3. Opening and closing of trust accounts
3.1 Opening and maintaining a trust account
3.2 Delegation of obligations
3.3 Declaration of exemption from the obligations related to the opening and maintaining of a trust account
3.4 Opening of a trust account
3.5 Declaration related to the opening of a trust account
3.6 Change of financial institution
3.7 Type of currency permitted in trust accounts
3.8 Sums paid immediately in accordance with the terms of the trust
3.9 Sums received as an advance on remuneration or costs
3.10 Sums received as earnest money
3.11 Sums received as a penalty deposit
3.12 Sums received as a security or guarantee deposit
3.13 Closing of a trust account
3.1 Opening and maintaining a trust account
A licensee must open and maintain a trust account unless he or she is subject to a legislative exception. When a broker is acting for an agency, these obligations are delegated to the agency. For its part, the agency may also delegate its obligations relating to the opening and maintaining of a trust account to another agency. Whether to declare a situation of exemption or for a delegation, the form Trust account – Notice of delegation and delcaration of exemptions must be sent to the Organization without delay.1
Without exception, all money received by a broker in the course of the broker’s functions that does not belong to the broker must be deposited in a trust account as specified in the Organization’s regulations.2
In addition, as part of its public protection mission, the OACIQ has the following powers:
- Require and obtain at any time from the financial institution that is the depository of every general or special trust account all the information or explanations deemed necessary or useful for the purposes of the regulation
- Freeze the sums held in trust
- Take possession of any sum entrusted to a licence holder, revoke the signature of the broker, agency executive officer or any other person authorized to sign for the licence holder, or close any of their general or special trust accounts.3
IMPORTANT!
Agency brokers remain responsible for the obligations imposed in connection with trust accounts. This applies not only to their agency, but also to the agency to which these obligations have been delegated.4
1 S. 24 of the Regulation respecting records, books and registers, trust accounting and inspection of brokers and agencies.
2 S. 10 of the Real Estate Brokerage Act.
3 S. 41 of the Regulation respecting records, books and registers, trust accounting and inspection of brokers and agencies.
4 S. 24 Regulation respecting records, books and registers, trust accounting and inspection of brokers and agencies
3.2 Delegation of obligations
An agency that delegates its obligation relating to the opening and maintaining of a trust account to another agency does not have to open a trust account. It is the agency to which this responsibility is entrusted that will manage its own deposits and those of the agency that has delegated its own.
An agency wishing to delegate the maintenance of a trust account must first ensure that it has received the written consent of the agency to which this responsibility will be entrusted. After receiving this consent, the delegating agency shall send the OACIQ a duly completed Trust account – Notice of delegation and delcaration of exemptions.
At the outset of the agreement, agencies should agree between them, in writing, on the procedures to be followed for the receipt and deposit of a down payment or advance on remuneration or costs, the issuance of receipts or dishonoured cheques. It is also recommended that agencies provide that all communication between them be in writing to avoid ambiguity.
The delegated agency will maintain only one general trust account. All down payments and advances of both agencies will be deposited there. In addition, we recommend that this agency maintain separate receipt booklets, deposit slip booklets and accounting registers clearly identified with the name of the agency that has delegated this responsibility to it.
The delegated agency must be aware that it may be accountable to the agency that has delegated this responsibility to it.
3.3 Declaration of exemption from the obligations related to the opening and maintaining of a trust account
The obligation to open and maintain a trust account does not apply to a licence holder who files a declaration with the Organization stating that he is in one of the following situations:
- He is employed by the Organization
- He is employed by a person who is not an agency and the broker engages, as such, in no brokerage transaction described in section 3.1 of the Real Estate Brokerage Act
- He receives no deposit, advance on remuneration or costs from clients or any other sum for others
If a licence holder is no longer in the situation described above, he or she must immediately notify the Organization in writing and comply with the obligations related to trust accounts provided for in this Chapter.
