Mortgage Funds Delayed on Closing Day: Can the Buyer Get Keys?
It’s possession day. The documents are signed, the movers are booked, the buyer’s mortgage is approved, and everyone is waiting for the keys.
There’s just one problem: the purchase money hasn’t arrived.
Mortgage funding delays happen. Sometimes a lender releases funds later in the day than expected. Sometimes one final lender requirement still needs to be satisfied. Sometimes the funds simply won’t arrive until the next Business Day.
So what happens to possession?
The buyer’s and seller’s exact rights and obligations ultimately depend on the wording of their purchase contract. In Alberta, most residential resale transactions use the standard AREA Residential Purchase Contract, so this article uses that contract as its primary reference point. If a different agreement is in play, or the standard contract has been amended, that wording will govern the parties’ rights and obligations instead.
If the seller has met their closing obligations but the buyer can’t complete on time, the seller may agree to accept late payment and allow the buyer to take possession on reasonable terms. But neither is automatic.
Does the Buyer Still Get the Keys?
Not necessarily.
An approved mortgage, a lender’s assurance that funds are coming, or movers already parked outside don’t, on their own, give the buyer a right to possession before the seller has been paid.
Under the standard AREA contract, if the seller has done what’s required to close and the buyer can’t complete on time, the seller may — but isn’t required to — accept late payment and allow possession on reasonable terms. In other words, the seller has a choice.
From the seller’s perspective, they’re being asked to hand over possession before receiving the purchase price. That’s an added risk, and it should be addressed deliberately — not by simply releasing the keys and hoping the funds show up shortly after.
Is There a Penalty for Closing Late?
Under the standard AREA contract, the consequence is generally late interest rather than a fixed penalty. If the seller agrees to accept late payment, the buyer must pay interest at the ATB Financial prime lending rate in effect on the Completion Day, plus 3%.
But paying late interest doesn’t itself entitle the buyer to possession. The seller still has to agree before the buyer gets the keys ahead of payment.
Can the Seller Release the Keys Before the Money Arrives?
Yes — if the seller agrees.
Where the mortgage is approved, the transaction is otherwise ready to close, and there’s reliable confirmation that funds are on their way, a seller may be comfortable letting the buyer take possession before payment is received. This is typically documented through a tenancy-at-will agreement.
A tenancy at will is a temporary occupancy arrangement that lets the buyer move in even though the transaction hasn’t yet closed financially. It matters because, from this point on, the buyer is occupying the property while the seller is still waiting to be paid.
Depending on the circumstances, a tenancy-at-will agreement may address:
- the buyer’s continuing obligation to complete the purchase;
- payment of late interest;
- responsibility for the property and utilities;
- insurance;
- restrictions on alterations or changes to the property; and
- what happens if the anticipated funds don’t arrive.
The agreement doesn’t replace the purchase contract — it sets out the terms on which the seller is agreeing to allow possession while completion remains outstanding. It can also preserve the seller’s rights under the purchase contract if the buyer ultimately fails to complete.
For that reason, a tenancy at will shouldn’t be treated as an automatic workaround to get the buyer their keys. The seller must agree, and the arrangement needs to be properly documented.
What If the Funding Delay Isn’t the Buyer’s Fault?
Often, it isn’t.
A buyer can have an approved mortgage, provide everything their lender and lawyer asked for, and still end up waiting on possession day simply because the lender hasn’t released the funds.
But as between buyer and seller, the purchase contract still governs. Once a financing condition has been waived or satisfied, the buyer generally remains responsible for having funds available to complete the purchase.
That doesn’t mean a short lender delay has to become a crisis — it just means the delay needs to be dealt with under the contract.
What If It’s More Than a Funding Delay?
There’s an important difference between mortgage funds arriving late and a buyer (or seller) who isn’t actually in a position to close.
A tenancy at will may be a practical option where the mortgage is approved, the transaction is otherwise ready to complete, and there’s reliable confirmation that the funds are coming. The situation looks very different where mortgage instructions haven’t been issued, financing remains unresolved, or there’s no reliable confirmation of when, or whether, the lender will fund.
Those situations go beyond the short funding delays discussed in this article. If there is uncertainty about whether either party can complete, seek legal advice as early as possible to understand your rights and options before agreeing to an extension or other arrangements.
How Can West Legal Help?
Closing day issues can be stressful, especially when the movers are waiting and everyone needs an answer. Having a lawyer who can explain your rights, walk you through the options and properly document any arrangements is essential to protecting your interests and navigating closing day issues.
If you’re buying or selling, or have questions about a delayed closing or your purchase contract, reach out to our real estate team at West Legal. We’d be happy to help you work through your transaction and any issues along the way.
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