Receipt of a deposit by electronic funds transfer

It is more and more common for deposits on real estate transactions, whether residential or commercial, to be made by electronic funds transfer. Here is how to proceed in such cases. First, it is crucial to indicate on the transaction proposal (promise to purchase or to lease) that the deposit will be paid by electronic funds transfer.

Residential transactions

Clause 4.3 of the mandatory Promise to purchase (PP) (PDF) form states that the deposit may, among other options, be made by an electronic transfer.

For other types of transactions

In the absence of a specific clause in a form, you must make sure that the terms and conditions related to the receipt and processing of the deposit are correctly indicated in the transaction proposal (lease or other) by including a clause to this effect in the contract. In all cases, to avoid any ambiguity, we suggest the following procedure:

Thorough follow-up

You must obtain the trust account number from the trustee (agency or broker) (usually the seller’s broker’s agency or your agency if you are the buyer’s broker, in the case where your agency would be trustee as indicated under clause 4.3 of the promise to purchase) in order to give this information to your depositing client (the buyer).

The brokers and agencies involved in the transaction must collaborate to make sure the deposit clause is respected. In fact, the same vigilance is required for an electronic funds transfer as for a cheque, with the same actions and consequences for the parties to the transaction.

The trustee (agency or broker) must verify his trust account daily to see if the deposit has been received.

File documentation

As a trustee (agency or broker), you must:

• Obtain written confirmation of the transfer from your financial institution. A copy of this confirmation must be kept in the transaction record. A good practice is to keep an additional copy that can be attached to your deposit book showing the name of the depositor and the transaction number or the address;
• Issue a receipt in the depositor’s name for the amount transferred and send him the original;
• Keep a copy of the receipt you issued in the transaction record;
• Make the appropriate entries in the accounting register of trust account.

To summarize, managing deposits made by electronic transfer is perfectly feasible. You simply have to plan accordingly, make sure the transaction documents reflect this method of payment and do the necessary follow-up. For any questions regarding the management of deposits made by electronic funds transfer, contact Info OACIQ.

SWIFT

Banks have set up a secure electronic funds transfer system called SWIFT ''Society for Worldwide Interbank Financial Telecommunications''. Because the transfer procedure is instantaneous, the availability of funds in the buying client’s account (the depositor) can be verified before the transfer is made to the agency or broker trustee’s trust account. For more information on SWIFT standards, visit the swift.com website.