This Clause Doesn't Work

Over the years, I’ve had a few Realtors ask if they should include a clause like this in the APS:

RELEASE OF DEPOSIT:
Should the Buyer fail to complete this agreement on the completion date, at no fault of the Seller, the deposit shall be deemed to be released by the Buyer and paid to the Seller by the deposit holder, without deduction. This clause shall constitute the Buyer’s irrevocable consent to release such deposit and no further written release shall be required.

But there’s a problem: it doesn’t work.

If you read the clause carefully, you'll notice the words:

“…at no fault of the Seller…”

This is a legal determination of fact.

Who decides whether the seller was at fault?

You can bet the seller thinks they weren’t. And I bet the buyer disagrees.

Someone has to decide.

And when it comes to enforcing contracts and deciding the facts — that someone is a judge.

So even with this clause included in the APS, you end up exactly where you started.

There are no shortcuts for the deposit release.

They get released under 3 circumstances:

• The deal closes
• Both parties sign a Mutual Release, or
• A court order directs the deposit to one side

That’s it.

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