What Happens to Your Deposit If You Back Out of a Home Purchase in Alberta

You paid a deposit when your offer was accepted, and now you want out of the purchase. The first question is usually whether you will get the money back, and the second is who has it right now.

This article explains how deposits are held in Alberta, the trust rules that protect them, and why the answer to refund or forfeiture turns on your contract and what led to the deal ending.

This article covers the law of Alberta.

Who holds the deposit in the meantime

In a typical resale, the deposit goes into a brokerage's trust account. A licensee must deposit trust money in an interest-bearing account at a bank, loan corporation, trust corporation, credit union or treasury branch, in the licensee's name and designated as a trust account. The money must be kept separate from the licensee's own money, and kept on deposit in Alberta. Licensees with business premises in Lloydminster may use a local trust account.

Money received in trust must be deposited within 3 business days of receipt, and for money received with an offer, the 3 days run from acceptance of the offer.

How the money can be released

A licensee may pay out trust money only in accordance with the Rules and the terms of the trust, and those terms must be in writing and agreed to by the licensee and all other parties. So a brokerage cannot release your deposit to you or to the seller on its own say-so; release follows the written terms, such as the purchase contract or a written direction.

A waiver or release by the person the licensee acts for, of the trust-account duties, is void. Before receiving money, a licensee must also sign a service agreement acknowledging the trust arrangement and setting out how the money will be received, held and disbursed.

• The brokerage must not use trust money for its general office expenses or commissions owed to its brokers or associates.
• Disbursements must be made by cheque or bank transfer with supporting documentation.
• You can ask for a statement of receipts and disbursements of your trust money, which must be given within a reasonable time unless otherwise agreed.

Refund or forfeiture: what it depends on

The Real Estate Act and its regulation do not set a rule for who keeps a deposit when a buyer backs out. That depends on the signed contract and on case law. The main questions are usually whether the buyer left through a right the contract gave, such as a condition not met in time, or simply stopped performing.

Alberta government guidance notes that a home inspection condition is not unusual, and that after an inspection a buyer may withdraw the offer, adjust the price to cover repairs, or move forward. Whether a deposit is returned after a condition is properly ended, or kept after a breach, is a matter of contract wording, so a lawyer should read yours.

Interest, unclaimed money and special cases

Interest on a deposit in a brokerage trust account goes to the Alberta Real Estate Foundation, at least quarterly and less service charges, not to the buyer or seller. If a licensee holds trust money for more than 2 years and cannot locate the owner, it must be paid to the Alberta Real Estate Foundation, which pays the rightful owner if entitlement is later established.

New builds differ. A buyer who paid a deposit to a builder may register a caveat on the land title to protect it. For a new condominium unit, the developer must hold the purchaser's money in trust until title is issued and deposit it in an Alberta trust account within three days excluding holidays and Saturdays. If the developer has not met the conditions for releasing it, the corporation or an interested party may apply to the Court for an order for payment out.

What to do next

• Find your contract and note the deposit amount, who holds it and any condition deadlines.
• Ask the brokerage for a statement of receipts and disbursements for the deposit.
• Do not sign a release or direction until you know what it gives up.
• Put any dispute and notices in writing and keep copies.
• Get legal advice early, since a claim must generally be brought within 2 years after you knew or ought to have known of it, or 10 years after it arose, whichever expires first.

Frequently asked questions