By Dennis Irwin

Just because the pond looks inviting on a hot and humid day, don’t dive in, ignoring the warning signs, until you know what lies under the surface. The pond may have hidden dangers lurking right below the surface that you’re not aware of. Do not ignore the possible dangers for the benefit of a little pleasure.

In my opinion, this describes the clause that Vito Campanale recently wrote about in REM. He feels this clause can solve the problem of sellers not releasing the deposit to the buyer who wants out of the transaction.

“The Seller agrees in the event that the Buyer does not waive the conditions within the dates and times as set out in this agreement and its amendments, the Seller gives the Deposit Holder, the Brokerage or other Party holding the deposit an irrevocable direction to release the deposit to the Buyer without the necessity of a Mutual Release signed by either Party.”

I apologize for the length of this article but I believe we must dissect the complete clause in detail, (including historical and legal) in order to consider the pros and cons before its use. This clause is not just about the return of the deposit but reaches over into possible legal issues. Remember, look below the surface for hidden dangers before jumping in head first.



This clause has been developed in response to a rare situation where a seller will not return the deposit on a contract. We don’t know the reason this has happened, but often it is due to the seller being unclear or misunderstanding the contract, which is easily resolved with a bit of legal advice. The second and most common reason is the buyer has, or appears to have, breached the terms or intent of the contract and the seller demands compensation.

Realtors need to properly explain what a deposit is for and why it is used in order to diffuse these situations. Let’s not overreact to rare situations while at the same time exposing our clients and brokerages to possible legal conflict.

Too often we in the industry use what appears to be a good idea. Others see it and think it’s great and since another Realtor used it, it must be legal and they can use it too, all while failing to fully consider the total ramifications. Until challenged, legally or otherwise, it works great but, if challenged, it is too late to retract. I think the use of this clause by any Realtor needs to be looked at with a much deeper interpretation of the implications it creates.

Mr. Campanale stated that he obtained a response from RECO that this clause did not violate any RECO rules as far as Joe Richer (the Registrar) could determine. What was not mentioned was that his request apparently was focused entirely on whether the clause complied with rules for permission and disbursement of deposit funds and NOT the legal or other ramifications of the clause and its use.

This goes much further when you consider what is not said in the clause. After a lot of comments from Realtors, RECO felt it necessary to state their position (alarm bell # 1).

Mr. Richer stated very clearly in his response that: 1) his approval only extends to the consent for written direction for disbursement of the funds; 2) the buyer and seller must fully understand what this clause means; 3) the client must be told to get legal advice; and 4) it is your duty to advise them of such (alarm bell #2).

Does anyone hear the alarm bells sounded by Mr. Richer? Just so everyone is clear (many Realtors don’t realize this), RECO, as a consumer protection organization, will not give a legal opinion. It is not in the mandate of RECO or the Registrar to do so. RECO can only advise whether a situation would be in violation of REBBA 2002, existing Rules and Regulations and Code of Ethics and how they apply to the conduct of its Realtor registrants. They are not a court of jurisdiction. The courts and RECO are separate entities enforcing different determinations. That’s the reason Mr. Richer only comments on one portion of the clause and why there was a subsequent qualifying statement from him and may I add, a very stern warning.

Realtors, beware. Why? Here are just a few of the reasons I see a ticking time bomb with this clause.

1) By agreeing to this, any value of the deposit for enforcement of the contract is completely eliminated.

If a buyer can obtain the deposit back simply for not removing a condition, what is the use of the deposit?

A history of deposits goes back to the mid ’80s when the courts got involved in determining who the deposit belonged to. Up to this point the deposit was believed to belong to the seller, given to secure the value of the contract and its terms. In most cases it was returned when conditions were not met, provided the buyer had been diligent in their attempts to satisfy the terms. Same as today, but no releases were signed.

The court ruled that the deposit belongs to both the buyer and seller to show good faith in support of the contract. This brought about the need for signed releases from each party. The parties had to agree to the release and the disbursement terms.

Mr. Campanale seems to suggest the deposit belongs solely to the buyer and the buyer controls or should control the return of any deposits. Wrong. Courts have made it clear that all parties must agree and sign the release.

Mr. Campanale believes that this clause is sufficient direction for the return of the deposit, which RECO agreed with, as do I, but he also says no mutual release is necessary. Wrong.

I have been aware of more situations where the buyer is in breach of a contract more so than the seller. The seller should never give up his rights to control the release of deposits if the reason is in question.

2) Because there is no accountability on the buyer to perform any term of the contract and the buyer can simply walk away if the time expires, this clause could promote fraud and unscrupulous dealing by buyers.

What is to prevent a buyer from putting offers on several properties, all at the same time, to hold them while they decide what property to take, if any, or if they can flip the contract to someone else? Then they can walk away from any deal they do not want or have determined they paid too much. All at the expense of the seller, who lost other buyers.

