Deposit on an Offer in Ontario: Who Holds It and When You Get It Back

by Kirby Chan, Broker

The Deposit on an Ontario Offer: Where It Goes and When You Get It Back

It is not an extra cost, your lawyer is probably not holding it, and on most offers you have twenty four hours to deliver it. Here is who holds your money, what the two deadlines actually are, and what happens to the deposit when a deal falls apart.

Signing an Ontario Agreement of Purchase and Sale with the deposit clause

Written by a Richmond Hill and Markham Real Estate Expert

The deposit is the largest sum most buyers hand over before closing and the part of the agreement they understand least. At Kirby Chan & Co. Real Estate Team we watch buyers discover on a Saturday night that their bank cannot produce a draft until Monday, and we watch firm deals collapse over money that was refundable a week earlier. This page sets out how the deposit works in Ontario. We are a real estate team and not lawyers, so every question about rights and remedies routes to your own lawyer.

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We will tell you what the deposit clause commits you to before you sign it

Quick takeaway: Five things to settle before you sign an offer. The deposit is credited to the purchase price, so it is the first instalment of your down payment rather than an extra cost. In a typical resale the listing brokerage holds it in a real estate trust account governed by the Trust in Real Estate Services Act, not your lawyer. The agreement offers three delivery options and the common default gives you twenty four hours from acceptance, which has to contain however long your bank needs to certify funds. The separate five business day figure under Ontario Regulation 567/05 governs when the brokerage banks the money and is not your deadline. And once the conditions are gone the deposit is exposed: on a firm agreement that you fail to close, Ontario authority allows a seller to keep it without proving a loss.

What This Guide Covers

1. The Deposit Is Not an Extra Cost
2. Where the Money Actually Goes
3. Herewith, Upon Acceptance, or Schedule A
4. The Twenty Four Hour Clock, and Why the Bank Is the Problem
5. The Five Business Day Rule Is Not Your Deadline
6. How Much to Offer as a Deposit
7. When a Condition Fails, and How the Money Comes Back
8. When the Deal Is Firm and You Cannot Close
9. Nine Mistakes That Cost Buyers Money
Frequently Asked Questions

1. The Deposit Is Not an Extra Cost

Start Here It Is the First Instalment of Your Down Payment

This is the misunderstanding that causes the most unnecessary anxiety, and it is fixed in one paragraph.

The deposit is credited to the purchase price on closing. It is not a fee, it is not money the seller keeps on top of the price, and it is not separate from your down payment. It is the first part of your down payment, paid early, held by someone other than the seller.

So the arithmetic on closing day is subtraction, not addition. Whatever down payment you are making, the balance your lawyer needs is that figure less the deposit you already paid, plus your closing costs. Buyers who think of the deposit as an extra expense save for money they do not need. Buyers who forget it is credited occasionally panic in the final week over a shortfall that does not exist.

What is genuinely extra are the closing costs, and land transfer tax is usually the largest of them. Our guide to land transfer tax in Ontario covers how that is calculated, and our guide to what happens on closing day covers the rest of what has to be in place. Budget for those separately. Do not budget for the deposit twice.

2. Where the Money Actually Goes

Not Your Lawyer A Brokerage Trust Account, Governed by TRESA

Ask most buyers who is holding their deposit and a surprising number say their lawyer. That is usually wrong.

In a typical resale transaction the listing brokerage holds the deposit in a real estate trust account. That account is kept separate from the brokerage's own operating money. The Trust in Real Estate Services Act governs it and the Real Estate Council of Ontario oversees it.

The deposit holder is named in the agreement. It is a line you can read rather than a convention you have to assume, and it is worth reading, because the deposit holder is the party you will be dealing with if anything goes wrong.

Trust money can only be paid out in accordance with the terms of the applicable trust. That single rule explains a great deal about how deposits behave in practice. It is why a brokerage does not simply release your money because you asked, why a deposit in dispute can sit for a long time, and why the return of a deposit after a failed condition still runs through paperwork rather than a phone call.

Why this matters before you sign rather than after. If you assumed your lawyer held the money, you also probably assumed your lawyer could return it. The person to ask about getting a deposit back is the person holding it and the lawyer advising you, and knowing which is which at the outset saves a week of confusion at the worst possible moment.

