If you back out of a firm Agreement of Purchase and Sale in Ontario, you can lose your deposit and be sued for the gap when the property later sells for less, on top of the seller’s added carrying costs. You can only walk away without penalty when a condition in your agreement lets you out, when a narrow legal right applies, or when you are still inside the cooling off window on a brand new condo bought from a builder.
People often treat an accepted offer as something they can still undo. In Ontario it is not that forgiving. Once both sides sign, you hold a binding contract, and our courts enforce these agreements firmly. This guide explains what you actually risk, the few exits that hold up, and the steps that protect you before you ever sign.
Can you back out of a real estate deal in Ontario?
You can, but the real question is never whether you are able to. It is what it will cost you. The answer turns on one thing first. Does your agreement still have a live condition that has not been met or waived.
If your offer is conditional, say on financing, a home inspection, or a status certificate review for a condo, and that condition is not satisfied within its deadline, you can withdraw and recover your deposit. That is the agreement working exactly as written. If your offer is firm, meaning you removed those conditions or never included them, you are committed. Cold feet, buyer’s remorse, or a better house down the street are not legal exits.
The table below sorts the common situations by how much room you actually have.
| Your situation | Can you exit cleanly | What you risk |
|---|---|---|
| A condition in your offer is not met and you have not waived it | Yes, you can withdraw | Deposit returned and no penalty, as long as you meet the deadline and notify in writing |
| A new condo bought from a builder, still inside the cooling off window | Yes, for any reason | Full deposit back with interest, if your written notice lands in time |
| A firm offer with no conditions and you simply change your mind | No | Your deposit, plus the price gap on resale and the seller’s carrying costs |
| A firm offer where the market has dropped since you signed | No | The highest risk. Your deposit plus a damages award that can run into six figures |
| A resale home where you assumed a cooling off period | No | No cooling off period exists. You are bound the moment your offer is accepted |
A quick read of that table tells most people what they need to know. The rest of this guide explains the why, so you can act on it.
What happens to your deposit if you back out?
Your deposit is usually the first thing you lose, and you can lose all of it even when the seller is not out a single dollar. In Ontario a deposit is treated as security for your performance of the contract, not as a simple part payment. Its job is to give you a reason to close. When you walk away from a firm deal, the deposit is generally forfeited to the seller.
This is settled law. The Ontario Court of Appeal confirmed it in Redstone Enterprises Ltd. v. Simple Technology Inc. and again in Benedetto v. 2453912 Ontario Inc. A seller can keep the deposit even if the property later resells for the same price or more. The deposit is not a refund of damages. It stands on its own as the price of your promise to complete.
Can a court ever order the deposit returned. Yes, but rarely. A judge can grant what the law calls relief from forfeiture, and the test is demanding. You have to show that keeping the deposit is out of all proportion to the seller’s loss and that it would be unconscionable for the seller to keep it. Ordinary deposits in the usual 5% to 20% range almost never clear that bar. Courts have stepped in for unusual facts, for example a deposit that ran to roughly 80% of the price, or a vulnerable buyer facing a developer that behaved unfairly. Those are the exceptions that prove the rule.
So treat your deposit as money you have already committed, and never assume a court will hand it back.
Can the seller sue you for more than the deposit?
Yes, and this is where the real money lives. If the seller resells for less than you agreed to pay, you can be ordered to pay the difference. On top of that, the seller can claim the costs your breach caused, such as extra mortgage interest, property tax, utilities, maintenance, and added legal and real estate fees while the home sits unsold.
The seller cannot simply sit back and run up the bill. They have to take reasonable steps to resell and limit the loss, which the law calls mitigation. Here is the part that surprises people. If you are the buyer who walked away, the burden falls on you to prove the seller failed to mitigate. That is hard to show, and buyers who try it usually lose. Two Ontario decisions make the stakes concrete.
Gamoff v. Hu, a buyer who walked away owed $470,000
A couple listed their Whitchurch Stouffville home for $2 million. A bidding war pushed the accepted offer to $2.25 million. After signing, the buyers had second thoughts and asked to be let out. The sellers treated that as a repudiation, relisted, and eventually sold for $1.78 million. The court ordered the buyers to pay the $470,000 difference plus the sellers’ added expenses, and accepted that the sellers had acted reasonably in reselling. You can read the decision in Gamoff v. Hu, 2018 ONSC 2172.
Deco Homes (Richmond Hill) Inc. v. Serikov, the deposit plus six figures more
A buyer agreed to purchase a new townhouse from a builder for $1,248,380 and paid deposits along the way. Close to closing, the buyer’s lender appraised the home at about $300,000 below the price and would not advance enough to complete. The deal collapsed and the builder later resold for $980,880. The court allowed the builder to keep the deposit of $120,915.30 and awarded a further $154,164.26 in damages, plus interest and costs. The buyer’s argument that the builder had not done enough to mitigate went nowhere. The decision is Deco Homes (Richmond Hill) Inc. v. Serikov, 2021 ONSC 2079.
Both cases came out of the same pattern. A hot market, a high offer, financing that fell short, and a buyer left holding the loss.
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When can a buyer back out without penalty?
There are real exits. Most of them live inside the agreement, and a few sit outside it. Conditions are the exits written into your offer. Three appear most often, along with one many buyers forget.
- Financing. If your lender turns you down or will not advance enough, and the financing condition is still live, you can withdraw.
- Home inspection. If an inspection turns up serious problems you did not know about, the inspection condition can let you out or open the door to renegotiate.
