The deposit is not automatically yours. The Auditor General of Ontario states that where an agreement falls through “the deposit is not automatically left with the seller, nor is it returned to the buyer” and that normally a court order is required if the parties do not agree in writing. The word “forfeit” does not appear anywhere in the OREA Agreement of Purchase and Sale. Section 27(1) of TRESA requires a brokerage to disburse trust money only in accordance with the terms of the trust, and after two years of unresolved entitlement it goes to RECO. Meanwhile the buyer remains in breach: RECO states that failing to deliver a deposit “is a breach of the agreement” and that a seller may cancel and sue. Whether a deposit is forfeited, and what damages you recover, are case-law questions no Ontario regulator has published a rule on — that is a lawyer’s job, not an article’s.
Closing day came and your buyer did not complete. You want to know whether the deposit is yours, how fast you can relist, and what you can recover. The first answer is the one people find hardest to believe, and it comes from the Auditor General of Ontario.
The deposit is not automatically yours
The Office of the Auditor General of Ontario put it in one sentence in its November 2022 audit of RECO:
“In the event that the agreement falls through, the deposit is not automatically left with the seller, nor is it returned to the buyer. Typically, the brokerage requires written agreement from the parties involved in the transaction to direct the disbursement of the deposit. If the buyer and seller do not agree in writing to the release of the deposit, normally a court order must be obtained to decide how the deposit will be distributed.”
And a verified negative worth knowing: the word “forfeit” does not appear anywhere in the OREA Agreement of Purchase and Sale. A full-text search of Form 100 returns zero hits. The standard form creates no automatic forfeiture right. If forfeiture is a term of your deal, someone had to write it into a schedule.
Why the brokerage cannot just hand it over
Section 27(1) of the Trust in Real Estate Services Act, 2002 requires a brokerage to deposit all money that comes into its hands in trust into a designated trust account, keep it separate from its own money, and “disburse the money only in accordance with the terms of the trust.” The terms of the trust are in the deposit clause of your agreement: the deposit is held “in trust pending completion or other termination of this Agreement.”
RECO’s own guidance to brokers of record says the brokerage has “a legal duty to observe a high standard of care and to act impartially when dealing with potential beneficiaries of that money”, and may disburse only “in accordance with the terms of a mutual consent or release signed by both the buyer and seller or from a court order.”
One point sellers often get wrong: the brokerages do not have to agree. RECO is explicit that brokerage signatures on the mutual release “are not required for the deposit money to be disbursed”, and that if the buyer and seller direct disbursement the brokerage “is obligated to release the funds as directed, even if the brokerage doesn’t agree.”
| Regulatory detail | Requirement |
|---|---|
| Where it must be held | A designated Real Estate Trust Account (O. Reg. 567/05, s. 15) |
| How fast it must be deposited | Within five business days (O. Reg. 567/05, s. 17(1)) |
| Who authorises a disbursement | The brokerage’s broker of record (O. Reg. 567/05, s. 19) |
| If entitlement stays unresolved | After two years the money goes to RECO — without prejudice to anyone’s claim (TRESA s. 27(4), (13); RECO Bulletin 8.1) |
| Trust account shortfall | The brokerage must immediately notify RECO and fund the shortfall (RECO Bulletin 1.3) |
How much money actually gets stuck this way
This is the part nobody publicises, and it is from the Auditor General.
| Finding, Auditor General of Ontario, November 2022 | Figure |
|---|---|
| Unclaimed trust money held between the Ontario government and RECO at the time of the audit | $13.7 million |
| Unclaimed consumer deposits RECO collected from brokerages, 1997 to May 2022 | $15.9 million |
| Of that, returned to a buyer or seller | $3.3 million, or 21% |
| Remitted to the Minister of Finance | $7.4 million, or 46% |
| Still held by RECO | $5.2 million, or 33% |
| Non-compliance notices to brokerages for failing to remit unclaimed deposits, 2017–2021 | 599 notices to 491 brokerages; 62% still unresolved as at May 2022 |
Only twenty-one per cent of unclaimed deposit money ever found its way back to a buyer or a seller. The Auditor General also records that “the legislation is silent on how long unclaimed deposits should be held after final remittance to the Minister of Finance” and that the Minister “holds unclaimed deposits indefinitely.” A deposit fight you do not resolve is not a deposit you eventually win. It is a deposit that disappears into a government account.
