When Must the Deposit Cheque be Deposited in the Bank?

Featured QUESTION:

Salesperson Smith prepares an offer for $435,000 on a property located in Toronto, Ontario, on behalf of Buyer Jones. The offer is drafted and signed by the client on Tuesday and includes a deposit cheque for $20,000 to be placed in the brokerage’s real estate trust account following acceptance. The buyer will require a new first mortgage of $150,000 and an appropriate condition is included in the offer. The offer is accepted by the seller on Wednesday.

When is the last day that the cheque could be put in the real estate trust account?


Your question doesn’t really indicate whether the cheque was submitted to the sellers with the Offer, or a day later. It makes a difference, since the “trigger” for the obligation is the receipt of the deposit, rather than the date the contract was formed

The rule for brokerages is “five business days”.

1st scenario: Offer on Tuesday with cheque

The cheque came in on Tuesday. The clock starts running on Tuesday with respect to the receipt of the cheque. This is the case, even though the actual acceptance did not take place until Wednesday.

You count by excluding the first day and including the last day.

Here’s the count:

Tuesday                0                 offer drafted, cheque received

Wednesday           1                 offer accepted/ agreement in force

Thursday               2

Friday                   3

Saturday                n/a

Sunday                  n/a

Monday                4

Tuesday                5

So, in this case, the listing brokerage must deposit the buyer’s deposit cheque to their account by the close of business on the following Tuesday. Please be aware that the bank closes its office generally to the public for same day banking business at 3:00 pm.

However, many banks will have special tellers or services available which extend the banking hours for customers to 4:30 pm or even 5:00 pm. The banks agree in those cases to “book the transactions” to the customer’s account, “that day”.

In effect, while the banks close their offices to their customers, they are open to other banks for transactions until midnight.

A real estate brokerage needs to ensure that the deposit is made by 3:00 pm, 4:30 pm or 5:00 pm as the case may be, in order to ensure that the deposit is booked to their account on Tuesday. That brings them within the 5 business days.

2nd scenario: Offer on Tuesday, with cheque delivered “upon acceptance”

This time we have a slightly different situation. The deposit is to be delivered upon acceptance. Look at the standard form agreement. It says upon acceptance means within 24 hours of acceptance.

So, in your #2 scenario, the Offer was drawn on Tuesday, accepted on Wednesday, which means that the deposit was due to be delivered on Thursday. Now, we are talking about hours, not days. Assuming the Offer was accepted at 8:00 pm on Wednesday, then the buyer has until 8:00 pm on Thursday to deliver the deposit cheque.

Now, the question is when does that cheque get deposited? The correct answer is Friday, the next day. That’s the obligation. However, the brokerage is provided with an ultimate deadline of “5 business days”, before it has committed any kind of transgression.

This is what we are looking at:

Tuesday                0        offer drafted

Wednesday           0        offer accepted/ agreement in force

Thursday               0        cheque received by 8:00 pm

Friday                   1

Saturday               n/a

Sunday                  n/a

Monday               2

Tuesday                3

Wednesday          4

Thursday             5

In the computation, you exclude the first day and include the last day. There is actually nothing “new” here. This is how grade 1 students are taught to count. It’s how juridical days are counted by the Supreme Court of Canada. You really don’t have to remember anything peculiar.

However, you could have a different definition in the agreement of purchase and sale. And, some companies really do. They count the first day so that their money refunded in 5 days, 10 days and 15 days, will catch many customers one day short. Look at your cellphone contract!

3rd Scenario: Offer on Tuesday with cheque “withheld”

This is similar to #2, but the cheque is simply produced and shown. It is not delivered with the Offer. In this case, the Offer will have to read “upon acceptance”. If the buyer’s agent does not part with possession of the deposit cheque, then it has never been delivered. It needs to be handed over to start the clock running for the Listing Brokerage.

Follow the balance in scenario #2.

4th  Scenario: Offer on Tuesday with cheque “in escrow”

This again is similar to #2, but this time the cheque is turned over to the seller’s agent, however, it is made subject to an “escrow arrangement”.

In this case, we separate two aspects of the cheque:

  1. its physical possession, and
  2. its legal possession.

So, while the seller’s agent has physical possession, the agent does not have legal possession. When we are looking at the laws of agency, the seller’s agent is merely the agent in these circumstances for the buyer’s agent. The instructions are not to do anything with the cheque other than just hold onto it. Since the buyer’s agent is the Principal in this circumstance, the seller’s agent must return the cheque when requested to do so. The time for deposit does not start running while the cheque is merely being held in escrow. It must be released from escrow, and that means that the seller’s agent has “legal possession” of the cheque as well. That’s day 0, the next day is day 1 etc.

One More little Wrinkle

The definition of Business Day in the Regulations has changed. When the Real Estate and Business Brokers Act 2002 came into force on 31 March 2006, it excluded Saturdays and days which were holidays which included Sundays as defined in the Interpretation Act. However, that Act was repealed on 25 July 2007, so we are now left simply with every day being a business day except Saturdays.

In light of the above, each of the answers posted above which excluded Sundays as business days would be wrong, and would have to be adjusted after 25 July 2007.

Brian Madigan LL.B., Broker


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