Placing the Deposit Cheque in the Trust Account
When a deposit is provided "herewith" with an offer by a Buyer, does the 5 day deposit requirement start the next day or the day after the final acceptance of the offer?
A Buyer makes an offer on May 1st with a deposit “herewith”.
A counter offer is received on May 2nd from the Seller.
The Buyer accepts the counteroffer on May 3rd.
When does the deposit have to reach the Trust Account?
Does the countdown start on May 2nd or does the countdown start on May 4th, the day after the counteroffer is accepted.
We are looking at the following provision:
“If an amount of money comes into a brokerage’s hands in trust for another person in connection with the brokerage’s business, the brokerage shall deposit the amount in the trust account maintained under section 27 of the Act within five business days.”
So, the true question is “when did the deposit come into the Brokerage’s hands in trust?
Based upon the facts presented in this question, we don’t know.
The deposit was delivered on May 1st. The count (absence of other facts) should start that day:
1 May Day Zero
2 May Day One
3 May Day Two
4 May Day Three
5 May Day Four (omit in 2018)
6 May Day Five
7 May Day Five (in 2018)
If we are talking about 2018, then, 5 May was a Saturday, which is not a business day, so skip 5 May and 7 May is the fifth day.
The reason that we are starting with the day of the Offer is that that was the day that the Listing Brokerage got the money. The cheque was payable to the Listing Brokerage. It was delivered into their hands. It didn’t go back and forth with the paperwork. This is often the case with email Offers. Once the deposit is independently forwarded to the Listing Agent, the negotiations may continue for quite some time, days, even weeks.
Let’s assume that we have two full months of negotiations. The Listing Brokerage is to have that money in their trust account all that time earning interest.
In reality, the Buyer might have asked for the deposit cheque to be returned when the Offer was not accepted. This is actually more likely. In that case, if the deposit went back and forth with the paperwork, then May 3rd was the date of the actual agreement and we would start the count at that point. It was at that time that the Listing Brokerage received the cheque into their “hands in trust for another person”.
This was not the case earlier. They were shown the cheque, but they were not to “cash it”. They simply had it in their possession “in escrow”.
You will appreciate that conversations, documents, emails and texts would better explain the true facts surrounding the “deposit cheque”.
If you are the Buyer’s Agent, you would be well-advised to make sure that the entrustment of the cheque into the Listing Agent’s hands is a delivery “in escrow” pending the actual acceptance of the Offer, at which time the deposit cheque may be released from escrow and placed in the Listing Brokerage’s trust account.
Most of the time, the true answer to this simple question is not documented in any way.
Brian Madigan LL.B., Broker