The buyer is not off the hook, and the deposit is not the ceiling
RECO published this in December 2023 and it is worth quoting to any buyer’s agent who suggests otherwise:
“entering into an agreement is binding and not delivering the deposit does not automatically mean a deal is cancelled or nullified. A failure to deliver a deposit is a breach of the agreement and could have serious legal and financial consequences. The seller could end up cancelling the deal altogether and even pursuing legal action against the buyer.”
The Auditor General also confirms the absence of the thing buyers most often assume exists: “in Ontario there is no legislated cooling off period when purchasing a resale property. This means that buyers cannot typically rescind an offer with no conditions without risking the loss of their deposit.”
Where I stop. Whether a particular deposit is forfeited, and what damages a seller can recover, are governed in Ontario by case law — relief from forfeiture, how a deposit is characterised, and the measure of the seller’s loss. No statute, regulation, RECO bulletin or Government of Ontario publication states the rule. I do not publish case law I have not read, so I am not going to state it. This is the point at which you need a litigation lawyer, not an agent and not an article.
The same applies to the duty to mitigate. It is a common-law principle. I searched ontario.ca, RECO and the Law Society of Ontario’s Residential Real Estate Transactions Practice Guidelines: none of them mentions mitigation, failed closings or aborted deals at all. Anyone quoting you a regulator on mitigation is inventing it.
Relisting: what the MLS rules require
| Rule | Requirement |
|---|---|
| 4.04 | “The Listing Brokerage shall Report if a firm sale falls through, or if a conditional Offer does not become a firm sale, to the Association by 11:59 p.m. the next Business Day.” |
| 4.02 | A sale must be reported “whether conditional or firm, by 11:59 p.m. the next Business Day following acceptance of an Offer”, and members may not avoid the obligation by cancelling a listing between receipt and acceptance of an offer |
| 3.10 | “Only one (1) MLS Listing for any one (1) trade function signed by the same Seller may be placed on the MLS System at any one (1) time” |
| 3.21 | Any amendment to the listing agreement must be reflected on the system by 11:59 p.m. the next business day |
Business day means all days other than Saturday, Sunday and Ontario statutory holidays.
Two consequences. First, the collapse is on the record the next business day — you cannot quietly relist as though nothing happened, and a buyer’s agent looking at the history will see it. Second, rule 3.10 means the old listing has to come off before the new one goes on.
How a collapsed deal affects the published statistics
TRREB’s note 1 states that “sales, dollar volume, average sale prices and median sale prices are based on firm transactions entered into the TRREB MLS System between the first and last day of the month.” So a sale is counted when it goes firm, not when it closes. A deal that collapses between firm and closing was already counted in the month it went firm.
Note 7 adds that “past monthly and year-to-date figures are revised on a monthly basis.”
What I cannot tell you: whether a collapsed firm deal is subsequently stripped out of the reported sales count. TRREB publishes no methodology document, note or release addressing it. Note 7 tells you revisions happen; it does not say what triggers them. I found nothing supporting either answer, so I am not asserting one.
Land transfer tax: nothing arises if nothing registered
Section 2(1) of the Land Transfer Tax Act imposes the tax on a person who “tenders for registration in Ontario a conveyance”. The Government of Ontario’s own guidance states the tax “is payable when the transfer is registered”, and that where a transfer is not registered within thirty days of closing a Return on the Acquisition of a Beneficial Interest in Land must be filed with payment within thirty days after closing.
On a straightforward buyer default where nothing registered, no land transfer tax arises at all. It is a buyer’s charge and it attaches at registration.
The one exception worth knowing: if the buyer registered a caution or notice and paid tax on it, a refund route exists where the transfer “did not take place”, and the Government of Ontario states there is no time restriction on requesting it. The Ministry of Finance bulletin requires a letter confirming the transaction is at an end, no interest was acquired, the agreement has not been assigned, and no action for specific performance has been or will be launched.