3. Herewith, Upon Acceptance, or Schedule A

Three Options, Three Different Deadlines

The Agreement of Purchase and Sale does not have one deposit deadline. It has a choice, and which one is selected changes what you have to do and when.

Herewith. The deposit accompanies the offer. The deposit holder has the funds in hand at the moment the offer is accepted, because they were delivered with it. There is no post acceptance scramble because the money is already there.

Upon acceptance. This is the common default. You have twenty four hours from acceptance to deliver the deposit to the deposit holder. Commentary on the clause describes this as a contractual promise by the buyer rather than a banking guideline, and notes that the clock runs even when acceptance lands on a weekend or a statutory holiday.

As otherwise described in Schedule A. If twenty four hours is not realistic, the parties write a specific deadline, time or method into Schedule A. This is the option to use when you know your funds are in an account that needs notice, or when acceptance is likely to fall on a Friday evening.

The point is that this is a negotiated term, not a fixed rule. If the standard twenty four hours does not suit your banking, the time to deal with it is while the offer is being drafted. Afterward you are asking the other side for an accommodation you could have built in for free.

4. The Twenty Four Hour Clock, and Why the Bank Is the Problem

The Most Common Way a Deposit Arrives Late Certified Funds Take Longer Than People Think

Deposits are generally paid by certified cheque, bank draft or wire transfer. Personal cheques are usually not accepted, and e-transfer limits are frequently too low to cover a full deposit.

So the twenty four hours is not twenty four hours of your time, it is twenty four hours that has to contain a bank's processing time. Branch hours, hold periods on recently deposited funds, daily wire cut offs and the time it takes to certify a draft all sit inside that window. Financial institutions do not adjust their schedules because an offer was accepted at nine on a Saturday night.

Late delivery is a breach of the agreement. How serious a breach, and what a seller can do about it, depends on the agreement and on the conduct of both parties, and it is a question for a lawyer rather than this page. Commentary on the clause points to Court of Appeal decisions in which terminations were upheld over very short delays, including a payment thirty five minutes late in 3 Gill Homes and nine minutes in Correa, while noting those were builder files. The same commentary points to a counterweight: in More and 2511899 Ontario, a party who was not itself ready, willing and able could not rely on a strict deadline.

You do not want to be the test case either way. The practical move is unglamorous. Before you make an offer, ask your bank what it needs to issue a draft or send a wire, how much notice it requires and what its cut off time is. Then choose the deposit clause that fits the answer.

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That is a clause we deal with before the offer goes in, not after it is accepted

5. The Five Business Day Rule Is Not Your Deadline

A Common Mix Up Two Different Clocks, Two Different Parties

People encounter a five business day figure in connection with deposits and assume it is how long they have to pay. It is not.

Under Ontario Regulation 567/05 a brokerage must deposit trust money into its real estate trust account within five business days of receipt, and weekends and statutory holidays do not count toward that window.

That is a regulatory duty of the brokerage. It is not your deadline. Your deadline is the contractual one in the agreement, which is normally twenty four hours from acceptance or whatever Schedule A specifies. The two clocks run on different parties for different reasons.

Which has a practical consequence worth knowing. A buyer who delivers the deposit on time has met the contract even if the brokerage banks the funds a few days later, and a brokerage that banks late has a compliance issue regardless of whether the buyer was punctual. If your draft does not show as cashed for several days, that is not evidence that anything has gone wrong.

Keep your proof of delivery. The date you delivered the funds is the date that matters to your obligation, so keep the receipt, the wire confirmation or the acknowledgement from the deposit holder.

6. How Much to Offer as a Deposit

A Negotiating Instrument, Not Just a Number

Around five percent of the purchase price is commonly described as typical in the GTA and competing offers frequently go higher. No rule sets the amount. It is a negotiated term.

What a larger deposit actually does. It signals financial capacity and commitment. In a competing offer situation a seller comparing two similar offers will read a larger deposit as the stronger one, because the buyer has more at stake in completing. That is a real advantage and it is why deposits escalate in bidding situations.

What a larger deposit also does. It puts more of your money somewhere you cannot reach until closing, and it increases what is exposed if you end up in default on a firm agreement. Section eight covers how unforgiving that outcome is in Ontario.

