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BCFSA’s information provides clear, concise, easy-to-read explanations of the requirements for real estate professionals under the Real Estate Services Act (“RESA”), Real Estate Services Regulation (“Regulation”), Real Estate Services Rules (“Rules”), and other applicable legislation.
BCFSA’s information is intended for use by real estate professionals, to support their understanding of the standards they must meet in the delivery of real estate services.
(a) Deposit Requirements
A deposit is not required to create a binding contract of purchase and sale. The requirement that a contract include some form of consideration is satisfied by the mutual exchange of promises between the buyer and seller.
There is no legal requirement for a money deposit, and alternatives like bonds, cryptocurrency, and commodities are legally possible. It is recommended that consumers take legal advice respecting such alternatives before agreeing to them.
(b) Stakeholder Provision
All deposits accepted by a brokerage in respect of a trade in real estate are held by the brokerage as a stakeholder unless it is with respect to a deposit received under Residential Tenancy Act provisions. This means that your brokerage is not holding the funds for the benefit of either the buyer or seller, but as a neutral third party.
Should a transaction not complete, all parties to the trade must sign an agreement indicating who the deposit is to be paid to. An agreement is required whether or not the contract of purchase and sale outlines what happens if one party breaches the contract. If a dispute arises between the parties with respect to the deposit, and no agreement to release the funds is signed, the funds may ultimately get deposited into court on application by the brokerage.
However, if the buyer is exercising their right to rescission under the Property Law Act and the Home Buyer Rescission Period Regulation, a separate written agreement is not needed. The rescission fee, equal to 0.25% of the purchase price, is payable to the seller with the remainder being released to the buyer. An agreement and release by the parties is not required in order to handle deposit monies in this manner where a rescission occurs.Learn More about trust accounts
(c) Monetary Interest Earned on a Deposit
When funds are held in trust by your brokerage, all interest accrued on those funds is to be paid to the Real Estate Foundation per RESA. The two exceptions are:
- When the parties to the trade stipulate that the interest is paid in accordance with their instructions given that the funds are held separately in a designated trust account; and
- When the funds are deposited into a separate trust account maintained by the brokerage for the client, in which case the interest is to be paid in accordance with the client’s instruction.
(a) Delivery of a Deposit to Your Brokerage
All money received by you for or on behalf of a principal in relation to real estate services, must be promptly delivered to your brokerage. This includes money received on account of remuneration, including remuneration received from another brokerage.
(b) Exceptions to Delivery of Deposit to Your Brokerage
If you are provided with a deposit and the principals in the transaction have agreed that the deposit is to be held by someone other than a brokerage, that agreement should be made by a separate written agreement. However, the requirement of a separate agreement does not apply if the deposit is in the form of a cheque, bank draft or money order payable to a third party other than you or your related brokerage. In that instance, you may deliver the deposit to the third party in the absence of a separate written agreement. The third party may not be holding the funds as stakeholder so all parties should verify how the funds are being held and be advised to obtain legal advice if necessary.
Understanding Your Obligation to Inform Your Managing Broker if a Deposit is Not Received in Accordance with the Contract of Purchase and Sale
You must immediately inform your managing broker if a deposit has not been received or is late in accordance with the contract of purchase and sale. Your managing broker, in turn, has an obligation to inform, in writing, all parties to the transaction that a deposit has not been received, or is late.
If a deposit is related to a trade involving a development unit subject to the requirements of REDMA, you should determine that the party holding that deposit, whether it be your brokerage or someone else, is aware that it is being held under the provisions of REDMA not RESA. This should be included in the contract of purchase and sale, and you should advise your client to seek legal advice to ensure there is no concern about either how the deposit is to be held, or the terms upon which it may be released.
Please read the regulatory information on presales for more information on the differences between deposits taken under REDMA vs RESA.
The Residential Tenancy Act permits a landlord to request a security deposit up to one-half of one month’s rent and a pet damage deposit up to one-half of one month’s rent. There is no requirement that a landlord hold a security deposit, or pet damage deposit in a trust account, but the landlord is required to pay the tenant interest on the security deposit and pet damage deposit at the rates specified in the Residential Tenancy Regulation.
RESA provides that when a security or pet damage deposit is paid and deposited in the brokerage’s trust account, the funds are not held by the brokerage as a stakeholder. The tenant does not need to give written consent for the security or pet damage deposit to be paid tor or on behalf of the landlord. Such consent would otherwise be required if the brokerage held the funds as a stakeholder.
Under the Residential Tenancy Act, the landlord must return the security and pet damage deposit, with any applicable interest, within 15 days either of the end of the tenancy agreement or the date the landlord receives the tenant’s forwarding address in writing.
The Residential Tenancy Act requires that a rental unit be inspected at the start and the end of the tenancy. If the tenant fails to participate in the inspection, either at the beginning or the end of the tenancy, the tenant’s right to the return of the security or the pet damage deposit is extinguished. Correspondingly, if the landlord fails to inspect the rental unit or prepare a condition inspection report, the right of the landlord to claim against a security or pet damage deposit is extinguished.
A landlord may only retain an amount from a security or pet damage deposit that is agreed to by the tenant in writing at the end of the tenancy, or the amount that is awarded by an arbitrator. In order to make a claim against a security or pet damage deposit, the landlord must file an Application for Arbitration within 15 days of the end of the tenancy.