Closing Date Extensions in Ontario Real Estate Transactions: What Buyers and Sellers Need to Know

The closing date is one of the most important dates in an Ontario real estate transaction. It is the date on which the buyer is expected to provide the required funds, the seller is expected to transfer title, and the transaction is completed.

But real estate transactions do not always proceed exactly as planned.

A buyer may experience an unexpected financing delay. A seller may have difficulty completing another transaction. A title issue may arise shortly before closing. In other circumstances, one of the parties may simply need additional time to complete their obligations.

When this happens, a buyer or seller may ask to extend the closing date.

However, requesting an extension does not necessarily mean that the other party is required to agree to it.

What Is a Closing Date Extension?

A closing date extension occurs when the parties agree to move the scheduled closing of a real estate transaction to a later date.

For example, if a transaction is scheduled to close on September 15 but the buyer requires several additional days to finalize financing, the buyer may request that the closing be extended to September 22.

If the seller agrees, the parties can document the new closing date through a written amendment or extension agreement.

An extension may be for one day, several days or a longer period depending on the circumstances and what the parties are prepared to agree to.

Why Might a Buyer Need an Extension?

Financing issues are one of the reasons a buyer may require additional time before closing.

A lender may require additional documents, mortgage funds may not be available when expected, or an appraisal may come in below the agreed purchase price and create an unexpected financing shortfall.

Other issues may also arise. The buyer may experience a delay in receiving funds from another transaction, there may be an issue with the buyer’s mortgage instructions, or another unexpected problem may prevent the buyer from being ready to close on the scheduled date.

Whatever the reason, buyers should contact their real estate lawyer as soon as they become aware that they may not be able to close on time.

Waiting until the closing date to address a known problem can significantly limit the options available.

Why Might a Seller Need an Extension?

Buyers are not the only parties who may need additional time.

A seller may request an extension because of an issue affecting title, an outstanding mortgage or other registered encumbrance, difficulties obtaining documents required for closing, or another problem that prevents the seller from completing the transaction as scheduled.

The legal implications of a requested extension will depend on the reason for the delay, the terms of the Agreement of Purchase and Sale and which party is responsible for the issue.

Does the Other Party Have to Agree to an Extension?

Not necessarily.

If the Agreement of Purchase and Sale establishes a firm closing date, one party generally cannot simply decide to change that date.

An extension normally requires the agreement of both the buyer and seller, unless the Agreement of Purchase and Sale or another applicable contractual provision provides otherwise.

This means that if a buyer cannot obtain financing by the closing date and asks for an additional week, the seller is not automatically required to provide that additional time.

Similarly, a seller who needs more time cannot necessarily require the buyer to accept a later closing date.

The rights and obligations of the parties will depend on the agreement and circumstances.

Can There Be Additional Costs for an Extension?

Where a buyer requests an extension because the buyer is not in a position to close, a seller may agree to the extension subject to certain terms.

Those terms may include reimbursement of additional expenses resulting from the delay, additional legal fees, carrying costs, interest or other amounts negotiated between the parties.

For example, if the seller incurs additional mortgage interest or other expenses because the transaction does not close when originally scheduled, the seller may seek to have those costs addressed as part of the extension.

The specific terms of an extension are negotiable and will depend on the circumstances.

A buyer should therefore not assume that an extension will necessarily be granted without additional cost.

Should a Closing Date Extension Be in Writing?

Yes. If the parties agree to change the closing date, the agreement should be properly documented in writing.

The written agreement can establish the new closing date and address any additional terms agreed upon by the parties, including costs, interest or other obligations resulting from the extension.

Clearly documenting the extension can help avoid disputes about what was agreed upon and what obligations remain outstanding.

The parties should speak with their respective real estate lawyers before agreeing to or documenting an extension.

What Happens If the Other Party Refuses the Extension?

This is where the situation can become significantly more serious.

Suppose a buyer is scheduled to close on Friday but discovers on Thursday that the mortgage funds will not be available. The buyer requests an extension until the following week, but the seller refuses.

The buyer cannot simply assume that the transaction will remain open until the buyer is ready.

If the buyer is contractually required to close and fails to do so, the buyer may be in default under the Agreement of Purchase and Sale.

Depending on the circumstances, the consequences may include the loss of the buyer’s deposit and a potential claim for damages by the seller.

For example, if the transaction fails and the seller later sells the property for less than the original purchase price, the seller may have a claim for damages against the defaulting buyer, subject to the terms of the Agreement of Purchase and Sale and applicable legal principles.

The consequences of a failed closing can be substantial, which is why an extension request should be addressed before the closing deadline whenever possible.

Do Not Wait Until Closing Day

One of the most important things buyers and sellers can do when a potential closing problem arises is communicate with their real estate lawyer immediately.

If a buyer knows several days before closing that financing may not be available, their lawyer may have time to communicate with the seller’s lawyer and determine whether an extension can be negotiated.

Similarly, if a seller becomes aware of a title or discharge issue that could affect closing, addressing it early may provide more time to determine an appropriate solution.

There is no guarantee that an extension will be granted, but identifying the problem early generally provides more opportunity to address it before the transaction is at risk.

How Minhas Lawyers Can Help

Minhas Lawyers Professional Corporation assists buyers and sellers with real estate transactions throughout Ontario.

If an issue arises that may prevent your transaction from closing on time, obtaining legal advice early can help you understand your obligations under the Agreement of Purchase and Sale, communicate with the other party and determine what options may be available.

Contact 

For better assistance regarding your questions and inquiries for Real Estate transactions, contact Minhas Lawyers.

Email: [email protected]

Phone: (905) 671-9244

Serving Mississauga, Brampton, Toronto, the Greater Toronto Area, and clients throughout Ontario.

This article is provided for general informational purposes only and does not constitute legal advice. The information is not intended to be a complete statement of the law and may not apply to your particular circumstances. Real estate transactions vary, and the rights and obligations of the parties depend on the Agreement of Purchase and Sale and the specific facts of the transaction. You should obtain legal advice regarding your particular circumstances.