What Happens If a Buyer or Seller Fails to Close in Ontario?

A real estate transaction in Ontario is said to have “failed to close” when a firm Agreement of Purchase and Sale — one with no outstanding conditions — is not completed on the scheduled closing date because the buyer or the seller did not do what the agreement required. This is different from a deal falling apart earlier through a valid condition, such as financing not being approved within the agreed window; that is a built-in exit, not a failure to close.

This distinction between an early, condition-based exit and a true failure to close is one of the more important ideas in this area of Ontario real estate law, since the remedies and consequences discussed throughout this guide generally only apply once a deal has actually become firm. An otherwise ordinary closing can also be delayed, rather than fully failed, by something like a lender needing an extra day to release funds — the parties sometimes agree to a short extension rather than treating a brief delay as an outright failure to close.

Once a deal is firm, both sides are generally expected to take the steps needed to complete it — the buyer arranging final funds and a lawyer, the seller preparing to transfer clear title. When one side does not follow through, the other side — the non-breaching party — generally has remedies available under Ontario contract law. For background on how a deal becomes firm in the first place, see our guide to the Agreement of Purchase and Sale in Ontario.

Closing day itself usually involves a chain of smaller steps — mortgage funds being advanced, a final transfer document being registered, and keys being released — and a failure can happen at any link in that chain. Sometimes the failure is obvious well in advance, such as a buyer who tells their agent they are no longer proceeding. Other times it only becomes apparent on the closing day itself, when funds simply do not arrive on schedule.

When a buyer fails to complete a firm purchase, the seller generally has two broad paths available: pursuing financial damages, or seeking an order for specific performance that forces the buyer to complete the purchase. In practice, damages are the more commonly pursued remedy, since forcing a reluctant or financially unable buyer through a court order is not always practical even where it is legally available.

The buyer’s deposit is generally at risk in this scenario and can be forfeited to the seller, either outright or applied against the seller’s actual losses, depending on the agreement’s terms. Our guide to real estate deposits in Ontario covers how deposit forfeiture generally works in more detail.

Sellers facing a failed closing often need to make a fairly quick decision about next steps, since the property may need to be relisted and remarketed while carrying costs continue to accrue in the background. The practical path chosen — pursuing the original buyer, relisting promptly, or attempting to negotiate a resolution — tends to depend on how badly the market has moved and how quickly a comparable buyer can realistically be found.

When a seller fails to complete a firm sale — for example, by refusing to transfer title, or because the seller sold the property to someone else instead — the buyer generally has the mirror-image remedies available: damages, or specific performance requiring the seller to actually transfer the property.

Because the buyer did nothing wrong in this scenario, their deposit is normally returned in full. The buyer may also pursue a separate damages claim for losses caused by the seller’s failure to close, which can include costs connected to lost opportunity, if the buyer can no longer secure a comparable property on similar terms, as well as expenses already incurred in reliance on the deal closing as planned.

A buyer in this position often faces a practical decision of their own: pursue the original seller through a damages claim or a specific performance application, or simply look for another property and treat the lost opportunity as part of a broader claim for damages. The right path tends to depend on how badly the buyer wants that specific property versus how quickly they need to move forward with a purchase elsewhere.

The most common way Ontario courts measure damages when a buyer fails to close is by looking at the shortfall — the difference between the original contract price and whatever price the seller is ultimately able to obtain when reselling the property. If the property sells for less than the original deal, that gap generally forms the core of the seller’s damages claim.

On top of the price shortfall, a seller can often also claim reasonable carrying costs incurred because of the delay — things like additional mortgage interest, property taxes, utilities, and costs of remarketing the property — though every item still needs to be reasonably connected to the buyer’s failure to close.

Specific performance is a court order requiring a party to actually go through with the transaction, rather than simply paying money in its place. Courts have traditionally treated real property as unique — no two parcels of land are identical, and courts have historically reasoned that a buyer who contracted for a specific property may not be fully compensated by a payment of money alone.

Because of this traditional view of land as unique, specific performance is more readily available in real estate disputes than in many other types of contracts, where damages are usually treated as a fully adequate remedy. That said, specific performance remains a discretionary remedy, and a court will still weigh whether it is actually appropriate and practical in the circumstances before ordering it, rather than granting it automatically just because real property is involved.

In practice, specific performance claims are less common than damages claims, partly because the process of obtaining and enforcing such an order takes time, and partly because many non-breaching parties would rather move on with a new transaction than stay tied to a buyer or seller who has already shown they do not want to complete the deal. Even so, the availability of the remedy can affect how a dispute is negotiated, since it gives the non-breaching party real leverage.

For a buyer specifically, failing to close because financing cannot be completed in time carries real practical risk. If the financing condition was already satisfied or waived before closing, the inability to actually fund the purchase at the last moment is generally treated as the buyer’s own problem under the contract, not an excuse the contract itself provides.

This is part of why buyers are often cautious about waiving a financing condition before their mortgage financing is truly confirmed, and why understanding conditions in an Ontario APS matters well before a closing date ever arrives. For options available earlier in a deal, before it becomes a failure-to-close situation, see our guide to backing out of a real estate deal. This article is general information about Ontario real estate law, not legal advice about a specific transaction — see our tools or contact page for general next steps.