Is the landlord entitled to legally keep the earnest money since the sale fell through?

Full question:

I had a lease purchase agreement and put up $5,000.00 earnest money but could not obtain a mortgage and the landlord kept the money. Is he allowed to do that since I had the intent to buy, but could not obtain the mortgage?

• Category: Real Property
• Subcategory: Sales
• Date: 04/07/2025
• State: Georgia

Answer:

Whether or not earnest money is required to be returned will be determined by the contract terms involved. In some cases, the contract will specify that the seller may keep the money if the sale is terminated by the buyer without fault on the seller's part. However, some contracts contain a clause that the sale if contingent on the buyer obtaining financing, in which case, the buyer may be entitled to a return of the earnest money if financing isn't able to be obtained after good faith efforts.

The following is an example of a contract clause regarding earnest money:

Entitlement to Earnest Money: Subject to the Disbursement of Earnest Money paragraph below:

1. Buyer shall be entitled to the earnest money upon:

a) failure of the parties to enter into a binding agreement;
b) failure of any contingency or condition to which this Agreement is subject;
c) termination of this Agreement due to the default of Seller;

d) the termination of this Agreement in accordance with a specific right to terminate set forth in the Agreement; or
e) upon the closing of Property; and

2. Seller shall be entitled to the earnest money if this Agreement is terminated due to the default of Buyer. In such event, Holder may pay the earnest money to Seller by check, which if accepted and deposited by Seller, shall constitute liquidated damages in full settlement of all claims of Seller. It is agreed to by the parties that such liquidated