What Happens to Your Deposit if a Sale Falls Through in New Brunswick

Your deal has collapsed and the deposit is sitting somewhere. Buyers want it back and sellers sometimes believe they are entitled to it. It is natural to wonder who decides.

This article explains how deposits are held in New Brunswick, why a brokerage cannot simply hand the money to one side, and what happens when the parties disagree.

This article covers the law of New Brunswick.

Who holds the deposit

A real estate agent who receives a deposit on a trade in real estate must hold it as trustee for all parties according to their rights under the offer or contract, not as agent for one party. The agent is not on your side or the other side's when it comes to the money.

In plain words, a trustee holds money for other people and must follow the rights set out in the contract, rather than favouring whoever the agent happens to be working with. That is why the deposit is treated differently from the rest of the agent's work.

An agent must pay deposit money into the trust account without delay. A cheque received with an offer need not be deposited until the offer is accepted, and then it must be deposited without delay.

There is an exception. An agent may act as agent for one party and receive the deposit for that party only if the offer or contract says so and every other party acknowledges it in writing. Read your offer to see which arrangement applies.

Why the brokerage cannot just pick a side

No money may be drawn from an agent's trust account except in accordance with the terms on which it was received. So a brokerage cannot simply release a disputed deposit to one side. If the buyer and seller each say the deposit is theirs, the agent is not free to decide.

This protects both of you. The agent cannot treat the deposit as the brokerage's own money, and cannot hand it over just because one person asks firmly or repeatedly. The money stays in trust until it can be released in line with the terms on which it was received.

Who is entitled to it?

That depends mainly on your agreement of purchase and sale. The rules on how an agent holds the deposit do not on their own decide who is entitled to it. The key questions are usually these.

• Did the deal fail because a condition in the agreement was not met, such as financing or an inspection?
• Were the conditions waived or removed before the deal ended?
• Did one side default on a term of the agreement?
• What does the agreement say about the deposit if the sale does not complete?

The answers turn on the wording and the facts, so two deals that look alike can end differently. A lawyer can read your agreement and tell you where you stand.

When the parties disagree

If the parties dispute a deposit, the agent may, and if necessary to resolve the dispute shall, pay the deposit into court on an interpleader. In plain terms, the agent hands the money to the court and steps aside, and the court decides who gets it. This takes the agent out of the middle.

If that happens, you may need to explain your position and show the documents that support it, so having your agreement, amendments and messages organized helps. How a particular dispute would play out depends on its facts, so it is worth confirming with a lawyer.

Parties can also try to work things out between themselves. Even then, the agent can only pay out the money in accordance with the terms on which it was received, so it is worth confirming the wording with a lawyer before you sign anything.

What to do next

• Find your signed agreement of purchase and sale and any amendments or waivers.
• Write down the dates and reasons the deal ended.
• Note when the offer was accepted and when the deposit was paid in, since a cheque received with an offer need not be deposited until acceptance.
• Ask the brokerage in writing where the deposit is held.
• Keep copies of emails and texts with the agent and the other side.
• Do not sign a release of the deposit until you understand it.
• Speak with a real estate lawyer before sending a demand or accepting a settlement.

Frequently asked questions