Sometimes -- but forfeiture is never automatic, and the brokerage cannot hand it over just because the seller asks.
Short answer
Forfeiture is possible where the buyer has "waived every condition and then simply fails to close," but it is "never automatic": per Treadstone Law's deposit-rules guidance, the brokerage will not release deposit funds to the seller without either the buyer's written consent or a court order. Where the buyer validly terminated on an unmet, properly-noticed condition, or the seller defaulted, the deposit is returned to the buyer instead.
A deposit is returned where "a valid condition wasn't met and proper written notice was delivered on time," where the seller defaults, or where both sides sign a mutual release. Forfeiture is possible only once every condition has been waived and the buyer simply fails to close — "the deposit is often seen as evidence of a buyer's good-faith commitment to the deal," and courts take a missed closing seriously precisely because of that function.
The brokerage holding the funds in trust has no authority to pick a side, no matter how confident the seller is that they are entitled to keep it. Release requires either the buyer's written consent or a court order — there is no third option where the brokerage simply decides.
Where buyer and seller cannot agree, the brokerage's remedy is an interpleader application: "it pays the disputed funds into the Ontario Superior Court of Justice and steps out of the fight, leaving buyer and seller to litigate against each other for the money." There is no fixed statutory deadline for how long that takes — "a contested deposit can be tied up for many months, and sometimes well over a year," once legal costs on both sides are factored in.
The deposit is also not necessarily a ceiling on what either side can recover. Where a seller's actual losses — carrying costs, a lower resale price on a relist — exceed the deposit amount, the agreement's wording may allow pursuing the difference separately, which is exactly why a lawyer should review a deposit dispute rather than assume the deposit is the whole story.
See the deposit handling guide and the case file on a deposit that never arrived.
Get ahead of an interpleader before legal costs on both sides make it worse.
