Return of Deposits

When trust funds are deposited into a real estate brokerage’s trust account for an accepted agreement of purchase and sale, they are held in trust for that transaction. The broker of a brokerage is responsible for overseeing the trust account and ensuring the trust funds are held in accordance with the Commission Bylaw.

The release of trust funds is subject to the Commission Bylaw and outlined in clause 1 of the Agreement of Purchase and Sale. Clause 1.2 states: “It is agreed by the Buyer and the Seller that the release of the deposit from the brokerage trust account is subject to the applicable NSREC Bylaws.”

The applicable Bylaws are 631(a) and 632. Bylaw 631(a) states: “Any time a transaction is not proceeding and there is a request for the return of deposit based on the terms agreed to in the transaction, the brokerage shall do one of the following:

(a) get a release signed by all parties to the transaction and return the trust funds to the buyer or seller as agreed to in the release.” 

If the parties cannot agree at the time of termination who will receive the deposit, it is governed by Commission Bylaw 632, which states:

“Any time more than one party to a transaction is making demands for any trust funds for which the brokerage is responsible, the brokerage shall hold the trust funds in the trust account until:

(a) the parties to the transaction agree, in writing, as to how the money shall be disbursed;

(b) the brokerage is ordered, by a court of proper jurisdiction, to disburse the trust funds in a specified manner; or

(c) until the trust funds are disbursed to the Commission.”

To summarize, regardless of whether the funds are being disputed, trust funds can only be released from a brokerage’s trust account with written mutual release from both parties or their respective lawyers. If the deposit is being disputed and one party or their lawyer will not provide written consent, the other party can apply to court of proper jurisdiction for release of funds where a judge or adjudicator can decide to whom funds will be released to. If an adjudicator decides to release the funds to one party, their decision will then allow the broker holding the funds to release the funds to the claiming party. If there is no written mutual release or court order, the broker is unable to return the funds.

The methods by which the deposit can be disbursed are documented on page 15 of the Audit Policy.