To avail yourself of an exemption, the form Trust account - Notice of delegation and declaration of exemptions (PDF) must be sent to the Organization immediately.
3.4 Opening of a trust account
A licence holder opens only one general trust account, as soon as the licence holder’s activities so require and not later than 10 days after the licence is issued, and as many special trust accounts as necessary, in which the sums held, given by a client or another person, shall be deposited.5 These accounts must:
- be composed of deposits covered by the deposit insurance under the Canada Deposit Insurance Corporation Act or guaranteed under the Deposit Institutions and Deposit Protection Act.
- be opened in Québec, in a financial institution governed by the Act respecting trust companies and savings companies, the Bank Act, the Act respecting financial services cooperatives, or the Trust and Loan Companies Act with which the OACIQ has entered into an agreement on the payment of interest to the Organization.
TOOLS :
- Form Instructions concerning the obligations to open and maintain a trust account (PDF)
- FAQ – Exemptions from maintaining a general trust account
5 S. 28 of the Regulation respecting records, books and registers, trust accounting and inspection of brokers and agencies.
3.5 Declaration related to the opening of a trust account
General account
A licence holder must complete and send a Declaration related to the opening or updating of a general trust account to the depositary financial institution and the Organization. The licence holder must keep a copy for inspection purposes.
Special account
When a licence holder opens a special trust account, he must complete a Declaration related to the opening or updating of a special trust account containing the mandatory statements, keep a copy of the declaration for inspection purposes and send it without delay to the depositary financial institution.7
The broker or agency must indicate the name of the client for whom the account is opened since tax receipts may be issued at the end of the year.
3.6 Change of financial institution
In the event of a change of financial institution, the licensee must ensure that all instructions applicable to the opening and closing of a trust account are respected, including the submission of a Trust transaction report.
3.7 Type of currency permitted in trust accounts
The regulations provide that a sum received by a licence holder and paid into a trust account may be paid in Canadian or foreign currency.
The regulations do not allow the receipt of cryptocurrency.8
Attention - It is not advisable to receive the deposit in foreign currency since it is difficult to predict the actual amount received due to variations in exchange rates and applicable banking fees.
If the amount deposited in the account does not match the amount in the trust clause included in the transaction proposal, the trustee shall notify the parties in writing. He may have to offset the difference between the amount received after deduction of the exchange rate and banking fees and the amount recorded in the trust clause.
3.8 Sums paid immediately in accordance with the terms of the trust
The sums that must be paid into a trust account are paid immediately, under the terms of the trust provided for in the transaction proposal or under the terms of any other agreement, into a general trust account opened under the name of the licence holder.9
Where a person who entrusted a sum to the licence holder expressly requests that the interest on that sum be remitted to him or her, the licence holder must immediately transfer the sum from the general trust account to a special trust account. The broker or the agency must ensure that the name of the client for whom the account is opened is indicated.
Attention - To properly follow the terms of the trust (trust clause), it is necessary to ensure that the clause is drafted in such a way as to allow for proper management at all stages, from receipt to remittance or withdrawal.
When reading the clause, it is important to be able to answer the following questions:
- When will the sum be collected?
- When must the sum be deposited?
- To whom does the sum belong?
- When should it be withdrawn?
- To whom should it be remitted?
- How should the remittance be done?
9 S. 25 of the Regulation respecting records, books and registers, trust accounting and inspection of brokers and agencies.
3.9 Sums received as an advance on remuneration or costs
Any sum received as advance on remuneration or disbursements must be paid without delay into the general trust account opened under the name of the licence holder receiving the sum.10
Attention - The advance on remuneration is an amount collected in advance from amounts due under the real estate brokerage contract. This is, for example, the case of amounts to be paid for services to be rendered, such as open houses, which would be billed to the client in addition to the remuneration percentage provided for in the contract. This amount can be collected in advance when the brokerage contract is taken up and paid to the broker as the services are rendered.
Remember that the use of the Annex RC - Remuneration and Costs form is mandatory in residential matters when the client is a natural person.
