The Stakeholder Provisions of Section 48 of the Real Estate Act, and the Method of Dealing With a Deposit Where There Is a Dispute Between Parties #135

By Gerry Neely
B.A. LL.B.

The stakeholder provisions of Section 48. of the Real Estate Act are so well known to agents that the disposition of the deposit where there is a dispute between the parties is routinely dealt with. A recent decision supports a reexamination of part of the method suggested on page D-15 of the Professional Standards Handbook for payment of the deposit to one party where a signed release has not been obtained from the other party.

In this case, a down payment of $10,000 was paid to the real estate agent by a purchaser who refused to complete his purchase. The vendor was forced to dispose of her house by exchanging it and some cash for a release of the vendor's indebtedness to a bank. The purchaser sued the agent for the $10,000 deposit. Upon the advice of its lawyer the $10,000 was paid to the purchaser in exchange for a release and the dismissal of the law suit. Subsequently the vendor sued the purchaser for breach of his agreement to buy the land, and sued the agent for breach of duty as a stakeholder.

The agent acknowledged that it had a duty to both parties and based its defense upon the failure of the vendor to vigorously pursue her claim. The judge concluded that payment to the purchaser ignored the rights of the vendor and that this was a breach of Section 48. The vendor was entitled to damages for $10,000 interest and costs. Damages were also awarded against the defaulting purchaser.

Page D-15 refers to the problem the agent faces when it is not possible to obtain written authority from both parties for release of the deposit. It is recommended that reasonable written notice of say, 30 days be given to each party, stating the agents intention to disburse the deposit in the manner described in the notice. The legal basis for this recommendation is that if the party adversely affected ignores the notice or delays in responding to it, and sues the agent for damages, the Court has a discretion to grant equitable relief to the agent by denying the claim if the Court believes that it would be unjust to the agent to award damages.

The reasons for judgment do not reveal whether the agent had given written notice, but the solicitor acting for the successful vendor has stated that the agent was aware of the vendor's intention to seek payment of the deposit. It is not apparent from the reasons for judgment whether the judge was aware of this. This case does not shed any light on what factors a judge would consider where the agent had given notice to the vendor and that notice had been ignored.

What can be said, however, is that since the remedy is discretionary, an agent who gives a notice which is ignored by the vendor and pays the deposit to one party without a signed release from the other party, is at risk. Unless the deposit is small and the risk acceptable, the agent should adopt the procedure referred to on page D-20 for payment of monies into Court.

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