What happens if a purchase contract deposit is late?

Life is busy – that seems to be a universal truth in every demographic and generation. The reality is that when life is busy, things get missed. That's the typical story given when a deposit that should have been delivered by a certain deadline, was not delivered on time. But at least it made it there, right? No big deal, right?? Well, let's back that truck up and take a quick look at the cascade of issues that flow out of a deposit delivered past its due date.

Time is of the essence
You've likely heard this statement before, but when it comes to a contract at law in Alberta, statements like "time is of the essence" bear a ton of weight. When a purchase contract is signed between the buyer and the seller, the parties are agreeing to certain terms and conditions, and those things all hinge on dates that are material to the parties. Due to this simple fact, a near-miss of any of those dates constitutes a breach of the agreement and comes with consequences.

Void option variable
In the standard AREA Purchase Contract used by all REALTORS^® in Alberta, a provision exists for the seller to be given a 'void option' should the deposit not arrive in exactly the way or timeframe anticipated in the agreement. This option gives the seller the massive unilateral authority to completely void the contract when the deposit does not arrive on time. This means that if the deposit is late, even by one day, the seller can terminate the whole agreement with no recourse by the buyer. It should be noted that the nuclear 'void option' is only just an option, and the seller could choose to accept the late deposit and give up their 'void option,' allowing the contract to continue to move forward.

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Brokerage responsibilities
In situations where one of the brokerages has been named as the trustee of the deposit money, the brokerage has certain responsibilities to ensure the parties are kept appraised of any late deposit situations. In an instance where a deposit is received late by the named trustee brokerage, they should be notifying all parties to the contract as well as both brokerages/agents that the deposit hasn't been received following the terms of the contract. Once everyone is aware of the situation, the seller's REALTOR^® needs to communicate the options the seller has in light of the situation. Brokerages should not deposit funds received late until or unless the seller gives them instructions to do so.

REALTOR^® Responsibilities
As you may have gathered, the delivery of the deposit to the brokerage/lawyer named as the trustee is a serious concern. The REALTOR^® representing the buyer needs to ensure their client understands the consequences of any late deposits and how seriously the timelines need to be taken. Having this discussion with the buyer at the time of the offer being written is ideal. This allows the buyer to identify any hiccups on their end and provides the REALTOR^® with an opportunity to build appropriate timelines into the contract. For the seller's REALTOR^®, the main responsibility is to ensure the seller understands their options when such an event arises and not to assume they know the instructions of the seller surrounding the void option until they receive that instruction.

Deposits in a purchase contract seem like such a small part of the overall contract, however, when handled improperly the weight of the consequences can be massive. REALTORS^® can help navigate both the buyer and the seller through these tricky waters when such a situation arises and ensure their clients make informed decisions.