When may a seller forfeit the buyer's deposit in a property transaction?

When may a seller forfeit the buyer's deposit in a property transaction?

• A. If the buyer defaults and the seller elects to withdraw after serving a completion notice
• B. At any time, regardless of default
• C. Only if the buyer completes
• D. Never; deposits are protected by law

Answer: (A)

Forfeiture of the buyer’s deposit happens as a security remedy when the buyer breaches the contract and the seller properly elects to terminate. In practice, if the buyer defaults, the seller can issue a completion notice. If the buyer still fails to complete by the specified date, the seller may rescind the contract and keep the deposit as compensation for the breach. This sequence—default by the buyer, the seller’s election to withdraw, and the serving of a completion notice—explains why the deposit can be forfeited. It isn’t automatic or unconditional, and if the buyer completes or there is no default, the deposit isn’t forfeited.

Forfeiture of the buyer’s deposit happens as a security remedy when the buyer breaches the contract and the seller properly elects to terminate. In practice, if the buyer defaults, the seller can issue a completion notice. If the buyer still fails to complete by the specified date, the seller may rescind the contract and keep the deposit as compensation for the breach. This sequence—default by the buyer, the seller’s election to withdraw, and the serving of a completion notice—explains why the deposit can be forfeited. It isn’t automatic or unconditional, and if the buyer completes or there is no default, the deposit isn’t forfeited.