So treat it as a trade, not a gesture. A deposit raised to win a property is buying you something specific, and it is worth being clear about what. If your offer is strong on price and timing, a very large deposit may be adding exposure without adding much persuasion.

And consider the alternative lever first. How conditions are structured often does more for an offer than the deposit figure does. Our guide to how conditional offers win without overpaying covers that side of it. The deposit is one instrument among several and it should not be the first one you reach for.

7. When a Condition Fails, and How the Money Comes Back

The Case for a Conditional Offer This Is What the Condition Is Protecting

If a condition in your offer is not satisfied within its timeframe and you do not waive it, the agreement does not become firm and the deposit is returned.

That is the whole function of a condition and it is the clearest financial argument for including one. A financing condition that is not met, an inspection condition you are not satisfied with, a status certificate review that turns up something you will not accept: in each case the mechanism returns your deposit rather than forfeiting it.

The money still has to come out of a trust account, and trust money is paid out in accordance with the terms of the trust. In practice the return runs through paperwork, normally a mutual release signed by both parties, handled by your lawyer and your representative.

Ask how long that takes. If you are relying on that deposit for another purchase or another offer, the gap between the condition failing and the money arriving in your account is a real gap. Plan for it rather than discovering it.

And mind the dates on the conditions themselves. A condition protects you within its timeframe. Once the period expires without a waiver or a notice, the protection is gone, and a condition you meant to exercise but did not is the most avoidable way to turn a refundable deposit into an exposed one.

8. When the Deal Is Firm and You Cannot Close

The Section to Read Before You Remove Conditions Ontario Courts Have Not Been Sympathetic

Once the conditions are gone the agreement is firm, and the deposit stops being a refundable placeholder.

If you fail to close a firm agreement, that is a breach, and the deposit is generally forfeited to the seller.

And forfeiture does not require the seller to prove a loss. In Benedetto v. 2453912 Ontario Inc., 2019 ONCA 149, the Court of Appeal held the seller was entitled to keep the deposit even where there was no loss on the resale. That is the point buyers most often expect to be otherwise. The deposit operates as a guarantee of performance, and it is forfeited on non performance rather than measured against damages.

There is a relief valve, and it is narrow. A buyer can seek relief from forfeiture under section 98 of the Courts of Justice Act. Commentary describes that relief as available where forfeiture would be unconscionable or grossly disproportionate to the seller's loss, assessed comparatively rather than against any fixed percentage of the price, and notes that success is uncommon.

Which is why the deposit belongs in the conversation about removing conditions. The moment you waive the last condition you convert a protected deposit into an exposed one, and in a market where financing can be revisited between offer and closing that is a decision with a number attached to it. Make it deliberately, with your lawyer, rather than as a formality.

9. Nine Mistakes That Cost Buyers Money

The Pattern We See

1. Budgeting for the deposit twice. It is credited to the purchase price, so it comes off what you owe on closing.

2. Assuming your lawyer is holding it. In a typical resale it is the listing brokerage, in a trust account.

3. Choosing upon acceptance without asking the bank. Twenty four hours has to contain the bank's processing time.

4. Planning to e-transfer it. Limits are frequently too low, and personal cheques are generally not accepted.

5. Thinking the five business day rule is your deadline. It governs the brokerage, not you.

6. Not keeping proof of delivery. The date you delivered is the date that matters to your obligation.

7. Letting a condition expire by accident. That converts a refundable deposit into an exposed one.

8. Treating a firm agreement as negotiable. Benedetto says the deposit can be forfeited without proof of loss.

9. Never asking about interest. By default a deposit generally sits in a non-interest-bearing account, and interest is a term you negotiate before signing, not after.

Recognition

Kirby Chan Awards and Achievements

🏆 2026 Platinum Award, Real Estate Agent, Markham

🏆 2026 Platinum Award, Real Estate Broker, Markham

🏆 2026 Platinum Award, Real Estate Agent, Vaughan

🏆 2026 Platinum Award, Real Estate Broker, Vaughan

🏆 2026 Platinum Award, Real Estate Agent, Brampton

🏆 2026 Platinum Award, Real Estate Broker, Brampton

🏆 #1 Individual Producer in Ontario for eXp Realty 2024

🏆 Top 3 Best Rated Real Estate Agent in Richmond Hill

🏆 Toronto Star Platinum Award for Best Real Estate Agent

🏆 Top Real Estate Agent Award in Markham

🏆 2X ICON Agent Award with eXp Realty

🏆 2025 Community Votes Platinum Award, Thornhill

🏆 2024 Community Votes Platinum Award, Thornhill

🏆 2023 Community Votes Platinum Award, Thornhill

🏆 2025 Gold Award for Real Estate Brokers in Markham

🏆 2024 Community Votes Bronze Award, Richmond Hill

Frequently Asked Questions

Is the deposit part of the down payment in Ontario?

