The Buyer signs an offer on 4 March, 2022 at 10.00 am which includes the deposit cheque “herewith”. The irrevocable date is 10 March, 2022 at 6.00 pm.
If Seller rejects the offer and negotiation ends, what is the scenario for return of deposit?
Need it to be deposited in Seller Brokerage trust account and then the Listing Brokerage will issue a cheque from that account and return to it Cooperating Brokerage and then to buyer?
This is a challenge if the Buyer only has so much money for a deposit in a very busy real estate market.
If the Offer was never accepted, then the “terms” in the Offer don’t apply to the parties because there was no contract formed. The terms are: the deposit is to be held in trust.
However, outside of the Offer, a Brokerage has an obligation to follow the Regulations under REBBA 2002 which would require them to place the deposit into their trust account “within the 5 business days of receipt”.
In this case, the Brokerage would have to comply with REBBA 2002 and place the funds in the trust account, whether or not the Offer is ever accepted. Once they receive the deposit, they have 5 business days to place it in their account.
As well, if the offer is never accepted, but the deposit is placed in the Brokerage’s trust account, the Buyer automatically gets their deposit back. It is not necessary to execute a mutual release signed. This return is automatic.
The Brokerage would keep a copy of the unaccepted agreement of purchase and sale to show why the funds were received, placed into the account and then returned to the Buyer.
Naturally, it’s best if the Offer is never accepted for the Buyer’s own cheque to be returned. This is efficient. And the money is free to use these same funds on another deal.
If you specify that the deposit cheque is to be held “in escrow”, then the Listing Brokerage doesn’t technically have it until the Offer is accepted, otherwise the 5 day requirement kicks in.
The usual route would be to amend the Offer provision related to the deposit delivery from “herewith” to “acceptance”.
Brian Madigan LL.B., Broker