Standard Forms Spotlight: Buyer’s Deposit Paid by a Third Party

Jun 09, 2021

Posted by
Marianne Brimmell
Communications Specialist


The BCREA Standard Forms team has received several great questions about what to do, if anything, when a buyer’s deposit is paid by a third party, such as a family member or a client’s business account. To help ensure REALTORS® are aware of their obligations, we’ve compiled a list of frequently asked questions on third-party deposits, with answers provided by our Standard Forms legal advisor.

1. Can a deposit be paid by someone other than the buyer? For example, can the deposit be paid by a family member not named on the contract, or from a client’s business account where the contract is not written in the company’s name?

While the deposit may be paid by someone other than the buyer, there may be resulting legal and tax implications. Such arrangements should be planned and the buyer and party paying the deposit on behalf of the buyer should always document the arrangement so there are no misunderstandings. The parties should also consider obtaining legal advice before doing so.

2. Are there any disclosure requirements for the buyer’s Realtor to disclose to the seller’s Realtor if the deposit is paid by a third party?

In general, there are no disclosure requirements for the buyer’s Realtor to disclose to the seller’s Realtor that the deposit is paid by a third party that is acting for and on behalf of the buyer. Furthermore, under the Real Estate Rules, the buyer’s Realtor has a duty to maintain the confidentiality of information respecting the buyer, which includes information regarding the financial circumstances of the buyer.

However, the buyer’s Realtor must consider other disclosure requirements that may arise in connection with a deposit being paid by a third party. For example, the buyer’s Realtor may need to disclose the third party if that third party is involved in connection with an assignment or proposed assignment of the contract where the terms of that contract require consent from the seller to such assignment. The buyer’s Realtor may also be required to disclose the third party’s involvement in connection with their FINTRAC reporting requirements. The buyer’s Realtor should discuss any such obligations with their buyer client. If, however, a transaction were deemed to be suspicious, Realtors should ensure they do not “tip-off” the client to their suspicions.

3. In the event the deal collapses, to whom should the deposit be paid if it has been paid on behalf of the buyer by a third party?

Once the deposit is paid to the deposit holder, it is being held for the parties to the transaction by that deposit holder as a stakeholder. At this point, as between the buyer and the seller, it is as if the buyer had paid the deposit themselves (even if it was paid by a third party on the buyer’s behalf). 

In the event a deal collapses, the deposit holder can only release it if the buyer and the seller sign a direction instructing that deposit holder do so. The parties can specify where the deposit be paid in that direction, which may include a third party if both the seller and the buyer agree.

Note, however, that the seller may not be aware of the fact that the buyer’s deposit was paid by a third party and therefore may be reluctant to agree that the funds be paid to that third party. If the seller does not wish to direct that the funds be released to someone other than the buyer, then the buyer may need to either receive the funds and pay them on to the third party or provide a further direction to the deposit holder.

Remember that while the third party may have paid the deposit on behalf of the buyer, that third party does not have any standing to make demands or to give directions in respect of the release of the deposit – only the parties to the contract may do this.

4. What other obligations might a brokerage/Realtor consider when a deposit is received by a third party?

When someone other than the buyer is paying the deposit, it gives rise to the Realtor’s FINTRAC obligations, such as third-party identification and receipt of funds. It may also raise flags about the source of funds and should be carefully considered along with the context. Where money laundering indicators present themselves, Realtors have obligations under the Proceeds of Crime Money Laundering and Terrorist Financing Act and should consult their brokerage’s compliance officer.

To access all Standard Forms resources available, including form guides, revision guides, videos for Realtors and consumers, form toolkits and more, please visit the Standard Forms Resource Centre.

If you have questions on Standard Forms, please email [email protected].   

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