These advances must not be confused with sums received in advance from a company offering advance remuneration services in return for a fee (remuneration discount).
10 S. 26 of the Regulation respecting records, books and registers, trust accounting and inspection of brokers and agencies.
3.10 Sums received as earnest money
Earnest money is a sum that the buyer pays with the promise to purchase to be applied against the sale price when signing the deed of sale.
Earnest money is different from the deposit in that it is not simply an advance. It is the penalty that the party (buyer or seller) will have to pay to exercise the right to cancel the promise to purchase. In case of withdrawal by the buyer, the buyer loses the sum paid. In case of withdrawal by the seller, the buyer is not only entitled to a reimbursement of the sum paid, but the seller must also pay an equivalent sum to the buyer. Therefore, the buyer gets back double the sum paid as earnest money.
When a buyer makes a promise to purchase with earnest money and withdraws, the agency or broker trustee who holds the earnest money must consider it as belonging to the seller by right.
Conversely, when a buyer makes a promise with earnest money and the seller withdraws, the agency or broker trustee must consider this sum as belonging to the buyer by right.
Moreover, the buyer will then have the right to claim from the seller an amount equal to the one remitted, given the latter's withdrawal. An earnest money clause is to be used only if the parties agree that the other may unilaterally withdraw from the promise to purchase in exchange for the penalty represented by the earnest money.
An amount given as earnest money cannot be presumed. There must be an express stipulation to this effect in the transaction proposal, failing which this sum will be considered as a simple deposit.
It should be used under exceptional circumstances only, when warranted by the situation. The payment of a deposit remains the preferred procedure in the vast majority of transactions.
TOOL :
3.11 Sommes reçues à titre de dépôt de pénalité
A penalty clause such as the one appearing on the mandatory form Annex F – Financing (F2.2), allows the seller who avails himself of this clause to obtain the amount of damages determined in advance.
It is important that the broker explain to the party he represents, when determining the sum to be stipulated in this clause, that this can be reduced by a court if it is considered abusive.
Therefore, this clause should not be used systematically, but rather reserved for very special circumstances where it is feared that in case of default by the buyer, it will be very difficult for the seller to recover any amount whatsoever as damages, for example if the buyer is not a Québec resident.
If the parties cannot agree on the party responsible for the non-completion of a sale, only the court may decide who is entitled to this amount.
A penalty deposit clause constitutes a departure from the principle of reimbursing a deposit to the buyer provided for in mandatory promise to purchase forms. A deposit that is refundable to the buyer should remain the preferred option.
3.12 Sums received as a security or guarantee deposit
A security or guarantee deposit clause can be used for commercial lease or for the lease of a vacation resort (house, cottage, condominium, apartment).
When a tenant takes possession of the premises, it is suggested that both parties make a written statement of the condition of the premises, using photographs for example. The condition of the premises shall be established again by the parties at the end of the lease. Barring any repairs for which the lessee would be responsible, the security deposit can then be refunded to him by the trustee.
Attention - Security deposits are not permitted in residential leasing. For a dwelling that is not intended for vacation use, the Civil Code of Québec stipulates that the lessor of a dwelling may not require a deposit. He may only require advance payment of the first month's rent.11
11 Art. 1904 of the Civil Code of Québec.
3.13 Closing of a trust account
When closing a general trust account, a licence holder must immediately send the OACIQ a Notice of closing of a general trust account containing the mandatory statements set out in the regulations, namely12:
- The name and address of the financial institution and the account number
- The date on which the account is closed
- The name, address and licence number of the broker or agency.
In addition, a Trust transaction report13, along with bank statements and the register of account transactions, must also be sent to the OACIQ.
It is important that the procedures for closing and opening a trust account be followed before opening a new one with another financial institution.
If the trust account is closed for cessation of activities, there may be other elements to be considered. For more information, see the "cessation of activities" section of the Guideline - Licence Issue and Maintenance.
