Encyclopedia
Deposit
Money a buyer or tenant pays to show commitment, held in trust. Whether and when it's refundable depends on the contract.
For example: A buyer pays a deposit after subject removal and reads exactly what happens to it if they fail to complete. (Illustration only, not a real deal.)
Official source: Real Estate Services Act (BC Laws)
Example only, not a real client. Say you make an offer on a small retail building with an initial deposit on acceptance and a larger one on subject removal. You set those amounts and dates in the offer, so you know exactly when your money is at risk and when you are fully committed.
What I’d tell a friend
Know when your deposit becomes non-refundable, who holds it and what happens to it if the deal falls apart.
Why it matters to you
It shows you're serious, but it can be at risk if you don't complete. Know when it becomes non-refundable and who holds it.
How to use it in your deal
Buyers should check when deposits are due, who holds them, whether they earn interest, and when they become non-refundable. Usually, a deposit is refundable if subjects aren't removed, and at risk once the deal is firm. Make sure the contract says what happens to the deposit in each scenario. Sellers want deposits large enough to discourage walking away.
Tenants' lease deposits may be applied to first and last months' rent or held as security; check how and when they're returned. In BC, brokerages hold deposits in trust under the Real Estate Services Act. Pay on time; a late deposit can let the other side end the deal.
If a dispute arises, the trustee may hold the money until the parties agree or a court decides. Wire deposits only after confirming the trust account details by phone with someone you know, since fraud targeting real estate payments is common. Confirm in writing who holds the deposit and in what kind of trust account.
Mistakes I see
Missing deposit deadlines. Not knowing when it's at risk. Unclear lease deposit terms.
In BC and Vancouver
The Real Estate Services Act and BC Financial Services Authority (BCFSA) rules govern trust funds.
Official sources: Real Estate Services Act (BC Laws) · Real Estate Services Rules (BC Laws) · BC Financial Services Authority
Deposits when you buy
A deposit shows the buyer is serious. It is usually held in trust by a brokerage or a lawyer until the deal closes, when it goes toward the price.
While subjects are in place, the deposit is often refundable if a subject is not met. After subjects are removed, a buyer who fails to complete can lose it, and may face further claims. Check with a BC lawyer on your situation.
Deposits in leasing
Landlords often ask for a deposit equal to some months of rent, sometimes applied to the first or last month.
Ask how it is held, whether it earns interest, when it is returned and whether it can be reduced after a period of on-time payment.
Questions to ask before you sign
- When is the deposit due?
- Who holds it?
- When is it non-refundable?
- How is a lease deposit returned?
Keep reading
Related terms: Subject removal, Completion date, Offer to lease
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General information for British Columbia only. It isn’t legal, tax, accounting or financial advice, laws and rates change, and reading it doesn’t make you my client. Any numbers or scenarios are hypothetical. Check the linked official source and talk to a lawyer, accountant or other qualified professional before you act or sign anything. See the terms and disclaimer.