Trust Deposits and Disbursements
October 26, 2016
The Real Estate Trading Act requires every brokerage in the province to maintain an interest-bearing trust account where all money received by consumers is held. The broker of the brokerage is responsible for maintaining their trust account, and as a consumer protection mechanism, the Commission inspects each brokerage’s trust account record keeping annually.
In order to properly manage the brokerage’s trust account, brokers need to understand the differences between methods of depositing (moving money in) to and disbursing (moving money out) from the trust account, as well as the rules surrounding how both of those processes are conducted.
A trust fund deposit is performed when a consumer provides a financial deposit to the brokerage and it is placed into the brokerage’s trust account. Trust deposits must only be placed in the brokerage’s trust account according to the terms of the real estate agreement (i.e. trust funds must come directly from the buyer and placed into the brokerage trust account with the exception of a cash trust deposit).The brokerage has multiple options regarding how they can deposit trust funds into the brokerage's trust account, including:
- personal cheque
- bank draft
- email money transfer (EMT)
- wire transfer
Cash deposits have specific rules around how they are maintained, as outlined in Bylaw 638, which states that when a cash deposit it is to be deposited into the brokerage’s trust account whether or not the buyer’s offer has been accepted. If the offer is accepted, the buyer’s brokerage transfers the deposit to the seller’s brokerage trust account according to the terms of the accepted offer. If negotiations do not result in an accepted offer, the buyer’s brokerage returns the cash deposit to the buyer.
A trust disbursement is the action of removing trust money from the trust account. The broker may only disburse funds from the trust account by trust cheque or an Electronic Funds Transfer (EFT).
Trust cheques must be used consecutively by number when disbursing funds from trust account. The trade must be identified on the trust account cheques (typically on the memo line) by noting the trade address, buyer’s name and trade number. All voided cheques must also be accounted for.
An EFT is an electronic transfer of money from one bank account to another, which is performed similarly to paying a bill through online banking. This method can only be use when transferring funds from the brokerage’s trust account to the brokerages general account. EFTs are different from email money transfers (EMT), where a banking service allows users to transfer funds between personal accounts using email and their online banking service (i.e. Interac E-Transfers).
Any EFT performed must meet specific criteria to be compliant. The EFT must include a confirmation number produced by the financial institution, which must also appear on the trust account bank statement. If you are uncertain if a confirmation number will appear on your bank statement, contact your financial institution to verify prior to making the disbursement.
At the time of the disbursement, the online EFT confirmation must be printed off, attached to your monthly trust record keeping and reference the trade. The same confirmation number must show on all trust account record keeping, including individual trust records and the trust control ledger.
Still unsure if your EFT would comply? Use this checklist for reference. EFT confirmations must include:
- the date of the transfer;
- the account from which the funds are being transferred;
- the account to which the money is being transferred;
- a confirmation number produced by the financial institution that corresponds to the subsequent bank statement; and
- information sufficient to identify the trade in real estate (trade address, buyer’s name and trade number, if applicable).