When a deposit is made in a real estate deal, it doesn’t automatically end up in the hands of the seller. That money is deposited in trust as per laws governing Ontario real estate transactions. If a deal happens to fall through, the funds that have been held in trust will be released once a mutual release has been signed by both the buyer and seller.
If the deal fails to close, the purchaser and seller can talk about having all or part of the deposit returned. If they fail to agree, the issue will head to litigation. Should a brokerage company mismanage any deposit money in trust they could suffer steep consequences in terms of fines and possibly forfeiting their license. Brokers have the legal responsibility to handle any deposit money that comes to them responsibly.
Real estate brokers aren’t the only ones who can hold a deposit in trust. Many purchasers and sellers feel more at ease using their lawyers to do so. But the bottom line is if a deal doesn’t in fact happen, getting deposit funds back isn’t as easy as holding out a palm, especially if animosity exists between buyer and seller.
It is in these instances an Ontario lawyer who has experience in real estate law can be of great help. Deposit funds are a crucial part of any real estate transaction. A savvy lawyer can help a client arrange a successful transaction while also focusing on ensuring that all applicable rights are protected.
Source: findlaw.ca, “Deposits when buying a home: it’s a matter of trust“, Accessed on Oct. 2, 2017