In hot market conditions, this is an open door policy for the buyer to play whatever game they want and the seller has little to no recourse if the clause is enforced. In fact, this is already happening even without this open-ended clause and this could only make matters worse.

3) Run this clause by any seller’s lawyer and I can say with certainty it would be removed.

However a buyers’ lawyer will love it. As a Realtor, you better be on the side of your client and be aware of the legal implications of this clause. Better yet, inform your client of the legal issues in detail. Oh, I forgot to mention, we are not lawyers and really cannot do that. So it’s best, as Mr. Richer said, to make sure they get legal advice.

4) The question of whether or not an irrevocable instruction can be withdrawn has already been in question before the courts.

In that case a lawyer, upon instruction from the seller, refused to follow an irrevocable instruction in the offer to pay commission to the listing agent. The lawyer was held responsible for not following the irrevocable instruction. This, however, was appealed and as of yet I have not seen the final result.

What if your seller demanded you (the brokerage) not release the deposit in spite of the irrevocable instruction? You are caught between making a decision to release the funds or follow what could be a legal demand of your client due to the fact the buyer had breached the contract. Now you create a situation of everyone going to court, which by the way is one thing we should try to avoid in our dealings. The brokerage – not the client – is in a catch 22 position.

5) This clause suggests there is no value to a mutual release.

Wrong. A competent Realtor doing a proper job of protecting their client will always insist on a mutual release.

A mutual release creates an agreement between the parties of how the brokerage is to disperse the funds. It should not simply say “to the buyer” but rather state who the cheque should be made out to.  For example, an offer to purchase says the buyer is Silly Sam in Trust. If the mutual release says to disperse to the buyer, the cheque should read, Payable to Silly Sam in Trust. However, there is no such trust and it cannot be cashed. Who paid the deposit?

More commonly, a party other than the buyer has supplied the deposit and the deposit should actually be released to that party and not the buyer. The release must direct the deposit to the party who is entitled to receive the funds. This clause gives no direction as to who the deposit should be returned to.

A mutual release creates an agreement that the parties relieve each other from further claim and also any claim against their agent. I don’t think further explanation should be required here.

A mutual release also creates an agreement that, upon signing by the brokerage, the brokerage will release the parties and also each brokerage from each other.

Last but not least, it provides the authority for the brokerage to release the funds (required by REBBA 2002) and creates a paper trail of such authority for the brokerage to support the payment from the trust account if or when there is a government audit.

6) When you remove the rights of one party you take away rights of the other party.

This is a prime example as the clause removes all rights of the seller to question why the buyer is not fulfilling the contract and just giving the deposit back. This flies in the face of all legal judgements I have seen when a buyer did not make attempts to satisfy the terms.

For example, in a case in 2015, the buyer and seller agreed the buyer could do a home inspection “at the buyers’ sole option”.  The buyer arrived before the inspector and decided he did not want the property because it had a single garage and not a double. The buyer cancelled the inspection and then signed a mutual release requesting return of the deposit. The seller said no and ended up taking it to court. The buyer lost and owes the seller a substantial amount of the large deposit.

In this case, can you imagine this clause working where the seller must return the deposit and the seller says no. Who do you think will be in the middle of any legal battle? Yes, the brokerage. It also puts the responsibility on the brokerage to decide what action they should take, when if the clause had been done properly it would not be the case. The brokerage has no authority to act and make a judgement in this situation.

7) Why use a clause that invites conflict?

Mr. Campanale, after seeing the many responses to his suggestion, explained his clause more. He stated, “The release of the deposit should not be at the seller’s option. The use of this clause and the subsequent release of the deposit does not deny the seller the right to sue if they felt the buyer did not act in good faith during the conditional process.” Did I read that right? Tell me why we would use a clause that invites conflict. Why use a clause that makes a seller have to sue after the return of the deposit rather than before the return. It is just as easy for the buyer to sue as the seller, so let parties work out an agreement, have it signed properly and release all parties. Oh, and this keeps the brokerage out of the conflict if you use the proper clauses. These circumstances usually arise when the actions of the buyer come into question more so than the seller.

8) The courts have taken exception to buyers who make no effort to satisfy the conditions in the offer.

It is not a matter of knowing why a buyer did not remove the condition but more about if they actively attempted to adhere to the terms of the contract by taking action to fulfill the terms and intent of the contract. The courts have taken exception to buyers who make no effort to satisfy the conditions in the offer. This is where the seller has a right to retain or demand the funds be held until the matter is settled. That right is removed with this clause.

9) Mr. Campanale makes the comment, rightly so, that it is up to the brokerage to decide if this clause can be used by their salespeople.

