Who Gets the Interest on Your Home Purchase Deposit in Alberta?

You hand over a deposit with your offer on a home, and it can sit in an account for weeks. It is natural to wonder who earns the interest on that money while it waits. Many buyers assume it is theirs. In Alberta, that is usually not the case.

This article explains where deposit money must be held, who receives the interest, how a new condo from a developer is treated differently, and what you can ask your brokerage to show you. It does not cover who keeps a deposit if a deal falls apart. That depends on the signed contract and the facts, and a lawyer can help with it.

This article covers the law of Alberta.

Where your deposit has to be held

Money that a real estate licensee holds for a client is called trust money. The Real Estate Act requires a licensee to put it in an interest-bearing account at a bank, loan corporation, trust corporation, credit union or treasury branch. The account must be in the licensee's name and designated as a trust account.

The licensee must also keep trust money separate from their own money. Trust money must be kept on deposit in Alberta. There is an exception for licensees with business premises in Lloydminster, who may use a local trust account.

Before a licensee receives any money, they must sign a service agreement that acknowledges the trust arrangement and sets out how the money will be received, held and paid out.

How quickly the deposit must go into trust

Under the regulation made under the Real Estate Act, money received in trust must be deposited within 3 business days of receipt. For money received with an offer to purchase, those 3 business days run from the date the offer is accepted.

This means your cheque or transfer may be in the brokerage's hands before the clock starts. How this applies if an offer is not accepted depends on your situation, so it is worth confirming with a lawyer. If you are unsure what happened to your money, ask the brokerage in writing.

Who actually receives the interest

A deposit held in a brokerage's trust account does earn interest. That interest is paid to the Alberta Real Estate Foundation, at least quarterly and less service charges. The buyer and seller do not receive it.

A licensee cannot get around the trust-account duties by having you sign them away. Any waiver or release of those duties by the person the licensee acts for is void.

New condo from a developer: a different rule

If you buy a new condominium unit from a developer, the Condominium Property Act sets separate rules. The developer must hold your money, other than rents or security deposits, in trust until title is issued.

• The money must be deposited in an Alberta trust account within three days, excluding holidays and Saturdays.
• It must be kept on deposit in Alberta.
• The developer is entitled to the interest.

If the developer has not met the conditions for releasing your money, the corporation or an 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.

If you buy a new home from a builder rather than a condo from a developer, a buyer who paid a deposit to the builder may register a caveat on the land title to protect it.

What you can ask for, and what to do next

A brokerage cannot simply release your deposit to one side on its own say-so. Trust money may be paid out only in line with the Rules and the terms of the trust, which must be in writing and agreed to by the licensee and all other parties. A brokerage also cannot use trust money to pay its own general office expenses or commissions owed to its brokers or associates, and payments from trust must be made by cheque or bank transfer with supporting documentation.

If you ask, the brokerage must give you a statement of receipts and disbursements of your trust money within a reasonable time, unless you agreed otherwise. If an expected deposit is not received or a deposit cheque is not honoured, the brokerage must tell all parties in writing, and an associate must tell the broker if an expected deposit has not arrived.

If trust money is held for more than 2 years and the owner cannot be located, the licensee must pay it to the Alberta Real Estate Foundation. The Foundation pays it to the rightful owner if their entitlement is later established.

• Confirm in writing when the offer was accepted and when the deposit went into trust.
• Ask which account holds the money and that it is in Alberta.
• Request a statement of receipts and disbursements.
• Keep your receipt, contract and any written direction about releasing the money.
• Have a lawyer review the agreement before you sign, since buyers may do so.
• Speak to a lawyer promptly about any dispute, because a claim must be brought within 2 years after you first knew or ought to have known of it, or 10 years after it arose, whichever expires first, and other provisions may also affect a contract claim.

Frequently asked questions