Yes. The deposit is not an extra cost on top of your down payment, it is the first instalment of it. On completion the deposit is credited to the purchase price, so the amount you bring on closing day is your total down payment less whatever you already paid as a deposit, plus closing costs. Buyers who treat the deposit as a separate expense budget for money they do not need to find, and buyers who forget it is credited sometimes think they are short on closing when they are not. The arithmetic matters: if you are putting twenty percent down on a purchase and you paid a deposit, the balance of your down payment is what your lawyer needs, not the full twenty percent again.

How much is a typical deposit in the Greater Toronto Area?

Around five percent of the purchase price is commonly described as typical in the GTA, and competing offers frequently go higher. There is no rule setting the amount. It is a negotiated term written into the Agreement of Purchase and Sale, which means it is as much a negotiating instrument as a number. A larger deposit signals to a seller that you are financially able and serious, which is why it appears as a lever in competitive situations. It also means more of your money sits in a trust account you cannot touch until closing, and more of it is exposed if the deal collapses through your own default. Both sides of that are worth weighing before you volunteer a large figure to win a bidding situation.

Who holds my deposit, and where does it sit?

In a typical resale transaction the listing brokerage holds the deposit in a real estate trust account, which is kept separate from the brokerage's own money. The Trust in Real Estate Services Act governs those accounts and the Real Estate Council of Ontario oversees them. Your own lawyer usually does not hold the deposit, which surprises people who assume their lawyer is holding their money from the moment they sign. The deposit holder is named in the agreement, so read that line rather than assume. Money in a trust account can only be paid out in accordance with the terms of the applicable trust, which is the reason a disputed deposit is not simply handed to whoever asks first.

How long do I have to deliver the deposit?

It depends which delivery option the agreement uses. If the agreement says the deposit is delivered herewith, the deposit accompanies the offer and the deposit holder already has the funds when the offer is accepted. If it says upon acceptance, which is the common default, you have twenty four hours from acceptance to get the funds to the deposit holder. If twenty four hours will not work, the parties write a specific deadline, time or payment method into Schedule A instead. The twenty four hour clock is a contractual promise, not a banking guideline, and commentary on the clause notes that it runs even when acceptance falls on a weekend or a holiday. Confirm with your own lawyer and your representative which option your agreement uses before you sign it.

Can I pay the deposit by e-transfer or personal cheque?

Generally no on a personal cheque, and often not by e-transfer. Deposits are usually paid by certified cheque, bank draft or wire transfer, and e-transfer limits are frequently too low to cover a full deposit. This is the single most common reason a deposit arrives late. If your agreement says upon acceptance, the twenty four hours includes however long your financial institution needs to certify funds or arrange a draft, and institutions do not keep real estate hours. Find out what your bank needs and how long it takes before you make an offer, not after it is accepted.

Do I get the deposit back if my financing or inspection condition fails?

If a condition in your offer is not satisfied within its timeframe and you do not waive it, the agreement does not become firm and the deposit is returned. That is the function of a condition and it is the reason a conditional offer protects your money in a way an unconditional one does not. The practical step still matters: the deposit sits in a trust account, so its return follows the paperwork, which normally means a mutual release signed by both parties. Your lawyer and your representative handle that, and it is worth asking how long it takes so you are not planning around money that has not arrived.

What happens to my deposit if the deal is firm and I cannot close?

If there are no outstanding conditions and you fail to close, that is a breach of the agreement and the deposit is generally forfeited to the seller. Ontario appellate authority is unhelpful to buyers here. In Benedetto v. 2453912 Ontario Inc., 2019 ONCA 149, the seller was entitled to keep the deposit even without showing a loss on resale. A buyer can ask a court for relief from forfeiture under section 98 of the Courts of Justice Act, but that relief is discretionary and is granted where forfeiture would be unconscionable or grossly disproportionate to the seller's loss, which is a high bar that is not often met. Treat a firm agreement as firm, because the deposit is the part of it you can lose quickest.