However, if a buyer gives an offer through a salesperson other than the listing office and it contains this clause, decisions are often made on the spot and often in demanding situations. I would fear a lot of salespeople would let this clause slip through without consultation with the brokerage or a lawyer. This is clearly where your troubles will begin with RECO and the law. In this day and age we see brokerages with little to no control over what the salespeople do. Some certainly don’t have viable training or even care as long as deals come in.

10) When things are going well and all parties are doing as they should, this clause works.

But then it is not needed, so why put clauses into the offer that can create a problem?

11) Mr. Campanale states, “Currently, RECO holds thousands, perhaps more, of deposit dollars in trust from deals where buyer conditions were not met and the seller refused to sign the mutual release.” This is misleading.

REBBA only has provisions that clearly state after two years if entitlement has not been determined, or one year if the entitled party cannot be located, that the brokerage must send the money to the government. If the parties get into a dispute and it goes to court, the court often orders the deposit money paid and held in the court. Such monies are not handled as suggested just from the seller not signing a release.

12) A Realtor can get into an issue with RECO quickly when the client makes a complaint that you did not explain it properly so they understood what they were signing.

It should not come as a surprise to anyone that there are clients who are not always truthful. Any party can complain to RECO, whether they are honest or not, and you will have to defend it. RECO could impose a fine on you should it determine you may not have given the proper advice simply by not telling the client to obtain a legal opinion before signing. That could include other potential violations of rules as well. RECO must act on all complaints from all sources, whether valid or not. It then has an obligation to investigate any potential violation of the rules (but not any legal law issues) and can impose penalties based on the actual conduct of only the Realtor. Then you could end up dealing with litigation after that.


In my opinion, this clause may, on its own, comply with REBBA 2002 and RECO Rules and Regulations but from a seller’s legal position I think it fails miserably and completely.  Obviously the intent of this clause takes away the right of the seller to contest the release of the deposit funds unless they want to use the courts. I believe the seller should have competent legal advice (before signing), which a Realtor cannot provide. You may walk yourself into a legal dispute with the seller, with the courts and with the compliance of RECO rules if the funds are returned.

The clause flies in the face of what courts have said in the past. Courts have ruled, in many cases, that a seller is within their legal rights to retain some or all of deposit monies should a buyer breach or fail to adhere to the terms and intent of the contract. The only other remedy, outside the court, is the parties agree to resolve the issue themselves, and give direction to the deposit holder for disbursement and to sign an agreement releasing each other and the agent through a mutual release.

There is no demand put on the courts that I am aware of, that a settlement of the parties must also state the parties are to release the agents involved from further claim, although in cases I have seen the judge has ordered a mutual release is to be signed, which did include the agents involved. A properly executed mutual release will have this component included. This is something a Realtor should ensure is done during the process and in writing and why a mutual release is important.

It is not in the Realtor’s best interest to allow a client (buyer or seller) to sign a contract that may put their client or themselves into a legal dispute without first obtaining a lawyer’s legal opinion.

It is also my opinion that this clause assists in encouraging salespeople to be lazy and not do their job thoroughly and completely by obtaining the proper permissions from the buyer and seller through a mutual release. If this cannot be done, there is obviously a dispute between the parties, so fix it before releasing the funds.

Mr. Campanale said: “I know that changing the way organized real estate and the Realtors who work in the industry do their business is not an easy proposition, even when it may be better for the industry itself and the consumers who rely on us.”

My response to this is that our industry has made a lot of changes to tighten up how parties and Realtors do business by changes in rules and changes brought on by the courts. In my 33 years (as a Realtor, broker, broker owner, manager) I have never seen changes done to loosen the rules or take away any consumer rights for the benefit of “the industry”.

In my opinion, this clause does nothing to better the industry or consumer protection but in fact could lead to more litigation. Consumers rely on us to conduct ourselves in a competent manner on their behalf and RECO is there to support them. It is not our business to attempt to circumvent competent and proven business practices to accommodate the convenience of Realtors or the industry by opening the door to more controversy and legal disputes between the buyer, seller and Realtors.

Let’s not play games with dynamite and our clients’ livelihood. Let’s go out of our way to provide superior service by doing our job completely and thoroughly, not looking for short cuts. Our industry has a tough reputation. Let’s not make it worse.

Dennis Irwin, a licensed Realtor since 1984, has spent years managing several offices, including 12 years as broker/owner of a multi-branch office. He has also been responsible for the ongoing training of salespeople. He is currently managing an active office along with keeping his hands on the challenges of the buying and selling process. Email Dennis.

  • vito camapanale

    Perhaps, Mr. Irwin missed the heading of my first article which was “What happens when the seller refuses to sign a mutual release”? So an 8 page dissertation of the importance of a mutual release wasn’t necessary. When the Seller refuses to sign the Mutual Release neither the Buyer nor the respective Agents will be released by either party to the transaction. So therein lays the problem.

