Trust Money Disputes - Disbursements

Purpose:  This bulletin explains a broker’s responsibilities to accept, hold, and disburse trust funds in accordance with the terms of trust, including potential dispute mechanisms.

This bulletin applies to all real estate and mortgage professionals that receive funds in trust.

Role of the broker in handling trust funds
The broker’s role in handling trust funds is that of a trustee.  As a trustee, the broker must:

Real Estate Act requirements for trust funds
The Real Estate Act (Act) requires:

Examples of broker acting as trustee

  1. One of the parties to a trade or deal claims the deposit or objects to the brokerage disbursing the deposit.  One party argues the other party did not take reasonable actions to meet the terms of the contract and the other argues they did. The facts of the situation will direct the trustee broker to disburse the funds. The broker has a duty to keep or disburse the deposit in accordance with the written terms of trust.
  2. A real estate contract requires the brokerage to deposit the trust funds to an interest-bearing account at a specific bank.  The interest rate is higher at another bank on the same type of account. The broker decides to deposit the trust funds at the other bank. The broker acting as trustee does not have the authority to deposit the trust funds at a bank other than the bank specified in the contract.  Trustees must act only within the authority under the terms of the contract.
  3. The broker represents one of the parties in the trade or deal.  This party argues that the broker also represents them in dealing with the trust funds. The party is not correct.  The broker acting as trustee does not act on behalf of, or in favour of, either party.  Their duty is to receive and disburse funds according to the terms of trust.

Trust money disputes
When a dispute arises, brokers must comply with the terms of trust and attempt to resolve trust disputes as quickly as possible. Brokers are responsible to ensure they disburse trust funds in accordance with the terms of trust.

Changes to terms of trust
The broker acting as trustee must have the written consent of the parties to change the terms of trust.

Delegation of broker duties as trustee for terms of trust
The broker may delegate his duties as trustee for the trust account to associates or associate brokers of the brokerage. The broker must ensure the delegation meets the requirements of sections 52 or 68 of the Real Estate Act Rules (Rules).  The broker is still responsible for the trust account and the delegated person should report any issues about the terms of trust to the broker immediately. 

Broker fees from funds held in trust
Brokers acting as trustees may be entitled to receive fees from trust and could disburse funds to the brokerage. This may happen where there is improper notice to cancel a property management agreement that has cancellation fees for early cancellation or where a buyer forfeits a deposit.  The broker must be proactive and explain why they will disburse trust money to the brokerage. 

Tips to prevent disputes
Brokerages should have clear policies that require associates to:

Tips to help resolve disputes
The broker who acts as the trustee should:

Next steps to resolve disputes
There will be times where there is no reasonable conclusion on how to disburse the trust funds.  In these situations, the brokerage has the following options:

Brokers acting as trustees must:

Final word from RECA
It is a difficult and at times controversial task for brokers to act as trustees.  RECA does not consider it conduct deserving of sanction when a broker, acting as a trustee, follows the guidelines and performs due diligence in making a reasonable decision, even if the courts ultimately do not agree with the broker’s decision.

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