- Status certificate for a condo. A review of the corporation’s finances and rules can give grounds to walk if something material turns up.
- Sale of your existing home. Some buyers make the new purchase conditional on selling their current property within a set time.
Each condition carries a deadline and a required way to act on it. Miss the deadline or fail to deliver proper notice and the condition is usually treated as satisfied, which locks you in.
A few problems outside the conditions can also justify ending the deal. A title search may reveal a lien or a claim the seller cannot clear before closing. The property may suffer major damage between signing and closing. Or the seller may have lied about or hidden a serious defect. Misrepresentation can be a valid reason to end a contract, but it is hard to prove and the dispute can be long and expensive.
Is there a cooling off period for homes in Ontario?
This is the detail most people get wrong, and it costs them. There is no cooling off period when you buy a resale home in Ontario. Not for a house, not for a resale condo, not for anything you buy through a listing on MLS. The moment your offer is accepted, you are bound. The few days you think you have to change your mind do not exist.
There is one real exception. When you buy a brand new or preconstruction condo directly from a builder, section 73 of the Condominium Act, 1998 gives you a cooling off period of 10 calendar days. Inside that window you can cancel for any reason and get your full deposit back with interest. A few points decide whether it helps you.
- The 10 days are calendar days, not business days, so weekends count against you.
- The clock starts on the later of the day you receive a signed copy of the agreement and the day you receive the disclosure statement together with the Condominium Buyers’ Guide.
- You cancel by giving written notice to the builder or the builder’s lawyer inside the window. A phone call, or a word to your real estate agent, is not enough.
This right does not apply to resale condos or to assignment purchases. Ontario has passed legislation that would extend a similar right to new freehold homes once it is proclaimed in force, but that change is not in effect yet as of mid 2026, so do not count on it. Statutes and timelines move, so confirm the current rule before you rely on it.
What if the seller is the one who backs out?
Sellers back out far less often, but it happens, and you are not without remedies. You can demand your deposit back, and you can sue for the cost of buying a comparable home plus the extra expenses the seller’s breach caused you.
You can also ask the court to order the seller to go through with the sale, a remedy called specific performance. Ontario courts grant it only when the property is truly unique and money would not be an adequate substitute, the standard the Supreme Court of Canada set in Semelhago v. Paramadevan. Proving uniqueness is difficult, so most of these disputes end in a damages award rather than a forced sale. If you are weighing a purchase, our guide to buying real estate in Ontario walks through the protections worth building in from the start.
The mistakes we see most often
In our practice, the same errors come up again and again. Each one carries a price.
- Waiving every condition to win a bidding war, then finding the financing is not there. The cost is your deposit plus the price gap on resale.
- Treating the deposit as the worst case. The cost is a damages award that can dwarf the deposit, as both cases above show.
- Believing a resale purchase comes with a few days to reconsider. The cost is being bound the instant your offer is accepted.
- Asking for repeated long extensions instead of dealing with the breach. The cost is a paper trail that reads as repudiation and weakens your position.
- Signing a firm offer before the mortgage is truly approved, not just preapproved on paper. The cost is the Gamoff and Deco Homes pattern.
- Trying to cancel a new condo by phone or through the agent instead of proper written notice inside the window. The cost is a missed deadline and a binding deal.
Frequently asked questions
Can I get my deposit back if I back out of a house purchase in Ontario?
Usually not, if your offer was firm. A deposit is treated as security for your promise to close, and the seller can generally keep it when you walk away, even if they lose nothing on a resale. A court can order it returned through relief from forfeiture, but only in rare cases where keeping it would be out of all proportion to the seller’s loss and unconscionable. A normal deposit almost never qualifies.
How much can I be sued for if I walk away from a firm deal?
More than the deposit. If the seller resells for less, you can be ordered to pay the difference, plus the costs your breach caused, such as extra mortgage interest, property tax, utilities, and added professional fees. In one Ontario case a buyer who walked away owed $470,000 on top of expenses. The size of the claim usually depends on how far the market moved after you signed.
Is there a cooling off period when buying a resale home in Ontario?
No. There is no cooling off period for resale homes or resale condos, or for anything bought through an MLS listing. You are bound as soon as your offer is accepted. The only statutory cooling off period is the window of 10 calendar days for a brand new condo bought from a builder.
Can I back out if my financing falls through?
Only if your agreement still has a live financing condition. If it does, and your lender will not advance the funds, you can withdraw and recover your deposit, as long as you act within the deadline and give proper notice. If you already waived financing or signed a firm offer, a lender saying no does not release you, and you remain on the hook.
What happens if the seller backs out instead of me?
You can recover your deposit and sue for the extra cost of buying a comparable property and other losses the seller’s breach caused. You can also ask a court to force the sale through specific performance, but only if the property is truly unique, which is hard to establish. Most seller breaches end in a damages award rather than a forced sale.
How fast do I need to act if I want out of a new condo?
Very fast. The cooling off period is only 10 calendar days, and weekends count. The clock starts on the later of the day you receive a signed copy of the agreement and the day you receive the disclosure statement and the Condominium Buyers’ Guide. You must give written notice to the builder or its lawyer inside that window, so book a legal review the day you sign.
The information provided above is of a general nature and should not be considered legal advice. Every transaction or circumstance is unique, and obtaining specific legal advice is necessary to address your particular requirements. Therefore, if you have any legal questions, it is recommended that you consult with a lawyer.