If you sue, where
| Court | Limit |
|---|---|
| Small Claims Court | $50,000 or less. Increased from $35,000 effective 1 October 2025. Minimum appealable amount rose from $3,500 to $5,000 |
| Superior Court of Justice | Anything above $50,000, or where you need “a specific type of order that only a Superior Court Judge can make” |
| Waiving the excess | A claim above $50,000 can still be filed in Small Claims Court “if you are willing to waive the amount over $50,000” |
On a GTA resale, a shortfall on resale plus carrying costs will usually exceed $50,000, so a seller’s claim normally belongs in the Superior Court. And a claim affecting title, or for specific performance, can only start there in any event.
Note also that a claim of $50,000 or less already started in the Superior Court “will not automatically transfer to Small Claims Court” — a transfer requires all parties to agree and the trial not to have started.
Two more things sellers ask about, and the honest answers
Bridge financing. If your own purchase now cannot close, you will be pointed at a bridge loan. I looked for federal consumer guidance to cite and there is none: FCAC’s mortgages hub and every one of its sub-pages, its “Choosing a mortgage” and “Buying a home” pages, and CMHC’s glossaries all contain zero mentions of bridge financing. If someone quotes FCAC or CMHC to you on a bridge loan, ask for the link. The terms will come from your lender’s own disclosure, and you should read them.
Reporting the collapse to RECO. A deal falling apart is not itself a reportable event. RECO Bulletin 1.3 requires immediate notice of a trust account shortfall or missing trust property, and prompt notice of specified financial circumstances. There is no RECO bulletin on failed agreements of purchase and sale at all — the trust guidance lives entirely in Bulletins 1.3, 8.1 and 8.2.
And RECO’s consumer deposit insurance does not help here: “In cases of a failed transaction where parties simply cannot agree on the disbursement of a deposit held in a real estate statutory trust account this coverage does not respond… because the funds are not missing or misappropriated. They are in dispute.”
How common is this? Nobody counts it
There is no published Ontario dataset on failed closings. The Superior Court’s published civil court data has no breakdown by cause of action. Statistics Canada’s Civil Court Survey does not break out real estate contract disputes and excludes appeal courts. TRREB publishes no failed-closing series.
The closest published proxy is the Auditor General’s unclaimed-deposit figures above, and RECO’s own claims data reported in the same audit: 195 consumer deposit claims received between 2016 and 2020, being two per cent of all 7,955 claims in the period.
What I would do, in order
- Get a litigation lawyer the same week. Not the lawyer who was doing the closing — or at least ask them whether they take this kind of file. Entitlement to the deposit and the measure of your damages are both case-law questions.
- Do not sign a mutual release to make it go away. Once signed, the brokerage must disburse as directed and your claim to that money is gone. RECO is clear the brokerage is obligated to follow the direction even if it disagrees.
- Get the property back on the market properly. The collapse is reported to the board the next business day under rule 4.04 regardless, so there is nothing to be gained by delay — and delay is exactly what a defendant will point at later.
- Document everything from the closing date forward. Carrying costs, the resale process, every offer received and every decision made about it. Whatever the mitigation rule requires of you, the record of what you did is made now, not later.
- Check whether the buyer registered anything on title. A caution or notice needs dealing with before you can convey, and it has its own land transfer tax consequences for them.
- Assume the Superior Court, not Small Claims. Above $50,000 there is no choice, and on a GTA resale a shortfall plus carrying costs usually clears that easily.
- Do not let two years pass on a stuck deposit. TRESA section 27(4) sends it to RECO, and the Auditor General’s numbers show that only twenty-one per cent of that money ever comes back to anyone.
What is not on this page
No case law, so no statement of when a deposit is forfeited or how damages are measured — those are the two things you most want to know and they are precisely the two things a regulator has not published. No bridge financing guidance, because no federal consumer source publishes any. And no claim about whether TRREB removes collapsed deals from its sales counts, because TRREB does not say.
A buyer walked on your Etobicoke or GTA sale?
