REAL ESTATE DEPOSITS
The deposit in a real estate transaction is generally paid after the purchaser and seller have agreed on a sale price and they sign the agreement of purchase and sale. The purpose of the deposit is to ensure that the purchaser has a financial stake in the real estate transaction and may signal to the seller the purchaser’s seriousness and good faith in the transaction. The agreement of purchase and sale will set out the amount of the deposit and may include the deadline for producing the deposit. Typically, the deadline for payment of the deposit is within 24 hours of the acceptance of the agreement of purchase and sale if an agreed-upon date has not been specified. The deposit is usually held by the listing brokerage in trust until the transaction is completed or terminated. In the event of default by the purchaser of the terms set out in the agreement of purchase and sale, the seller may be entitled to terminate the transaction and withhold a portion of or the entire deposit. The statement of adjustments will include a credit in favour of the buyer in an amount equal to the deposit paid at the time of signing the agreement of purchase and sale. Real estate deposits held by a licensed real estate brokerage in Ontario are insured against losses subject to certain terms and conditions. This insurance provides limited coverage against fraud, insolvency, and misappropriation of funds by a brokerage. For further information about limits on consumer deposit insurance coverage, please visit the Real Estate Council of Ontario’s website.
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Disclaimer: The information contained in this article is not to be construed as legal advice. The content is drafted and published only for the purpose of providing the public with general information regarding various real estate and business law topics. For legal advice, please contact us.
About the Author:
Shahriar Jahanshahi is the founder and principal lawyer at Jahanshahi Law Firm with a practice focus on representing business star-ups and investors in the province of Ontario. For further information about Shahriar Jahanshahi, click here.