Litigation Law Newsletter, Volume 1, Number 4: Deposits for Home Purchases
Click “Subscribe Now” to get attorney insights on the latest developments in a range of services and industries.
April Focus
Deposits for Home Purchases
Whether you’re an owner selling your residence, or a buyer purchasing a residence, deposits are required. The deposit gives the vendor some measure of security in case of default by the buyer.
But what happens if a real estate transaction goes sideways? How does a party retrieve the deposit? The answer to this question is not as simple as it seems.
Retrieving the Deposit
Deposits are usually held by one of the party’s real estate agents, in trust. This means that unless there is a resolution between the parties or a court order, the real estate agent cannot release the funds under any circumstance. For example, suppose a vendor claims entitlement to a $100,000 deposit because of default by the buyer. The vendor cannot simply ask the real estate agent to release the funds from trust. Instead, the vendor must bring a court application unless the buyer consents to the release of the funds. However, given that litigation is expensive, often both parties will try to work out an arrangement in order to avoid expensive legal fees.
Settlement Is Usually Preferable
In Ontario, a successful party is generally only entitled to receive 60% of his legal costs from the other party. Thus, if a party incurs legal fees of $50,000 and was successful at court, the party who was unsuccessful at court would be responsible to pay the successful party $30,000, representing 60% of the $50,0000 incurred. Looking at it another way, the successful party will still have to pay $20,000 of his $50,000 legal expenses. Therefore, if a buyer defaults on his obligations under the contract, as in my example above, I would typically recommend the vendor to try and settle with the buyer for a minor amount to avoid the legal fees that would otherwise be lost. This would also allow the vendor to retrieve the funds much sooner than if he proceeded by way of a court application.
While I am hopeful that you will never find yourself in this spot, disputes arise often. It is important to know your options when things go off track so you can make the most of a difficult situation.
Wishing everyone is safe and healthy during these trying times.
Recent Insights
- March 30, 2023 Blogs 州の給与透明化法-PERMの求人活動を実施する前に 雇用主が確認すべき5つの問題 | State Pay Transparency Laws: 5 Questions Employers Must Ask Before Starting A PERM Recruitment Campaign
- March 29, 2023 In the News Joseph Silvia has been quoted in an article by MarketWatch, “Signature Bank provided critical services to law firms. Now they’re weighing their next move.”
- March 28, 2023 In the News Jacob Frenkel was featured recently in the CNBC Worldwide Exchange segment, "Two former SEC and Treasury officials discuss the Justice Department’s SVB investigation."
- March 27, 2023 Industry Alerts U.S. Supreme Court Decides Perez v. Sturgis Public Schools
- March 27, 2023 In the News Dickinson Wright Listed in Modern Healthcare’s 2023 Largest Law Firms
- March 22, 2023 Media Mentions Kris Beecher has been quoted in an article by the Arizona Republic, "Native leaders are watching new lawmaker who represents more than half of Arizona's tribes.”
- March 22, 2023 In the News Leslee Lewis Named a “Notable West Michigan Lawyer” by Crain’s Grand Rapids Business
- March 22, 2023 In the News Three Dickinson Wright Attorneys Named 2023 Texas Super Lawyers Rising Stars
- March 22, 2023 Media Mentions Joseph Silvia has been quoted in the S&P Global article, “'Small universe' of buyers available for Silicon Valley Bank.”