The standard Agreement of Purchase and Sale in Ontario allows a buyer to submit a deposit in 3 different ways:
“Herewith”…”Upon Acceptance”…and “As otherwise described in this Agreement”
Undeniably, the buyer has to abide by the option chosen.
1. Herewith means the deposit is submitted with the Offer.
2. Upon Acceptance, as defined in the Offer, means “that the Buyer is required to deliver the deposit with 24 hours of acceptance” of the Agreement.
3. As otherwise described in this Agreement provides for unusual situations, say where the deposit may have to be sent from another Province.
Upon acceptance is the most common method used.
Now and then, however, the deposit is late, not delivered or is declared NSF, amounting to no deposit.
No Deposit Can Render the Offer Void
Since not obtaining the deposit establishes a breach of contract by the Buyer, the Agreement can be voided by the Seller.
This, though, is not as simple as it sounds.
As the Agreement does not clarify what can happen when the deposit is late or not delivered on time, the Seller may:
1. Wait until closing to see whether the transaction will close, or
2. Obtain a Court Order declaring the Agreement null and void.
No Need to Sit on Pins and Needles Waiting
The better solution might be to simply insert a clause in the Agreement that clearly states what can happen if the deposit is late or not forthcoming. Here’s an example of such a clause:
“Acceptance of this offer by the Seller is conditional upon the Buyer submitting the deposit within 24 hours of acceptance of this Offer, failing which this offer shall be null and void and not binding on the Seller(s) herein unless the parties agree in writing to extend the offer.”*
The Seller can now declare the offer null and void, without the need for a court order or sitting on pins and needles waiting to see whether the deal closes. If the deposit is late, the Sellers, can also choose to agree to carry on with the Agreement.
Immediate Notification is a Must
Of course the Seller and Seller’s lawyer should be notified immediately should the deposit be late or not received by the Listing Brokerage who normally deposits the money in trust.
*Suggested clause has been formulated with the assistance of David Hurren and Carlo Galtieri, both practicing real estate Lawyers in the Niagara Region of Ontario.