Send me the address and the closing date. I will tell you what the property realistically resells for today against what you had agreed, how the collapse will read on the listing history, and how I would position the relist. I am not your lawyer and the deposit question is not mine to answer — but the resale number is, and you need it before you decide anything else. No cost and no obligation.
connect@jatindua.com · 437-987-1925 · Book a free consultation
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Frequently asked questions
If my buyer does not close, do I keep the deposit?
Not automatically. The Office of the Auditor General of Ontario stated in its November 2022 audit of RECO that where an agreement falls through the deposit is not automatically left with the seller, nor is it returned to the buyer, and that if the parties do not agree in writing a court order is normally required to decide how it is distributed. The word forfeit does not appear anywhere in the OREA Agreement of Purchase and Sale, so the standard form creates no automatic forfeiture right.
Why will my brokerage not just release the deposit to me?
Because section 27(1) of the Trust in Real Estate Services Act, 2002 requires a brokerage to deposit trust money into a designated trust account, keep it separate from its own money, and disburse it only in accordance with the terms of the trust. The terms of the trust are set by the deposit clause, which holds the money pending completion or other termination of the agreement. RECO adds that a brokerage has a legal duty to observe a high standard of care and to act impartially between potential beneficiaries.
Do the brokerages have to sign the mutual release?
No. RECO states plainly that although the OREA mutual release form has a space for both brokerages to sign, their signatures are not required for the deposit money to be disbursed, and that where the buyer and seller direct in a mutual consent that the trust money be disbursed the brokerage is obligated to release the funds as directed even if the brokerage does not agree.
What happens to the deposit if we never agree?
After two years it leaves the brokerage. Section 27(4) of TRESA requires a brokerage holding money in trust for two years, where entitlement has not been determined or is unclear, to pay it to the administrative authority, and section 27(13) preserves any person’s right to claim it afterwards. RECO Bulletin 8.1 states that all unclaimed money held in trust for more than two years must be paid to RECO. The Auditor General found $13.7 million held in unclaimed trust money between the Ontario government and RECO, and that of the $15.9 million RECO collected between 1997 and May 2022, only $3.3 million, or 21 per cent, was returned to a buyer or seller.
Can I sue the buyer for more than the deposit?
A seller can bring a claim, and RECO has published that failing to deliver a deposit is a breach of the agreement and that a seller could cancel the deal and pursue legal action. What a seller actually recovers is governed by case law rather than by any Ontario statute or regulator publication, so I am not going to state the rule. That is a question for a litigation lawyer.
Do I have to try to resell to reduce my losses?
The duty to mitigate is a common-law principle applied by the courts. I searched the Government of Ontario site, RECO and the Law Society of Ontario’s Residential Real Estate Transactions Practice Guidelines, and none of them codifies or explains it. Anyone quoting a regulator to you on mitigation is inventing it. Get the answer from your litigation counsel, and in the meantime document everything you do.
How quickly does the collapse show up on MLS?
The next business day. PropTx rule 4.04 requires the listing brokerage to report to the association by 11:59 p.m. the next business day if a firm sale falls through or if a conditional offer does not become a firm sale. Rule 4.02 separately prohibits members from avoiding reporting obligations by cancelling a listing between receipt and acceptance of an offer, or encouraging a seller to do so. Business day excludes Saturdays, Sundays and Ontario statutory holidays.
Does a collapsed sale get removed from TRREB sales statistics?
I do not know, and the published record does not settle it. TRREB’s note 1 states that sales, dollar volume, average and median prices are based on firm transactions entered into the MLS System during the month, so a sale is counted when it goes firm rather than when it closes. Note 7 states that past monthly and year-to-date figures are revised monthly. But TRREB publishes no methodology document, note or release addressing whether a collapsed firm deal is removed, so I will not assert either answer.
Is land transfer tax payable if the deal never closes?
Not if nothing was registered. Section 2(1) of the Land Transfer Tax Act imposes the tax on a person who tenders a conveyance for registration, and the Government of Ontario states that the tax is payable when the transfer is registered. On a straightforward buyer default with nothing registered, no land transfer tax arises. Where a buyer registered a caution or notice and paid tax on it, a refund is available where the contemplated transfer did not take place, and the Government of Ontario states there is no time restriction on requesting it.
