Deposits

The Deposit as Trust Money (4.1)

Clause 4.1 establishes that clauses 4.2 through 4.8 form the terms of trust for the deposit. Once a deposit is paid, it is trust money, not the seller’s money, not the buyer’s money, and not the brokerage’s money.

For clients, this means:

• the deposit cannot be released casually

• the brokerage must follow trust law and contract terms exactly

• disputes over deposits are governed by the contract and legislation, not emotion or fairness
  
  

For REALTORS®, this means absolute compliance is required. Deposit mistakes are not protected by E&O insurance.

Who Holds the Deposit and Why It Matters (4.2)

Clause 4.2 appoints a trustee to hold the deposit.

In most resale transactions, the listing brokerage holds the deposit in trust. This is standard practice because the listing brokerage is considered to have legal possession of the property and is best positioned to manage trust funds if a dispute arises.

There are exceptions:

• some builders hold deposits directly

• some law offices hold deposits

• some listing brokerages do not have trust accounts
  
  

When the buyer’s brokerage holds the deposit, it creates additional risk. If the deal collapses, the listing brokerage and seller are relying on a third party to comply correctly with trust obligations. This can complicate dispute resolution.

Teaching point for clients:
Who holds the deposit matters — not because it affects ownership, but because it affects control, compliance, and risk.

Amount, Method, and Timing of the Deposit (4.3 & 4.4)

Clauses 4.3 and 4.4 set out:

• the deposit amount

• how it must be paid

• when it must be paid
  
  

Deposits form part of the purchase price and must be paid on or before the date specified. Additional deposits are commonly due within two business days after removal of all conditions.

For buyers, this means:

• deposit deadlines are hard deadlines

• funds must be available when promised

• “waiting for a transfer” is not an excuse under the contract
  
  

For REALTORS®, it means:

• confirming funds early

• diarizing deadlines precisely

• never assuming a deposit is “on the way”
  
  

Failure to Pay the Deposit – Seller’s Void Option (4.5)

Clause 4.5 gives the seller a powerful right.

If the buyer fails to pay the deposit by the agreed date, the seller may void the contract by giving written notice. This right expires the moment the seller accepts the deposit, even if it is late.

This is a sensitive but critical discussion with sellers. Sellers must understand:

• they do not have to accept a late deposit, so ask your client prior to accepting a late deposit.

• accepting it removes their right to void

• voiding must be done properly, using the correct written notice
  
  

Critical REALTOR® risk:
If an agent accepts a late deposit without informing the seller, the seller may lose their void right — and the agent may face civil liability if the seller suffers a loss (for example, losing a stronger backup offer). A Seller may have received a back up offer and is wanting the chance to VOID the contract if the Buyer does not deliver the deposit on time. 

Always involve the broker and recommend legal advice before acting.

If the Seller is going to VOID the agreement, it must be done timely as instructed by the Seller, use the Notice (For Seller Void Option) to void. 

Trust Account Deposit Timing and Late Deposits (4.6)

Clause 4.6 requires that once a brokerage receives a deposit, it must be deposited into trust within three business days.

This clause creates two separate timelines:

1. The buyer must deliver the deposit by the date in 4.3 or 4.4

2. The brokerage must deposit it into trust within three business days after receipt
   
   

If a deposit is late:

• you cannot simply accept it

• all parties must agree in writing

• a Late Deposit to Trust form must be signed before acceptance of the funds
  
  

Accepting a late deposit without proper documentation can:

• eliminate the seller’s void rights

• expose the REALTOR® and brokerage to legal claims

• create serious trust compliance issues
  
  

How Deposits Are Disbursed (4.8)

Clause 4.8 explains exactly when and how deposits are released, provided the funds are confirmed.

Deposits may be returned to the buyer if:

• a condition is not satisfied or waived

• the buyer voids due to missing dower consent

• the seller voids due to failure to pay the deposit

• the seller fails to perform the contract
  
  

Deposits may be released to the seller if:

• all conditions are satisfied or waived

• the buyer fails to perform the contract
  
  

Deposits may also be applied to real estate fees directly from trust, with any excess paid to the seller’s lawyer before completion.

Important client misunderstanding to correct:
The deposit is returned to the buyer named in the contract, not the person who physically provided the money. If the deposit was gifted, repayment is handled privately after trust disbursement.

Deposit Disbursement Does Not End Legal Rights (4.9)

Clause 4.9 confirms that releasing the deposit does not prevent either party from pursuing further remedies under the contract.

In other words:

• deposit disputes can continue

• damages may still be claimed

• releasing funds does not mean the dispute is “over”
  
  

Deposit disputes are not covered by E&O insurance. They must be handled with precision, documentation, and broker involvement.

Why Section 4 Matters to Your Client

Section 4 determines:

• whether a contract stays alive or dies

• who controls the deposit

• when money can be released

• how disputes unfold
  
  

For buyers, the deposit represents commitment and risk.
For sellers, it represents leverage and protection.
For REALTORS®, it represents one of the highest-risk areas of practice.

Clear explanations, strict deadlines, and careful documentation protect everyone involved.