    Mr. Irwin is completely missing the point. The clauses that are currently being used in Ontario are MISLEADING TO THE BUYER. This point was not addressed at all by Mr. Irwin. These clauses state that if the condition is not fulfilled the offer is null and void and the buyers deposit shall be returned and furthermore that this condition is for the benefit of the buyer and may be waived at the buyer’s sole option by notice in writing to the seller…… The way this clause is written any Buyer would believe that if the condition was not met and upon proper written notification the deposit would be returned. Nowhere in the agreement does it say that the return of the deposit is subject to the seller agreeing to release such deposit. Mr. Irwin says “The seller should never give up his rights to control the release of the deposit”. Do you think someone should tell the Buyer that the seller has that right? Perhaps if this was made clear in the agreement, Buyer’s would be more reluctant to give up their deposits until all conditions are waived when the deposit actually finds its true and intended value in the deal. Furthermore this is a right that is inadvertently given to the Seller because of the way we do business in Ontario not a right that the Buyer knowingly intends to convey to the Seller .Not once did Mr. Irwin in his response seem to have any regard for the Buyer’s rights or concerns or financial interest. They are consumers as well and an integral part of the transaction and their interest should be protected also by the Real Estate Industry.

    Mr. Irwin likes to use a fear mongering tactic stating that with my clause buyers would be writing offers indiscriminately and simply select the best one. I don’t think there are many professional Realtors out there that want to play this game. Mr. Irwin goes on to say that it is already happening without the use of my clause. So if it’s already happening without the use of my clause what is his point? The return of the deposit does not in any way negate the seller’s ability to sue the Buyer and his agent for damages for this type of behaviour.

    I have run this clause by many lawyers who agree that my clause is appropriate considering that Mutual Releases are the practice in Ontario. However many wonder why a Mutual Release is required at all when the agreement that is obviously is agreed to by the Seller is quite specific about the deposit being returned to the Buyer when the condition is not met. In other words why do we need the Sellers consent once again?

    Mr. Irwin questions the irrevocable direction even though a court held that a lawyer was held responsible for not following such irrevocable instructions. So the irrevocable direction is still enforceable! He indicates that an appeal court may overturn the lower court decision. We Realtors better hope that doesn’t happen or we may find lawyers sending our commission back to the sellers for us to chase.

    Deposits that are given by Buyers in a Real Estate Transaction in the Province of Ontario are generally given in good faith with the clear understanding that such deposit would be returned in the event any of the conditions were not met. Mr. Irwin also states “Obviously the intent of this clause takes away the right of the seller to contest the release of the deposit funds unless they want to use the courts”. The seller should not have this right, a right that under the current circumstances, we as a Real Estate Industry wrongly facilitate. The issue as to whether the Buyer has acted in good faith should be settled in court, where it belongs, after all isn’t that where the buyer has to go to get the deposit back if the seller refuses to sign a mutual release. We as Realtors should not be involved in this argument at all. Sadly, some Sellers will use the requirement for their signature as an opportunity to hold the deposit as a ransom or as Mr. Irvin likes to put it to contest the release of the deposit. The problem is that sellers can refuse to sign the release whether they have a valid reason or not and we in the industry facilitate that behaviour which my clause would solve.

    Some people in our industry, like Mr. Irwin, who disapprove of my clause, make the argument that the use of this clause does not protect the interest of the seller. This argument lacks substance. What possible benefit does a Seller receive if the deposit funds, after two years, are sent by the Deposit Holder, usually the Listing Brokerage, to RECO to remain in a Trust or what I call the “Dead Zone” for an indefinite time period? Therefore, how is the Listing Brokerage helping the Seller in any way??

    As I stated in my last article on this subject, the return of the deposit without the necessity of a mutual release occurs in 3 Provinces already, Manitoba, Alberta and Saskatchewan. So my suggestion is not novel or unique, it’s already being done for the good of all consumers and as far as I know the Sellers and their respective Listing Brokers seem to be operating just fine.

    Unless we in organized Real Estate make changes, RECO will continue to accumulate the Buyers deposits indefinitely where they will remain in what I call the “Dead Zone”. These funds, I assume accumulate in a trust fund somewhere and is virtually dead money. Money’s that I have stated belongs to the buyer and should be in their hands for them to invest back in the economy.

    Mr. Irwin was right about one thing, the refusal of the Seller to sign a mutual release is rare. However, when it does occur it infuriates the Buyer and more often than not the Buyer feels mislead and it makes us all look bad in this industry. We in Organized Real Estate can fix this problem by using a clause such as the one I suggested.

    • Alan M.