Which court do I sue in?
It depends on the amount. The Small Claims Court limit rose from $35,000 to $50,000 effective 1 October 2025, with the minimum appealable amount rising from $3,500 to $5,000. Above $50,000 the claim belongs in the Superior Court of Justice, as does any claim seeking an order only a Superior Court judge can make. On a GTA resale a shortfall plus carrying costs will usually exceed the Small Claims limit, although a claim above it can still be filed in Small Claims Court if the excess is waived.
Does RECO deposit insurance cover a deposit stuck in a failed deal?
No. RECO states that in cases of a failed transaction where the parties simply cannot agree on disbursement of a deposit held in a real estate statutory trust account, the coverage does not respond, because the funds are not missing or misappropriated but in dispute. The coverage responds to brokerage theft, fraud, insolvency or misappropriation.
Do I have to report the failed deal to RECO?
A transaction failing to close is not itself a reportable event. RECO Bulletin 1.3 requires a brokerage to notify RECO immediately of a shortfall in the real estate trust account or of missing trust property, and promptly of specified financial circumstances such as insolvency or a court order relating to breach of trust. There is no RECO bulletin on failed agreements of purchase and sale at all; the trust guidance sits in Bulletins 1.3, 8.1 and 8.2.
Related reading
- The appraisal came in low: what happens next in Ontario
- Your home is not selling: what the days-on-market number hides
- Seller disclosure in Ontario: latent defects, patent defects and stigma
- Your agent will not cancel the agreement: what Ontario law actually lets you do
Sources
Every figure on this page traces to one of these, and each was read on 1 September 2026. Primary sources only — statute, regulation, and the government or agency that administers the rule. Where I could not verify something from a primary source, the page says so instead of guessing.
- Value-for-Money Audit: Real Estate Council of Ontario, November 2022 (PDF). Office of the Auditor General of Ontario. Section 4.7.1 states that in the event an agreement falls through the deposit is not automatically left with the seller nor returned to the buyer, and that normally a court order must be obtained. Reports $13.7 million in unclaimed trust money held between the Ontario government and RECO, $15.9 million collected in unclaimed consumer deposits between 1997 and May 2022, and 599 non-compliance notices issued to 491 brokerages between 2017 and 2021 for failing to remit unclaimed deposits. Accessed 1 September 2026.
- Trust in Real Estate Services Act, 2002, S.O. 2002, c. 30, Sched. C, section 27. Government of Ontario e-Laws, consolidated from 1 December 2023, read 1 September 2026. Requires every brokerage to maintain a designated trust account, to deposit all money held in trust for others into it, to keep it separate, and to disburse it only in accordance with the terms of the trust. Subsections (4) and (5) require money to be paid to the administrative authority where entitlement remains undetermined or the person entitled cannot be located after two years, and subsection (13) preserves any person’s right to claim it. Accessed 1 September 2026.
- O. Reg. 567/05, General, under the Trust in Real Estate Services Act, 2002. Government of Ontario e-Laws, consolidated from 1 December 2023. Section 15 requires the account to be designated a Real Estate Trust Account. Section 17(1) requires trust money to be deposited within five business days. Section 18 requires disbursement as soon as practicable where required by the terms of the trust. Section 19 requires every trust transaction to be authorised by the brokerage’s broker of record. Accessed 1 September 2026.
- Broker of Record Corner: returning deposits in failed transactions — RECO. Real Estate Council of Ontario, no date shown on the page. States that a brokerage holding deposit money has a legal duty to observe a high standard of care and act impartially, that it may disburse only under a mutual release signed by both buyer and seller or a court order, and that brokerage signatures on a mutual release are not required for the deposit to be disbursed. Accessed 1 September 2026.
- Legal corner: deposits play an important role in a real estate transaction — RECO. Real Estate Council of Ontario, 12 December 2023. States that not delivering a deposit does not automatically mean a deal is cancelled or nullified, that a failure to deliver a deposit is a breach of the agreement, and that a seller may cancel the deal and pursue legal action. Accessed 1 September 2026.
