From receiving the cheque to withdrawing the deposit: correctly reflecting reality

The various mandatory promise to purchase forms for residential brokerage contain clauses concerning the deposit to be paid on the purchase price.

The deposit according to clause 4.3 of the Promise to purchase form

Clause 4.3 of the form Promise to purchase – Chiefly residential immovable containing less than five dwellings excluding co-ownership (PP) first states that the deposit:

• is remitted with the promise to purchase on the immovable;
• is remitted within 72 hours following fulfilment of the conditions outlined in the promise to purchase, excluding the signing of the deed of sale at the notary and the payment of the purchase price;
• shall be applied against the purchase price;
• is paid:
  • by cheque payable to the agency or broker trustee;
  • by electronic transfer to the trust account of the agency or broker trustee;
  • by bank draft to the order of the agency or broker trustee.

This mechanism protects the parties to the transaction. The seller is assured that the deposit is concrete, and the buyer is assured that his money is protected. The procedure outlined in clause 4.3 must be rigorously followed.

What to do after receiving the deposit?

Second, clause 4.3 stipulates that:

• The deposit shall be placed in the trust account of the agency or broker trustee upon acceptance of the promise to purchase.
  • It is therefore possible for the buyer to choose whether the amount given with the promise to purchase will be deposited in his broker's account, if the broker is acting on his own account, or in the trust account of his broker's agency.
  • If the seller’s agency has delegated its obligation to maintain a trust account to another agency, the name of the agency that holds the account must be specified on the listing sheet of the delegating agency. This addition is to avoid having a cheque made out to an agency that does not have a trust account.
     
• The trustee must deposit the sum without delay in his trust account “until the sum is required by the acting notary for the purpose of the deed of sale, whereupon that sum shall be applied against the purchase price.”
  • Since the deposit is to be remitted to the notary only upon request, the broker or agency holding the trust account is advised to keep written proof of such request (copy of the email or fax, for example) and to make sure, prior to withdrawing the money, that the cheque’s clearing period has expired.
  • To learn more about clearing periods, see the following article:  Chain transactions: Allow a time period for the signing of the deed of sale.
     
• “As soon as this sum is deposited into his trust account, the TRUSTEE shall give the depositor a receipt. ”
  • The depositor is the person who is paying the deposit money. If the depositor’s cheque is drawn on a joint account, the receipt must be issued to both names appearing on the cheque. If the cheque is drawn on a company account, the refund will be made to this company and not to the person signing the cheque.
  • A sample of a trust receipt can be found on this page.
     
• “Should this promise to purchase become null and void, the TRUSTEE shall immediately refund the deposit to the depositor, without interest. The TRUSTEE shall require that the request for a refund be made in writing. Otherwise, the TRUSTEE may use that deposit only in accordance with this promise to purchase or with the law.”
  • When a deposit must be refunded, the refund shall be made to the depositor and not to the buyer, as was the case previously. The deposit refund cheque must be made to the order of the depositor whose name appears on the trust receipt (see above). The refund request must be made in writing.

To learn more about refunding sums held in trust, read the following article: Trust account: refund of sums received as deposits or earnest money.