In short
It sets out who gets the deposit and releases both sides from further claims.
The deposit held in trust can't be released without both signatures or a court order.
How it works in Ontario
A mutual release is a short signed document in which the buyer and seller agree that their Agreement of Purchase and Sale is over. It also says what happens to the deposit and releases each side from further claims under that deal.
It's used when a deal ends, for example when a condition isn't met, when both sides agree to walk away, or to settle a dispute over a deal that didn't close.
It doesn't need to be complicated, but it has to be signed by both the buyer and the seller. Once it's signed and delivered, the brokerage holding the deposit can pay it out as the release directs.
Why the deposit needs a release
The deposit is held in trust, usually by the listing brokerage. The brokerage can't decide on its own who's right, so it normally won't release the money without a direction signed by both buyer and seller, or a court order.
Even when an agreement says the deposit goes back to the buyer if a condition fails, brokerages commonly ask for a signed mutual release first.
What if one side won't sign?
If one party refuses, the deposit usually stays in trust and neither side can get it. The dispute may then have to be settled by negotiation or in court, and the brokerage may pay the money into court.
Legal costs can sometimes approach the amount in dispute, which is one reason many disputes are settled with a negotiated release.
Read it before you sign
A mutual release is final. It can return the full deposit to the buyer, give some or all of it to the seller, or split it.
Once signed, you may give up claims you didn't realize you had. Get legal advice before signing one.
If you're the seller, think about timing too. Until a release is signed, the original agreement may still be in place, which can affect your ability to accept a new offer.
Common questions about mutual release
What is a mutual release in Ontario real estate?
A mutual release is a signed agreement in which the buyer and seller both agree to end their purchase agreement. It sets out who gets the deposit and releases both sides from further claims under that deal. It's commonly used when a condition isn't met or both parties agree to walk away.
Can a deposit be released without a mutual release?
Usually not. The brokerage holding the deposit in trust will generally release it only with a direction signed by both buyer and seller, or a court order. Some lawyers suggest adding wording to the offer that directs the deposit back to the buyer if conditions fail.
What happens if the seller won't sign a mutual release?
The deposit typically stays in trust until the parties agree or a court decides. The buyer may need legal action to recover it, which costs time and money. Speak to a real estate lawyer about your options. Signing a release you disagree with isn't required.
Does a mutual release mean no one gets sued?
It depends on the wording. A mutual release normally releases both parties from further claims under that agreement, but only what's written is covered. Have a lawyer review it before you sign. Claims outside that agreement may not be covered, so read every line.
Sources
General information for Ontario, updated October 2026. Not legal, tax or mortgage advice. Rules change, so confirm with your lawyer, lender or the source above before you rely on it.