      Vito,

      You have crafted a clause that no listing REALTOR, who is paying attention, wouldn’t have a clear fiduciary responsibility to strike from an Agreement of Purchase and Sale. Obviously you created the clause hoping that it would get overlooked by some, due to: inexperience, incompetence or indifference. The REALTOR Code of Ethics obliges a REALTOR to conduct their business in a way that doesn’t create controversy with other members, and yet with your subject clause you have managed to create a clear controversy that was such that even RECO, itself, had to wade in.

      Regarding your following statement:
      “However many wonder why a Mutual Release is required at all when the agreement that is obviously is agreed to by the Seller is quite specific about the deposit being returned to the Buyer when the condition is not met. In other words why do we need the Sellers consent once again?” We know that you can’t be naïve enough not to know that the seller’s consent is required to ensure that the buyer takes their due diligence seriously, consequently you must be slyly making your argumentative argument!

      Dennis Irwin’s article is not only a great article, Dennis showed great leadership in his articulations — better leadership than RECO, CREA etc., etc., and certainly better leadership than you.

      • vito camapanale

        I don’t normally respond to offensive comments written anonymously but in your case I will make an exception. Perhaps most people know who you are but I certainly don’t! You write of your fiduciary responsibility to the seller but I wonder how you exercise that same fiduciary responsibility to your buyers or do you or your fearless leader ever deal with buyers? Since you claim to understand your fiduciary responsibilities one of the principals of course is full disclosure. So do you explain to your buyer that the return of the deposit that they entrusted to the deposit holder is subject to the seller agreeing to such a release and if the seller chose not to release the deposit the buyer would have to sue for it in court. Furthermore, even if the seller does not have a valid reason, the Deposit Holder will not release the deposit to the buyer, unless instructed by court order. Somehow Mr. Alan M, I don’t think you do!

        You and Mr. Irwin erroneously believe that the seller has the right to determine whether the buyer has acted in good faith while trying to meet the buyers conditions in the agreement. That belief is ludicrous!!Where in the agreement is that right conveyed to the Seller? How is it possible for a Seller to make an unprejudiced decision on whether a buyer acted in good faith or not and what evidence would he have available to him to make that decision? Typically the agreement does not call for the buyer to provide such evidence and if they did the seller would not be the right person to decide on that evidence at any rate.

        So the next time you are representing a buyer who are using conditions to protect themselves in the offer, I implore you to provide the buyer with full disclosure as to the possible risks that they may be taking if the seller refuses to sign a mutual release of the deposit or maybe you might just consider using my clause to ensure they get their deposit back in case the conditions are not met!

        Furthermore the concept that deposit holder’s, typically the Listing Brokerage, refuses to accept my clause because they want to protect the interest of the seller is a fallacy. As I stated before , how is the Listing Brokerage protecting the seller or providing any benefit to the seller whatsoever if the deposit sits in the Listing Brokerages trust account for two years and then is sent to RECO to be held by them indefinitely. RECO has thousands of dollars to prove my point.

        We in organized Real Estate in Ontario can fix this problem but for some reason we choose not too and it sounds like you and your fearless leader are part of the problem!

        • Alan M.

          Vito,

          You seem to feel that you have the status of the Regulator for the Province of Ontario. If you don’t want a deposit to be potentially held up, then don’t give it up until all your conditions are met. But if you want to impress a seller with an immediate deposit, then impress them — however, how impressed should they be with an immediate deposit if it can blow away with the wind?

          Vito, the problem is that most REALTOR’s don’t have enough product knowledge to be able to sell their clients into homes that they shouldn’t have any concerns about — in terms of wanting to back out of a deal. It sounds as though you compete a lot, and want to impress the seller’s, but also don’t want to risk tying up a large deposit. You can’t have your cake and eat to too, Vito.

          Were it the case that a seller was vexatious in their determination to hold up a deposit, they could incur additional expenses should the matter need to be settled in a Court of Law. Consequently, unless there is some legal merit in holding up a deposit, a savvy REALTOR would advise their seller to let it go.

          At least one Province gives the listing Brokerages Managing broker the authority to release a deposit, after a period of time — if they feel that their seller was acting unreasonably, and that’s how it should be handled. Should the seller feel that their listing Brokerage didn’t handle the matter appropriately, then they can sue their listing brokerage. It’s not rocket science Vito!

          • vito camapanale

            The problem, as you put it, is the conditional clauses that are currently used in organized Real Estate in Ontario say the Buyers will receive their deposit back if the condition is not met. It does not say that the release of that deposit is subject to the Seller agreeing to such a release. If OREA or Organized Real Estate added that additional qualification to the conditional clauses perhaps Buyers may reconsider putting up the deposit until the conditions are waived. However judging from how difficult it to convince people like you, it appears we in Organized Real Estate in Ontario prefer to mislead the Buyer and the result is thousands of Buyers deposits are sent to RECO every year. As you put it ” you can’t( shouldn’t) have your cake and eat it too”!!!

