The British Columbia Court of Appeal has ruled that a vendor must not prove damages in order to retain a deposit where a buyer fails to complete a purchase, even where a contract states that forfeit of the deposit is ?on account of damages.?
The five-judge panel in Tang v. Zhang?concluded that the phrase does not change the general rule that deposits must be forfeited where the buyer fails to close, but merely guards against double recovery. The decision, which engages the wording in the Greater Vancouver Real Estate Board?s standard form contract, reverses the BCCA?s 2009 decision in?Agosti v. Winter,?and provides general guidance regarding the interpretation of deposit?forfeiture?clauses.
According to Alexandra Cocks?and?Lisa Martz, writing in McCarthy T?trault?s?Real Estate MATTERS,?the decision will be welcomed by stakeholders in the real estate sector.
?In?Tang, the BCCA has provided clear direction to buyers and sellers about the status of a deposit paid under a land contract where the purchaser fails to close, clearing up some confusion that had arisen in British Columbia case law in recent years due to arguments made based on the wording of specific deposit forfeiture provisions,? they write.
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