How Is Your Deposit Protected Buying a New Condo in Alberta?

You have signed to buy a new condo unit, often before it is built, and paid a deposit. Now the money is out of your hands for months or years. It is fair to ask where it sits and who can touch it.

Alberta's Condominium Property Act has specific rules for money paid to a developer on a new unit. This article explains those rules, how they differ from a resale deposit, and what other protections and deadlines may matter to you.

This article covers the law of Alberta.

Where your money must be held

When you buy a new condominium unit from a developer, the developer must hold your money in trust until title is issued. Rents and security deposits are the exception to that rule.

The developer must deposit your money in an Alberta trust account within three days, excluding holidays and Saturdays, and must keep it on deposit in Alberta. In plain words, your deposit should not sit in the developer's operating account or move outside the province.

Who gets the interest

For a new unit bought from a developer, the developer is entitled to the interest on the money held. That is different from a resale deposit held by a real estate brokerage, where interest goes to the Alberta Real Estate Foundation and neither the buyer nor the seller receives it.

Check your purchase contract for anything it says about interest, and ask a lawyer if the wording is unclear.

If the developer has not met the release conditions

If a developer has not met the conditions for releasing a purchaser's money, the condominium corporation or another interested party may apply to the Court for an order for payment out.

The Court may direct who is paid, appoint an administrator or receiver, and award costs. Whether an application makes sense depends on your facts, so it is worth getting legal advice before going to Court.

Other protections and time limits

If you bought a new home from a builder and paid the builder a deposit, you may register a caveat on the land title to protect it.

A claim, for example for return of a deposit, generally must be brought within 2 years after you first knew, or ought to have known, of it, or within 10 years after the claim arose, whichever expires first. Other provisions can affect a contract claim, so the specific facts matter.

Whether a deposit is refunded or lost if a deal falls through depends on your signed contract and on court decisions, not on a simple rule in the trust provisions. A lawyer can read your contract and tell you where you stand.

Resale deposits and condo information compared

If you ever buy a resale unit instead, a brokerage holding your deposit follows different rules under the Real Estate Act and its regulation. The main ones are:

• Money received in trust must be deposited within 3 business days of receipt, and for money received with an offer to purchase, the 3 business days run from acceptance of the offer.
• The brokerage must keep trust money separate from its own money.
• The brokerage can pay out trust money only in line with the Rules and the written terms of the trust, so it cannot simply release a deposit to one side on its own say-so.
• A brokerage must notify all parties in writing if an expected deposit is not received or a deposit cheque is not honoured.
• A client can ask for a statement of receipts and disbursements of their trust money, and the brokerage must provide it within a reasonable time unless otherwise agreed.

Condominium corporations also have duties to give information to buyers. On written request from an owner, purchaser or mortgagee, the corporation must provide an estoppel certificate within 10 days, covering contributions payable, arrears and interest owing. The certificate is conclusive proof of the matters it certifies, as of its date, in favour of the person who requested it. The corporation must also give prescribed information and documents within 10 days of a request.

What to do next

• Keep your contract, receipts and proof of how and when you paid.
• Ask the developer in writing where your deposit is held and confirm it is an Alberta trust account.
• Note the contract dates and conditions so you do not miss a deadline.
• If you paid a builder a deposit on a new home, ask a lawyer whether to register a caveat.
• If something goes wrong, note the date you first learned of it, because the 2-year clock may run from then.
• Have a lawyer review the contract before you sign, if you can.

Frequently asked questions