Property Damage at Closing: Who Is Responsible in Ontario?

You have your financing lined up, your lawyer is ready, and you are counting down the days to getting the keys. Then it happens: a pipe bursts, a storm takes down part of the fence, the basement takes on water, or you walk through right before closing and notice new damage that was not there before. The question that immediately follows is simple, and stressful: who pays for this in Ontario, the buyer or the seller?

The good news is that Ontario home purchases usually have a clear starting point for responsibility. The tricky part is what counts as “damage,” how serious it is, what your Agreement of Purchase and Sale says, and what steps you take the moment you discover the problem.

What “closing” means, and why timing matters

In everyday terms, closing is the day the property legally transfers from the seller to the buyer, and the buyer gets possession. Until that transfer happens, there is a gap where a lot can go wrong: weather events, leaks, vandalism, appliance failures, and even simple accidents during a move-out.

In Ontario, many transactions use standard-form agreements that include an “insurance and risk” clause. In plain language, this clause is designed to answer: who carries the risk if something happens before the deal completes?

The general rule in Ontario: the seller carries the risk until closing

In many Ontario deals, the seller remains responsible for the property up to completion, and is expected to keep it insured until closing. If the property suffers significant damage before closing, the buyer typically has contractual rights that can include ending the deal or proceeding in a way that accounts for the loss.

That said, everything flows from the contract you signed, including any added clauses, plus the specific facts of what happened.

“Substantial damage” vs. “annoying damage”

A lot of closing-day disputes come down to one phrase: substantial damage.

Ontario commentary on standard APS language commonly explains that when damage is substantial, the buyer may have options such as:

• ending the agreement and getting the deposit back, or

• completing the purchase and taking the benefit of the seller’s insurance proceeds (or a similar adjustment approach under the contract)

What counts as “substantial” is not a one-size-fits-all definition. It depends on the home, the damage, and whether the property can still be used the way a buyer reasonably expected. A broken handrail is a problem, but a fire, a major flood, or serious structural damage is in a different category.

What happens with minor damage?

Minor damage is where people get surprised. A home can absolutely have new scuffs, a torn screen, a cracked light fixture, or a missing remote, especially if the seller is in the middle of moving. These issues may not rise to the level of “substantial damage,” but they still matter.

This is why many Ontario professionals recommend protecting the buyer with clear language in the offer about the property’s condition on completion, and what happens if there are significant changes or damage. RECO specifically points to using protective clauses that require the seller to restore the property, or compensate the buyer, if there is substantial change or damage.

The pre-closing visit: your best chance to catch issues early

A pre-closing visit, often called a final walkthrough, is not just a formality. It is your chance to confirm that:

• the home is in substantially the same condition as when you agreed to buy it,

• included items are still there (appliances, window coverings, light fixtures, etc.), and

• nothing new has happened that would change your decision or your closing strategy

What to do immediately if you discover damage before closing

If you notice damage between the day your deal goes firm and your closing date, speed matters. The earlier you document it and involve the right people, the more options you usually have.

Here is the most practical playbook:

First, document everything. Take photos and video, note dates, and write down what you observed. If possible, compare it to earlier listing photos, inspection photos, or your own earlier walkthrough.

Next, notify your agent and your lawyer right away. This is important because the solution may involve notices, amendments, credits, holdbacks, insurance coordination, or, in rare cases, delaying or not completing the transaction depending on your rights.

Then, get clarity on the cause and scope. A small ceiling stain can be an old issue, or it can be a sign of an active leak. A wet basement could be a one-time storm event, or it could be ongoing seepage.

Finally, push for a written solution. Verbal promises do not protect you on closing day. You want the resolution documented in writing, usually through your lawyers, and aligned with the APS.

Insurance: what most people assume, and what is safer

Many buyers assume, “The seller has insurance, so we are covered.” The contract often requires the seller to keep the property insured until closing, but buyers can still be exposed to stress and uncertainty if a claim is disputed, delayed, or does not cover everything the way you expect.

Some Ontario real estate resources recommend that buyers consider arranging their own property insurance earlier than they think, because relying entirely on the seller’s policy may carry risk in certain situations.

Your insurer and your lawyer can help you time this properly, especially if you are closing soon, buying a vacant property, or buying a property with unique risks.

Condos, freeholds, and tenanted homes: why the details change

Condominium units: If the damage is within the unit, responsibility often follows the same contract logic as a freehold, but the condo corporation’s insurance may also be involved depending on what was damaged (unit vs. common elements). This is one reason documentation and legal guidance matter quickly.

Tenanted properties: If you are buying a home with tenants still in place, or if the seller is still occupying the property until closing, your APS clauses and the actual possession terms matter a lot. Damage caused by occupants can become a dispute about repairs, credits, or closing adjustments.

New builds and Tarion: a different layer of protection

Pre-construction and new-home purchases can involve different risks than resale homes, including delays and builder-related issues. In Ontario, Tarion provides certain pre-possession protections, such as deposit protection, delayed closing or occupancy coverage, and other financial loss protections in specific scenarios.

Tarion is not a replacement for a careful APS review, but it is an important part of the Ontario landscape for new homes.

Smart clauses that help prevent closing-day fights

A well-written offer can reduce the odds of a messy dispute if something happens before closing. For buyers, this often includes language confirming the property will be delivered in substantially the same condition on completion, and setting out what happens if there is damage or major change. RECO highlights the value of using clauses to clearly require restoration or compensation when there is substantial damage or change.

For sellers, clear wording and good documentation can also help prevent last-minute renegotiations over issues that are not truly new, or that were already disclosed.

Common scenarios, and how they usually get handled

Water damage days before closing: Often becomes a question of scope and repair plan. The best outcomes usually involve prompt remediation, written confirmation of the work, and either proof of repair or an agreed credit or holdback arrangement.

Appliances missing or swapped: If the APS says they are included, it is not optional. Missing inclusions should be raised immediately, and handled through the lawyers.

Damage discovered after closing: Generally, risk shifts once the deal closes, and post-closing problems can be harder to pursue unless there is misrepresentation, a breach of contract, or a specific warranty.

The takeaway: protect your closing, and reduce the stress

Property damage right before closing is frustrating, but in Ontario, you are not expected to just shrug and accept it. Your rights often come down to the risk and insurance language in your Agreement of Purchase and Sale, whether the damage is substantial, and how quickly you document and respond. The earlier you catch issues with a pre-closing visit, and the faster you get your agent and lawyer involved, the more likely you are to land on a fair outcome.

If you are buying or selling in Toronto or the Greater Toronto Area and want fewer surprises, work with a team that treats the details seriously. The Johnson Team is known for strong market knowledge, clear guidance, and creative strategies that protect clients through every step, including the closing stretch. Contact The Johnson Team to get connected with an agent right away, whether you are preparing to buy, getting ready to sell, or simply want a plan that helps your transaction close smoothly.