          • Alan M.

            Vito,

            In a more progressive Province and in the area of the deposit clause, there should be a qualifier to the extent that: it is understood and agreed that any release of the deposit will be subject to the terms of the Brokerage Trust fund Act, for example. Such a qualifier then forms the clear impetus to explain the pertinent regulation in its entirety. Should a member fail to do so, they would have bought the deposit for themselves, by way of errors and omissions. Simple!

          • Dave says

            It is simply dishonest and untrue to state that “thousands of Buyers deposits are sent to RECO each year”.
            It is a fairly rare occurrence and you discredit yourself by resorting to untruths.

  • Alan M.

    This is probably one of the best and most lucid articles ever posted on R.E.M.. Cudos, to Dennis Irwin’s intellect and candor!

  • PED

    PRECISELY!

  • The discussions on this matter are attacking the suggestion and not the problem or for that matter the servicing of a need in an efficient manner.

    So the Buyer or Seller on the occasion of the agreement becoming null and void want to do one of two things in respect of deposits: return it or hold subject to possible litigation. That is for the parties to the agreement.

    Registrants want, if the agreement is at an end and deposits are to be returned, want to use the process of returning deposits to the Buyer as A means to become absolved of all liability. I am no expert on RECO or REBBA 2002 application to the appropriateness of this model of deposit return, given registrants are not parties to the sale agreement…registrants having their own client or customer service contracts. It seems it may border on the same issues raised by RECO with respect to obtaining advertising permission…but I digress.

    Since most agreements result in returning deposit (most commentary is that Mr. Campanale is trying to resolve a “rare” circumstance, so lets take that as a given) why do we not want to create the most efficient means to that end….oh yes, it is because unless we use the mutual release process registrants are left unreleased….

    Put in the AofPS the deposits are returned automatically not less than the 5th day following the termination of an agreement and not more than xx days, AND include the return is subject to none of the parties to the agreement giving notice of their intention to litigate ….or whatever terminology is required to have them instruct the deposit be held until a mutual release is signed.

    Get the best of both worlds….instant approval for deposit return with right to rentention if a party wishes it.

    I am sure there is a legal reason we do not do this, so lets look at making new law that makes life for the majority of instances easier! IMO.

    • Realistic

      Cameron, a couple of my comments from what you have said.

      First to apologize to all readers, my reply will show my name as Realistic. Not being a computer guru I have not figured out how to change this, created several years ago, to be my name. I really am Dennis Irwin though. (maybe I should leave it as is so nobody knows. LOL)

      Now comments.
      A lot of salespeople believe that the buyer and seller have not released each other, by signing the Mutual Release, unless the Agents (brokerages) sign too. WRONG. Once the buyer and seller sign, the parties are released from each other regardless of whether the Agents signs it.

      However, once the buyer and seller sign (without changing it to remove the Agents involved) they have also agreed not claim against the Agent. The buyer and seller could remove reference to the Agent if they wished and we could not stop them from releasing each other.

      Once the buyer and seller sign, without a change, the Agent has not released the buyer or seller and until the Agent does sign, a claim by the Agent could be made against the buyer or seller, or the agents could battle each other. Likely such battle between the parties would be consistent with a dispute about commissions. Thus the reason all parties need to sign.

      I would think any wise buyer or seller will want the Agent signatures on the document. This is not about releasing the Agent. It is about ALL the parties releasing each other. However it will include the Agents, not because they are a party to the agreement, but because they were acting as Agent for the parties and as such could still be liable to a claim.

      Every Agent needs to ensure that “when the Party is over” make sure it is over for all concerned. It is your duty, it is your job, is is your professional career on the line. You could actually leave yourself open to claim.

      A lawyer once told me. I spend 70% percent of my time protecting myself from my client. I responded to him by saying ” great, we spend 75 % of our time protecting ourselves from our clients lawyer”. No disrespect to the lawyers, but life is like this if you do not dot the ‘I’s” and cross the “T’s”.

      Last comment. Cameron as a licensed Realtor ( I assume) you never want to admit to anyone that “I am no expert on RECO or REBBA 2002”. Mr. Richer was not watching this I am sure. Might be bad table manners to admit that . LOL, (A lot of us join you in this regard) Cheers.

      • Well that is interesting. My comment about RECO and REBBA 2002 were more tongue in cheek than abject….and anyone who knows me will know that. And although one may want to say they are an expert or know REBBA 2002 (RECO is about the organization and not the legislation), there is always new interpretation and law that comes from actions related to the law…so none of us literally can be an expert ….I am good with the reference, although I take your point.

        You raise the refinement of the brokerages signing off on the Mutual Release. I do not agree that our role is to make sure it is “over” for all. My suggestion does that by the way though, it says it is over and funds are dispersed unless a party files notice of intent to dispute it being over.

