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Brokerage Standards Manual

Notice of Change: Information in this manual changed when new agency and disclosure rules came into effect on June 15, 2018. Learn more about the new rules.

III. Trust Account Management

When Trust Funds Are Deposited

(a) Promptly Upon Receipt

Section 27 of RESA requires that a licensee must promptly pay or deliver all money to the brokerage that is required to be deposited in the brokerage trust account, and that the brokerage must promptly pay such funds into a brokerage trust account.

Additionally, all money held or received on account of remuneration for real estate services, including a share of remuneration received from another brokerage, must be deposited in the brokerage trust account. An exception exists for remuneration that has already been earned. In such cases, the money may be deposited in a commission trust account, or, if the brokerage has no related licensees, remuneration may be deposited in the brokerage’s general account.

As noted above, when a deposit is received from a buyer at the time an offer is made, section 27 of RESA requires that the deposit must be given by the licensee to the brokerage and the brokerage must promptly, upon receipt, place the deposit into the brokerage’s trust account. In the event that the offer is not accepted, the brokerage may return the deposit to the buyer without the need for approval from the seller.

If a cheque is received after banking hours, and it is not possible to deposit the cheque, it must be deposited the following business day.

If the offer is rejected before the cheque could be deposited, the cheque can be returned to the buyer without first having been deposited in the brokerage’s trust account. If, however, the cheque is received during banking hours and it is possible to deposit the cheque, the cheque must be deposited even though the offer may still be open and may still be rejected. The fact that no agreement has yet been reached does not permit the brokerage to hold the deposit cheque. If an agreement is not reached between the buyer and seller, the deposit may be returned to the buyer without the consent of the seller.

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(b) Alternate Methods Of Providing For Payment Of A Deposit

In addition to providing for the full deposit at the time of the offer, the following alternate methods of providing for payment of a deposit conform to the requirements of RESA:

  • the Contract of Purchase and Sale may provide that the deposit is payable within a specified period of time upon the acceptance of an offer or counter-offer;
  • the Contract of Purchase and Sale may provide for a small initial deposit which is to be increased to a specified amount upon notification of acceptance of an offer or counter-offer or removal of conditions precedent.

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(c) Delays In Depositing Funds

Although it is acceptable to delay receipt of the deposit until acceptance or removal of conditions, it is not acceptable for a deposit cheque to be received and held pending a subsequent event.

It must be stressed that it is not acceptable for the Contract of Purchase and Sale to provide that the licensee will hold the buyer’s deposit cheque and upon acceptance of the offer or counter-offer, deposit the cheque in the brokerage’s trust account.

If the parties agree that a deposit will be dealt with in a manner other than paying it promptly into the brokerage’s trust account, i.e., holding the deposit cheque to a later date, paying the deposit to a third party, etc., the parties must establish the alternate method of dealing with the deposit in a written agreement separate from the Contract of Purchase and Sale.

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(d) Need For Separate Written Agreement If Not Paid To Trust

In some cases, the parties to a trade in real estate may agree that funds, which would otherwise be paid to the brokerage to be held in trust, be paid to the seller, or to a third party.

Section 27(4) of RESA requires that if funds that have been held or received by a licensee are not to be deposited in that brokerage’s trust account, the parties to the trade in real estate must have entered into a written agreement, that is separate from any agreement giving effect to the trade in real estate, which provides that the licensee is not obligated to deliver the funds to the brokerage for the purpose of paying the funds into the brokerage’s trust account.

Section 7-1 of the Rules also requires that where an agreement provides that the funds are not to be held in the brokerage’s trust account, the licensee or brokerage must ensure that the money is paid in accordance with the agreement.

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(e) Not Sufficient Funds (N.S.F.) Deposit Cheques

In the event that a buyer’s deposit cheque is returned N.S.F. or is otherwise dishonoured, there are two possible explanations. The first is that there has been an honest mistake by either the buyer or the buyer’s bank. The second possibility is that the buyer has insufficient funds or is engaged in some improper scheme.

The seller must be informed of the situation without delay. Section 3-1(4) of the Rules requires that a managing broker ensure that all parties to the agreement relating to the trade in real estate are immediately notified if the deposit contemplated by the agreement is either not received or is not honoured. Such notice must either be given in writing or confirmed in writing.

Provided the seller agrees, it is permissible to contact the buyer and to allow the buyer a very short period of time within which to provide a certified cheque, a bank draft or money order. (Note: a client is able to issue a “stop payment” on a certified cheque.) If the deposit money is not replaced, the seller must be fully advised of the situation as noted above. The seller should also be advised to obtain legal advice as to their position vis-à-vis the buyer.

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