What Is a Real Estate Lawyer's Trust Account Used For During a Closing in Ontario?
A real estate lawyer's trust account is a separate account used to hold client money for a transaction, such as the funds you send to close a purchase. The lawyer then pays those funds out as the closing requires.
The Law Society's Compensation Fund typically pays for losses involving trust funds held for real estate closings, but it is a last resort: you must first try to recover the loss from the lawyer or paralegal and from any other sources. Deposits are different. A deposit received by a brokerage that is to hold it under the Agreement must be put into the brokerage's real estate trust account within five business days of receipt. RECO's consumer deposit insurance covers deposits held there against events such as theft, fraud, insolvency or misappropriation, up to $200,000 per claim, but not where a failed deal leaves buyer and seller unable to agree on who gets the deposit.
Wire fraud is a common risk with closing funds. Before sending money, confirm the payment instructions by calling your lawyer's office on a number you already know, never one from an email, and be wary of any last-minute change to account details.
Key takeaways
- The Law Society's Compensation Fund typically pays for losses involving trust funds held for real estate closings, but you must first try to recover the loss from the lawyer or paralegal and other sources.
- A deposit a brokerage holds under the Agreement must go into its real estate trust account within five business days of receipt.
- RECO's deposit insurance covers brokerage-held deposits up to $200,000 per claim, but not where buyer and seller cannot agree on who gets the deposit after a failed deal.
- Confirm payment instructions by phone using a number you already know before you send any closing funds.