Jul 20–24

Mon, Jul 20

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**HOOK**

There is a clause I see showing up in Agreements of Purchase and Sale that is designed to automatically release the deposit to the seller if the buyer fails to close.

It looks airtight. It's well drafted. And it doesn't work.

Today I'm going to show you exactly why — and what the law actually says about when a deposit can be released.

**INTRO**

My name is Zachary Soccio-Marandola. I'm a lawyer here in Toronto. And I help people like you close real estate deals every single day. If you enjoy this type of content, make sure you subscribe and join our community. And if you have a closing coming up, we've built the most transparent legal fee calculator online — it gives you a full breakdown of every dollar you'll spend and even calculates closing costs like land transfer tax and title insurance. That's linked in the description below.

**What a Deposit Actually Is**

So let's start with the basics. What is a deposit?

When a buyer submits an offer, they put forward a sum of money — the deposit. That money gets held in trust, typically by the listing brokerage, while the deal works its way toward closing.

Now at a high level, here is what the common law says about that deposit when a deal falls apart.

If the buyer fails to close — if they walk away from a deal they were legally obligated to complete — the seller is generally entitled to keep the deposit. It's not a penalty. It's the agreed-upon consequence of the buyer's breach. The seller doesn't have to prove their losses dollar for dollar. The deposit is forfeitable.

And it works the other way too. If the seller is the one who defaults — if they fail to close when they were supposed to — the buyer is entitled to their deposit back. And depending on the circumstances, they may have additional remedies on top of that.

So the deposit is not just a gesture of good faith. It has real legal consequences tied to who breaches the agreement.

**The Clause**

Now, here is where it gets interesting.

I've been seeing a clause show up in Agreements of Purchase and Sale. And whoever drafted it clearly understood the problem they were trying to solve. It reads like this:

"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."

So what is this clause trying to do?

It's trying to create a contractual mechanism that bypasses the normal release process. It deems the deposit released. It pre-authorizes the deposit holder to pay it out. And it says no further written release is needed.

On paper, it looks like it solves the problem. If the buyer fails to close, the seller just gets the deposit — automatically, no fighting over it.

The problem is the four words sitting right in the middle of that clause.

At no fault of the Seller.

**Why It Doesn't Work**

Here's why those four words break the whole thing.

In Ontario, the release of a deposit is not governed purely by contract. It is governed by legislation. Under the Trust in Real Estate Services Act, a deposit holder — the brokerage holding that money in trust — can only release a deposit in specific, defined circumstances.

Those are: the deal closes, both parties sign a mutual release directing where the money goes, or a court order instructs the deposit holder to release it.

That's it. Those are the only three ways a deposit moves.

Now, look at the clause again. It says the deposit releases if the buyer fails to close at no fault of the Seller. But who determines fault? Who decides whether the seller is at fault or not?

The buyer thinks it was the seller's fault. The seller thinks it was the buyer's fault. They both have lawyers. They both have a position.

Neither party has the unilateral authority to make that determination. Fault is a legal conclusion. It requires either an agreement between the parties — which is a mutual release — or a judge to decide.

So even with this clause in the agreement, even with the buyer's irrevocable pre-authorization sitting right there in the contract, the deposit holder still cannot release that deposit based on the clause alone. Because the condition that triggers the release — no fault of the seller — cannot be established without the very process the clause was trying to avoid.

The clause assumes its own conclusion. And that's why it doesn't work.

**The Only Three Ways a Deposit Gets Released**

So let's be clear about how a deposit actually gets released — because this matters in every transaction.

One. The deal closes. The deposit gets credited toward the purchase price. This is the normal outcome.

Two. Both parties sign a mutual release. If a deal falls apart, the buyer and seller can agree in writing on what happens to the deposit — buyer gets it back, seller keeps it, or it gets split. Both sides have to agree. Both sides have to sign.

Three. A court order. If the parties cannot agree, either side can bring an application to court and let a judge decide. This is the route that takes time, costs money, and creates uncertainty for everyone involved.

There is no fourth option. There is no clause you can draft into an agreement that bypasses this framework. The legislation governs, and the legislation is clear.

**SUMMARY**

A well-intentioned clause does not override the law. In Ontario, deposits release on closing, by mutual release, or by court order — and no contractual language changes that. If you're seeing this clause in agreements, now you know exactly why it doesn't hold up.

**OUTRO**

If you're enjoying these behind the scenes, real estate law videos, make sure you subscribe to the channel — I post a new video every week. And if you're a Realtor, I also send a weekly update about different legal situations that come up in our closings. That's our Realtor Newsletter and you can subscribe to it with the link down in the description. Thanks for watching.

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🌐 Website: https://www.socciomarandola.com/
📱 Legal Fee Calculator: https://www.socciomarandola.com/legal-fee-calculator
🚀 REALTOR® Newsletter: https://www.socciomarandola.com/newsletter

There is a clause showing up in Agreements of Purchase and Sale in Ontario that is designed to automatically release the deposit to the seller when a buyer fails to close. It looks well-drafted. It's clearly intentional. And it doesn't hold up. In this video, Toronto real estate lawyer Zachary Soccio-Marandola breaks down exactly why — walking through what a deposit actually is, what the law says about how it can be released, and why one specific contractual clause fails the moment you look closely at it.

If you're an Ontario buyer, seller, or Realtor, understanding how deposits are governed — and what can and can't be done with them when a deal falls apart — is essential. This video covers the legal framework under the Trust in Real Estate Services Act, the only three circumstances in which a deposit holder can release funds, and why no clause in an agreement can bypass that process. Whether you're drafting offers or advising clients, this is the kind of detail that matters when things go sideways.

Video Chapters

00:00 Introduction
01:00 What a Deposit Actually Is
02:15 The Clause
03:30 Why It Doesn't Work
05:15 The Only Three Ways a Deposit Gets Released
06:15 Summary

*This video is for general informational purposes only and does not constitute legal advice. Watching this video does not create a lawyer–client relationship. Real estate laws and procedures can vary depending on the facts of each case and the jurisdiction. Always consult with a qualified real estate lawyer in your area before relying on or acting upon any of the information discussed in this video.*