        And while the brokerages may want to hold a deposit to satisfy its concern….if it has one…there is nothing IMO to allow them to do so…the deposit is not theirs, they are not a party to the agreement. PM me on facebook and I welcome a discussion in person or on the phone.

        • Carolyne L

          There are still people out there, perhaps first-timers, younger or older, who don’t understand the difference and sometimes use both terms interchangeably.

          Although I have shared this old article previously, occasionally I get requests for permission to reprint this copyrighted article:
          * Deposit or Down Payment the Difference Between Them is –
          (and – Do you know where your money is, and why?)

          http://www.carolyne.com/downpayment.html

          It should never be embarrassing to anyone to ask questions, and if the receiver of the question doesn’t know the answer, the appropriate and acceptable response always is: “I don’t know, but I’ll find out.”

          Don’t ever accept being advised to sign something you don’t understand, as a member of the public, or as an agent. Irrevocables or time is of the essence aside. Keep detailed, specific notes that you can refer to if needed at some point in time to secure your legal position, should you ever be called upon to validate such.

          Email follow-up is a wonderful and easy mechanism to use for note-keeping, even if only you send email to yourself while things are top of mind. And if you are not a participant in a paperless office, print out the email notes as soon as practical and put in the appropriate property listing file.

          Carolyne L 🍁

        • Realistic

          Cameron, I was joking about not admitting to being an expert on REBBA or RECO. I like you, like to joke around. I agree with constant changes to the way we are expected to do business, sometimes makes it hard to keep on top of it. Not many in the business, and I include the legal profession as well, are expert in it and I certainly do not hold out that I am either. Working knowledge, yes, expert, no.

          Not quite sure I agree with your take on us making sure it is over. When I say that, I mean, if the parties have agreed it is over then lets do the paper work that says so. Simply good business. It is not our job to demand it of them but rather to get them to agree or not agree. We have no control over them.

          As for your comment about brokers holding deposits I am with you 100% that there is nothing in any legislation that gives the party (brokerage or anyone else) holding the deposit, the right to hold the deposit without direction to do so. We also cannot release it without a direction. As you say, we are not a party to the agreement and have no interest in the deposit which is for the parties, not the brokerage. This I think supports the reason for the release signed by all parties giving direction to the deposit holder.

          Pretty much on the same page with you.

  • Stephen Sun

    I agree with everything you said, however, Mr. Campanale did indicate in his original post that his suggested clause was for a Buyer to insert into the APS. What you wrote is from the Seller’s perspective. There are always two sides to a coin and it depends which side you sit on. The clause is definitely a benefit to the buyer (as you’ve indicated so as well) and if the Seller’s agent doesn’t catch it then that’s not the Buyer’s agent’s fault is it? The Buyer’s agent has every right to insert clauses that benefit the buyer, as they should, to protect the buyer. As you have assumed that there are unscrupulous Buyers, there are also unscrupulous Sellers. They will withhold the deposit even after the Buyer has done everything to try to satisfy the contract, when then?

    So there is nothing wrong with what Mr. Campanale suggested, it really depends who you are working for.

    • Realistic

      Stephen, I don’t disagree at all that a Buyer can put in anything they want. But a seller should take out anything they don’t want. However, the sellers salesperson needs to be sharp to catch it, understand it, explain it to the client and then know what to do with it. I was pointing out, what I think are good reasons that a listing salesperson needs to think about before allowing it to stay in.

      I think my point really is not who has the right to use it but more
      about how informed are the salespeople in advising and understanding
      what they are having their clients sign. A buyer and seller can agree to
      what ever they want if it is legal, and really this clause is not illegal in
      my opinion, yet at the same time it can create a lot of legal headaches.

      My concern was a listing salesperson leaving it in the APS and what implications it has to the seller along with what other issues the clause can create. As mentioned in my article, ask the lawyer on each side and you get a different answer. My concern was and is the fact that too many listing salespeople will not get or understand what the clause could really mean, how it could effect the seller and more what will a legal case or RECO do with it. Too much rubber stamping by salespeople when they really don’t understand what is written.

      And never suggest sending it to a lawyer. That could blow the deal. We don’t have time to do that or check this clause (or others) so lets just sign it and get on with the deal. Our irrevocable could run out. We got more buyers lined up etc. etc. Hello RECO.

      Lack of training in our industry is becoming a major concern as we see less and less brokerage/management oversight (or ability to oversee) and more and more salespeople. Because of this lets just keep getting the proper releases signed for all parties benefit.

      That’s my thoughts anyway.