Does the deposit earn interest while it is held?

By default it generally does not. Commentary on Ontario trust accounts notes that a deposit sits in a non-interest-bearing trust account unless the parties agree otherwise, and interest on the deposit is a term that can be negotiated and written into the agreement. On a large deposit held for a long closing, the interest is not trivial, so it is a term worth raising rather than accepting by default. Where a brokerage does hold trust money in an interest-bearing account, it must tell a person the current interest rate on request. Ask your representative what the agreement says about interest before you sign, because adding it afterward requires the other side to agree.

What happens to my deposit if the brokerage fails or someone steals it?

The Real Estate Council of Ontario administers a deposit insurance programme that acts as a backstop for rare events such as brokerage theft, fraud, insolvency or misappropriation of trust funds. No coverage figure appears on this page because the terms and limits of that programme are set by RECO and would be out of date here, so confirm the current coverage with RECO directly if it matters to your transaction. The everyday protection is structural rather than insurance based: trust money is held separately from the brokerage's own funds, brokerages are subject to reconciliation and record keeping obligations, and RECO can require those records.

Who should I talk to about the deposit on an offer in Richmond Hill or Markham?

Your real estate lawyer for the legal questions, because the deposit is a term of a binding contract and the consequences of getting it wrong are contractual. Your representative for how the deposit is being used in the offer itself, because the amount, the delivery option and whether interest is addressed are negotiated terms that affect how your offer is received. Kirby Chan is a Broker with Kirby Chan and Co. Real Estate Team at eXp Realty, serving Richmond Hill, Markham, Thornhill, Vaughan and York Region, and the team will tell you before you sign what the deposit clause in front of you actually commits you to and how long your bank will need. Reach the team at 416-305-8008.

Contact Kirby Chan

Settle the Deposit Clause Before the Offer Goes In

The deposit amount, the delivery option and whether interest is addressed are negotiated terms, and all three are easier to set while the offer is being drafted than to change once it is accepted. We will tell you what the clause in front of you commits you to, what your bank will realistically need, and when a larger deposit is buying you something in a competing offer rather than just adding exposure. If you are buying or selling in Richmond Hill, Markham or Thornhill, that conversation is part of the work.

Book a Consultation

Kirby Chan, Broker
416-305-8008
info@kirbychanandco.com

Carrie Szeto, Salesperson
416-505-6285
carrie@kirbychanandco.com

Kirby Chan & Co. Real Estate Team, eXp Realty
https://kirbychanandco.com

Dedicated Real Estate Hotline

416-305-8008

Note: This guide is general information and is not legal, financial, tax or accounting advice, and it does not create a solicitor and client relationship with anyone. The deposit is a term of a binding contract and the Agreement of Purchase and Sale that you sign governs, including the deposit amount, the delivery option, the named deposit holder, any provision about interest and anything written into a schedule. The descriptions here of trust accounts, the five business day requirement under Ontario Regulation 567/05, the delivery options in the standard agreement, the twenty four hour obligation, the return of a deposit where a condition is not satisfied, forfeiture on default and relief from forfeiture under section 98 of the Courts of Justice Act summarise published commentary and general practice at the time of writing, are general, are subject to exceptions, and must be confirmed with your own lawyer before you rely on them. Court decisions referred to here, including Benedetto v. 2453912 Ontario Inc., 2019 ONCA 149, turn on their own facts and on the agreements before those courts, and nothing here should be relied on to predict the outcome of any dispute about any deposit. Whether a late deposit, a failed condition, a termination or a forfeiture gives rise to any right or remedy in a particular transaction is a legal question for a lawyer. No deposit amounts, percentages, interest rates, insurance coverage limits, prices or market statistics are quoted here because they vary and would be out of date; the reference to five percent reflects commonly described practice and is not a rule, a recommendation or a figure that applies to any particular offer. The terms and limits of any deposit insurance programme are set by the Real Estate Council of Ontario and must be confirmed with RECO. Banking processes, limits, cut off times and the availability of certified funds vary by institution and must be confirmed with yours. Market conditions vary. Consult a licensed real estate professional for advice specific to your situation and a lawyer for legal questions.