When a Real Estate Deal Falls Apart, Who Keeps the Deposit?

As a real estate lawyer, one question comes up more than almost any other: what happens to the deposit if the deal doesn't close?

The New Brunswick Court of Appeal answered that question recently in Lockhart v. Glidden, 2026 NBCA 66 – and the facts read like a cautionary tale for anyone buying or selling a home.

In 2023, David and Cathy Lockhart listed their home in Irishtown, north of Moncton. Curtis and Tracy Glidden came in with an offer of $800,000 and a $25,000 deposit. The Lockharts countered at $875,000 with a $50,000 deposit. The Gliddens accepted, and the deal was set to close that August.

Then, on the afternoon of closing day, the Gliddens balked. They raised objections to two encumbrances on the title and insisted both be cleared that same day. The Lockharts asked for a short extension.

The Gliddens refused, and the deal collapsed on the spot.

The Lockharts relisted the house, sold it for less, and were left nearly $18,300 out of pocket.

When they went to collect the deposit sitting in trust, the Gliddens fought them for it.

At trial, a judge found the Gliddens had wrongly walked away from the deal – but ruled the Lockharts could keep only enough of the $50,000 to cover their proven losses. The remaining $31,700 was ordered to be returned to the Gliddens.

What the Court of Appeal Decided

Nearly three years after that failed closing, the Court of Appeal saw it differently. It held that a “true deposit” – one meant to secure performance of a contract, not simply a partial payment toward the price – is forfeited the moment a buyer wrongly repudiates the deal, regardless of whether the seller can point to a matching loss.

Even if the Lockharts had gone on to resell the house for more than the original price, they would still have been entitled to keep the full deposit. It isn't compensation for a loss. It exists to secure the purchaser's performance, and it's forfeited when that performance doesn't happen.

There is one guardrail: courts won't allow double recovery.

If a seller pursues damages beyond the deposit, whatever they've already kept gets credited against those damages, so they can't collect both in full.

Here, the Lockharts’ actual losses were smaller than the deposit, so there was nothing further to claim – and nothing left to hand back.

The Court awarded them the entire $50,000 deposit, together with accrued interest and $3,000 in costs.

What It Means for Buyers And Sellers

For sellers, this is reassuring: a properly worded deposit clause does real work. If a buyer wrongly repudiates the agreement, sellers don't need to prove their losses matched the deposit dollar for dollar to keep it.

For buyers, it's a caution. Walking away from a deal – even over what feels like a legitimate objection at closing – can cost you the deposit outright. If the seller's losses run higher, they can also claim the difference, but the deposit is credited against that claim rather than added on top.

For both sides, the lesson is that the wording of the purchase agreement matters more than people assume.

The court's reasoning turned partly on the specific language used: whether the deposit was forfeited “by way of liquidated damage” versus “on account of damages” and whether the agreement became “null and void” under certain circumstances.

Those aren't throwaway clauses.

They determine what happens if a deal collapses, and they're worth a conversation with your lawyer before you sign an agreement, not after a deal falls apart.

Veronica L. Ford is a Partner with Lawson Creamer. She can be reached at vford@lawsoncreamer.com.