When buying property, it is routine and expected in such transactions for the buyer to pay a deposit towards the purchase price of the property. This deposit signifies that the buyer is committed to complete the purchase, as the buyer will lose their deposit if he or she fails to close the sale. From the seller’s point of view, the deposit justifies taking the property off the market pending the close of the transaction.

In the recent case of Keramati v Ko, Ms. Ko purchased Mr. Keramati’s condominium unit and paid a deposit of $100,000, which amounted to 7% of the purchase price. However, Ms. Ko could not fund the purchase, and the sale collapsed. Mr. Keramati then re-listed the condo, sold it to a different buyer and realized $115,000 in profit.

The issue before the court was whether or not it should order the return of Ms. Ko’s deposit. The court held that Mr. Keramati did not have to return the deposit because (i) he did not commit any wrongs in the transaction, and (ii) it would not result in a windfall. Further, when Ms. Ko failed to close the transaction, Mr. Keramati was free to re-list the condo and realize any profits in doing so.

An order for the return of a deposit from a failed transaction is an exceptional remedy that is granted only where allowing the seller to keep the deposit would shock the conscience of the court and the community. Some factors examined by the court in deciding whether or not to order such relief include extreme inequality of bargaining power between the parties and a bargain that resulted in a substantially unfair result. None of these factors applied in this case as the court noted that the sale of the condo was an ordinary sale that occurs hundreds of times per day in Ontario. It is important to note that a deposit differs from part-payment in that part-payment is a much higher percentage of the purchase price. If part payment was paid, it might have been open to the Court to order the return of the funds.

Regarding the amount of the deposit, the law is clear that a large deposit alone does not justify an order for its return after a failed sale. Since the deposit was only 7% of the total purchase price, allowing the seller to retain it would not shock the conscience of the court or community. Buyers in hot real estate markets put down deposits far greater than 7% routinely. In this case, Ms. Ko entered into the transaction knowing that if she failed to fund the entire purchase, she would lose her deposit. Additionally, Mr. Keramati was fortunate to make a profit instead of a loss on the subsequent sale as a result of Ms. Ko’s failure to close.


If you intend to purchase property, you might be expected to submit a deposit of approximately 10% or more towards the purchase price. Putting down a deposit is serious as the consequence of failing to close results in the loss of the deposit. Moreover, if the sale collapses, the seller re-lists the property and can’t sell it at the same price, the buyer may be held responsible for the amount of the loss that the seller suffered on the subsequent sale.

If you are a buyer and do not believe that you will be able to close the transaction for want of funds, first ask the seller for an extension of the closing date. The seller is under no obligation to accept this request, but they may ultimately do so to save themselves the trouble of re-listing the property.

Contact Walker Law litigation lawyers for assistance with your civil, contract dispute, and real estate litigation dispute. Please note that this article is intended for educational purposes only. It contains general information about legal matters and should not be considered legal advice.

Tags: Civil Litigation Law, Contract Dispute, Residential Real Estate Dispute

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