In modern real estate transactions, the availability of funds on closing remains a critical — and sometimes overlooked — issue. While most transfers today are completed by wire, bank drafts are still occasionally used. Timing problems can arise when, for instance, a bank’s wire system closes at 4:30 p.m. but incoming funds are received at 4:45.
The Real Estate Agent’s Role Before Lawyer Retention
Before a lawyer is even retained, the real estate agent plays a key role in ensuring a smooth closing. Agents should:
- Confirm financing details early with the buyer, ensuring funds will be available and the lender’s process aligns with the closing date.
- Coordinate with the seller regarding anticipated proceeds and any existing encumbrances on the property.
- Alert clients to potential timing issues, such as wire cut-offs, bank hold policies, or draft requirements, so both parties can plan ahead.
By addressing these factors early, agents help minimize the risk of delays once lawyers are involved.
Verifying That Funds Are Cleared
Lawyers who regularly handle real estate closings are well aware of the “hold on funds” problem. When funds are received, it is the receiving lawyer’s responsibility to ensure that the money is actually available and has been released from any bank hold.
If a hold is placed, the proper course of action is for the receiving lawyer’s bank manager to contact the issuing bank manager directly to confirm that the funds are legitimate and authorized. Once confirmed, the receiving bank can release the hold. This verification process typically takes a few hours but prevents unnecessary closing delays.
Problems arise when a lawyer fails to follow this procedure. Waiting for the standard hold period to expire can result in delays or financial loss for clients.
Mitigating the Risk
Some firms manage this risk by maintaining a trust account line of credit, such as $3 million, allowing them to use funds immediately while the bank hold period runs its course. This provides the necessary liquidity to complete closings on time, even if funds have not yet been formally released.
Another effective safeguard is to maintain trust accounts with all five major Canadian banks — RBC, TD, Scotiabank, BMO, and CIBC. This strategy significantly reduces the risk of delay because:
- Same-bank transfers are verified and cleared instantly.
- Timing flexibility improves, as each bank has its own wire cut-off schedule.
- Established banking relationships allow faster communication and fund verification.
- Diversification reduces exposure to system outages or interbank hold policies.
Conclusion
Ensuring the timely availability of funds on closing requires diligence and foresight from both the real estate agent and the lawyer. Agents help prepare clients and anticipate timing issues, while lawyers must verify and clear funds to avoid delays. Together, these steps protect clients’ interests and ensure closings proceed smoothly.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com