contract. Something the buyer has promised to do.

The contract is formed when the offer is accepted. The OREA form shows you this.

When the deposit is payable "Upon Acceptance", the buyer has 24 hours after acceptance to deliver it. The agreement already exists at that point. The deposit is the first obligation under it.

So when a buyer doesn't pay, the deal doesn't just fall apart. The buyer is in breach of the contract.

A recent Ontario decision, Brown v. Bolarinwa, shows how this plays out.

The buyers made an unconditional offer of $900,000 with a $25,000 deposit. The sellers accepted that evening.

The buyers then visited the property the next day, changed their minds, and never paid the deposit. Their agent asked whether a mutual release should be prepared.

The sellers refused and treated that as a breach, relisted the property, and sold for $825,000.

The court found that the original buyers had a binding contract, even without the deposit being paid.

And those buyers ended up being liable for the $75,000 difference in sale price.

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Here's the part that involves you.

The buyers in this case claimed their own agent told them they weren't bound until the deposit was paid. That didn't work as a defence against the sellers.

But this can result in a separate claim against the agent. A buyer who relied on bad information can try to claim against their Realtor for it. They can also file a complaint with RECO.

That's why the way the deposit gets explained to a client matters.

Signing is what binds them. The deposit comes after.