In Ontario, a buyer’s deposit is held in trust — usually by the listing brokerage in a segregated account — and forfeiture to the seller is never automatic even if the buyer defaults; it takes the buyer’s written consent or a court order.
Treadstone’s deposit-rules page describes the holding arrangement as “in trust — usually by the listing brokerage”, and notes that in a private, unrepresented sale “a lawyer’s trust account commonly serves the same role”. The deposit is returned to the buyer when a condition wasn’t met and proper written notice was delivered on time, when the seller defaults, or when both sides sign a mutual release. It is forfeited to the seller only on the buyer’s own default, and even then “forfeiture isn’t automatic” — the brokerage will not release funds without the buyer’s signed consent or a court order. Where the two sides disagree, the brokerage can bring an interpleader application, paying the disputed funds into the Ontario Superior Court of Justice and stepping out of the fight entirely.
Two RECO rules sit behind the brokerage’s own obligations. “all unclaimed money held in trust for more than two years must be paid to RECO”, per Bulletin 8.1 — the brokerage is not required to forward amounts under $25 but must document reasonable efforts to locate the person entitled first. Separately, RECO’s consumer deposit insurance covers brokerage “theft, fraud, insolvency, or misappropriation of funds” up to $200,000 per claim, and $4 million per single event, though claims above that are shared pro-rated among claimants. Both figures are Ontario-specific: BC, Alberta and Québec run their own trust and deposit-insurance regimes under BCFSA, RECA and the OACIQ, which were not verified for this page — don’t assume Ontario’s numbers travel.
A financing condition isn’t met, and the buyer delivers written termination notice on time. The seller disputes that the notice was proper and wants the deposit released. Neither the brokerage nor either lawyer can simply pick a side by phone — the brokerage’s trust obligation is to hold the funds until it has clear authority to release them. If the buyer and seller can’t agree on a mutual release, the listing brokerage’s recourse is an interpleader application: pay the disputed deposit into the Ontario Superior Court of Justice and let the two sides litigate the entitlement directly.
See also: consumer deposit insurance and the statement of adjustments.
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