- Bulletin 8.1, Unclaimed money in the real estate trust account (PDF) — RECO. Real Estate Council of Ontario, effective 1 December 2023. States that all unclaimed money held in trust for more than two years must be paid to RECO, that where entitlement has not been determined or is unclear the money must be paid to RECO after two years, and that amounts under $25 need not be forwarded. Accessed 1 September 2026.
- Bulletin 1.3, Notice requirements (PDF) — RECO. Real Estate Council of Ontario, effective 1 December 2023. Requires a brokerage to notify RECO immediately of a shortfall in the real estate trust account or missing trust property, and promptly of specified financial circumstances. It contains no notice requirement triggered by a transaction failing to close. Accessed 1 September 2026.
- Consumer deposit insurance, frequently asked questions — RECO. Real Estate Council of Ontario, read 31 August 2026, no publication date shown. States that consumer deposit insurance responds to brokerage theft, fraud, insolvency or misappropriation up to $200,000 per claim, and does not apply where funds are held in dispute between the parties rather than missing. Accessed 1 September 2026.
- OREA Form 100, Agreement of Purchase and Sale, deposit and time clauses. Ontario Real Estate Association standard form, revision 2024, read from a licensee-reproduced copy. The deposit clause requires the deposit to be held in trust pending completion or other termination of the agreement. Clause 20 makes time of the essence subject to written extension. A full-text search of the form returns no occurrence of the word forfeit: the standard form creates no automatic forfeiture right. Accessed 1 September 2026.
- PropTx MLS Rules, rule 4.04, effective 2 December 2024 (PDF). PropTx. Rule 4.04 requires the listing brokerage to report to the association by 11:59 p.m. the next business day if a firm sale falls through or if a conditional offer does not become a firm sale. Rule 4.02 prohibits cancelling a listing to avoid the reporting obligation. Rule 3.10 permits only one listing for the same trade function by the same seller on the system at any one time. Accessed 1 September 2026.
- Market Watch, July 2026 (PDF) — Toronto Regional Real Estate Board. Toronto Regional Real Estate Board, released 6 August 2026. Page 27, note 5, defines Average Listing Days on Market and Average Property Days on Market. Reports 5,995 GTA sales, 14,484 new listings, 26,098 active listings, average price $1,003,956, median $860,000, average sale-to-list 97 per cent, average LDOM 32 and average PDOM 45, with the City of Toronto and Toronto West district breakdown on page 4. Accessed 1 September 2026.
- Land Transfer Tax Act, R.S.O. 1990, c. L.6, and Land Transfer Tax guidance. Government of Ontario, page published 6 April 2022 and updated 2 January 2026, and the consolidated statute at e-Laws. Section 2(1) imposes the tax on a person who tenders a conveyance for registration. The guidance states that the tax is payable when the transfer is registered and that where a transfer is not registered within thirty days of closing a Return on the Acquisition of a Beneficial Interest in Land must be filed with payment within thirty days after the closing date. Accessed 1 September 2026.
- Small claims court: suing someone — Government of Ontario. Government of Ontario, page updated 1 October 2025. States that effective 1 October 2025 the monetary jurisdiction of the Small Claims Court increased from $35,000 to $50,000 and the minimum appealable amount from $3,500 to $5,000, and that a claim above $50,000 must go to the Superior Court of Justice unless the excess is waived. The figures are prescribed by O. Reg. 626/00 as amended by O. Reg. 42/25. Accessed 1 September 2026.
About the author — Jatin Dua, Etobicoke real estate agent
I’m the Broker of Record at RE/MAX Quantum Realty, 799 The Queensway in Etobicoke. I write these pages the same way I work a file: read the primary source, quote it, date it, and say plainly where the source is silent or where two sources disagree. If a figure on this page has no citation beside it, that is a mistake and I want to hear about it.
I work with buyers, sellers, renters and investors across Etobicoke, Mimico, Humber Bay Shores, New Toronto, Long Branch, Alderwood and Stonegate–Queensway. connect@jatindua.com or 437-987-1925.