      • Brian Martindale

        “Too much rubber stamping by salespeople when they really don’t understand what is written.” Truer words were never spoken.
        “And never suggest sending it to a lawyer. That could blow the deal.” Translation: We wouldn’t want a legal expert to override our mission.
        “Our irrevocable could run out.” Translation: My commission could disappear.
        “Hello RECO.” Translation: Good bye amateurs.
        I realize that many of my recent posts on this site have been negative in nature, and that there is not much of a positive spin to my opinions. In fact there are a great many professionals who operate within Organized Real Estate. There are just far too many who are not, and that is reality. To ignore reality is to invite failure. Failure to perform with integrity in this arena based upon knowledge and experience is not an option when it comes to dealing with the public interest. I am positive about that. I am also positive that RECO and some within ORE are finally getting it, that they realize that over populating the ranks of registrants with fresh naïve cannon fodder on an ongoing basis is not good for the public interest, but that it is good for the coffers of the likes of OREA for instance, bureaucrats who feed off of the system of producing hobbled registrants (76% of OREA’s income derived from real estate courses? Unbelievable!) on crutches for the most part. That is not fair to the newbies and it is certainly not fair to the public. It is a wonder that so many ‘do’ become professionals, almost on their own, and that is a testament to their individual senses of what is right…for the public…first and foremost. I am positive that RECO is on the right track in Ontario. Best of good luck to the future of professionalism within ORE.

        • Carolyne L

          In yesterday’s Toronto news online it was noted that “82% of millennials intend to buy a house in the next 5 years.” Didn’t explain if that meant “during” the next 5 years, or as at the 5 year time period, this would kick in. Someone had apparently done a survey.

          If agents can hang on long enough it might mean there is a future in real estate.

          And, I just heard a horrid Brampton stat: The population has doubled in recent years. So this indeed seems odd.

          I kept stats on many things. Numbers of deals written by local colleagues was not among my research. It simply didn’t matter to me what others were transacting. I concentrated fully on what “I” was doing relative to my own production, and I never compared myself to others. For a very long time, I mistakenly believed that everyone did what I did. I really was naive. My career stood on its own two feet. But from time to time I never understood the jealousy. I never thought my production was special, and no one was more surprised than me when I was offered the title of number one rep representing corporate Western Ontario Region, out of 3900 agents at the time. It cost me about 200-250k annually to be there, when other corps were offering 100% commission structures. I never complained about what cost me because I was smart enough to recognize (and my mind goes back to the recent REM Alberta story…) that it costs money for a brokerage to run a stable business.

          But eventually the office politics and harassment won out, and thinking I would never leave the firm, I did the unthinkable and went off on my own.

          I still don’t track that information but a colleague who does, just shared some info with me that I found quite disturbing.

          On the forever local stat basis, no wonder my average of a transaction record (property sold, either my listings or I sold another MLS listing) caused so much jealousy, as I for nearly every year wrote plus or minus, “a transaction per week.” I think my lowest number one year was thirty-five or thirty-six transactions; and I never compared myself to other agents. I just figured there were many out there doing more business than I was, according to their advertising and promo.

          I didn’t keep close track of how many transactions other agents put together annually. (And then divided among husband wife teams and group-teams. ) WOW! doesn’t nearly express it.

          And was surprised that this figure, allegedly supported by TREB stats, (new processes let agents at large track each other’s production) apparently says that historically Brampton agents wrote six transactions on average, annually each and every year for a very long time.

          BUT in recent few years, that number of average transactions had dropped to only “two” !!! (2) per agent annually.

          Those are earth shattering stats. Means agents specific to Brampton area are literally starving to death. That doesn’t begin to even cover their franchise and branch affiliation fees, licensing, renewals, and insurance.

          WOW! the local agent earnings is much worse than I realized, in recent few years. And even not great historically compared to agents in other areas. I don’t know if the stats reflect the number of new registrants compared to other areas or not. Someone may be able to speak to that. Again, I never kept track of such info.

          Then you have a few agents who do a dozen deals annually or more, and that just proves repeatedly that averaging lies. But nonetheless it is indeed a bleak market for local agents, infiltrated deeply as it is by Toronto, Bolton, Georgetown and Mississauga agents. They even work at offices in Markham, Hamilton, and Oakville and sell in Brampton, having no local knowledge. So dangerous. Keeps lawyers busy, I guess.

          Carolyne L 🍁

  • Ken Page

    There is a simple solution. Its called an option. The buyer should pay for the right to buy real estate. This way the seller get compensation for removing his property from the market. The option time would allow the buyer time to complete financing an inspections. The option agreement gives a period of time to complete financing then a substantial amount is paid to close the deal.

  • Bill Johnston

    Great article! The creator of the clause confirms that old adage; “A little knowledge is a dangerous thing”. Bill Johnston, M.A., LL.B. Legal Counsel, Bosley Real Estate

    • Dave says

      This was an excellent article that I wish everyone would read and then understand. Our Brokerage will continue to demand a mutual release or direction that clearly states who gets the deposit.