diswell

Hi there,

We're moving to Canada in March and are in the process of finding a rental property for a couple of years.

I wanted to check the "rules of the game" with regard to placing a deposit on a rental property. I checked the Wiki, but couldn't find mention of this...

We've found a place we'd like to rent from March, and we're working with the real estate agent in Canada. We've just sent over a host of paperwork to prove income, identity, references and such, which the realtor is reviewing now.

They've told us that with regard to the deposit, we'll need to wire the funds to a "listing brokerage trust account". The bank then requires *four weeks* to verify the funds/source, and only after the funds are verified with the bank will the property be taken off the market.

From our perspective, we want the property secured for us legally asap as (cynics-r-us) there's always the prospect that someone could jump in in front of us for whatever reason, and we're suddenly without a property with just a few weeks to go before we move.

So, your thoughts please on 2 questions:

1. Listing brokerage trust accounts - I'm assuming this is some sort of escrow, but any information on this part of the process would be welcome.

2. Four weeks to verify funds/source - is this typical, or is it a delaying tactic to try to get another deal in place ahead of March?

Thanks guys
Terry

Novocastrian

^^ Welcome to BE. I'm not sure about this but it sounds a bit scammy to me.

Where did you see the listing, not I hope on craigslist or kijiji etc. Do you know anyone local who could check it out for you?

diswell

Thanks for the reply - we found the place on realtor.ca and it appears to be marketed through a Remax agent. So hopefully all legit, but the delays in the timeline are more than we'd like. If it's common practice to use this listing broker process for rental then we'll go with the flow (as long as we can guarantee the deposit is refundable while we continue looking).

SchnookoLoly

Calling HGerchikov... she should know if this sort of thing is normal.... paging HG.........

Shirtback

Where in Canada? Each province has its own rules governing rentals.

Wire transfer? Usually days not weeks to clear if bank-to-bank UK -> Canada. Cheques can take 4 weeks to clear...

+1 to hoping HGerchikov will chime in.

JonboyE

Remax is the biggest chain of real estate brokerages in North America. I am not sure which province you are heading to but you can check if the brokerage is licensed with the The Real Estate Council of (insert province). In BC you can do this online. I would be very surprised if you can't do this in all other provinces.

If you are dealing with a Remax brokerage that is licensed by the province your money is safe.

A real-estate brokerage must maintain a trust account to handle the money they receive and spend that does not belong to them. In your case the deposit belongs to the landlord so it is right and proper that your money is deposited in a trust account. The correct way to make the payment is xxxxx brokerage - in trust.

Four weeks seems quite a long time to hold the cash but it is just them being prudent. Real estate brokers work under very strict rules for dealing with trust monies and paying uncleared funds from a trust account will get them into a lot of trouble.

Regarding the bolded bit you need to read the contract you sign but I suspect the deposit will be non-refundable. And why not? You are asking the landlord to take the property off the market and hold it for you. They are entitled to some compensation if you change your mind.

diswell

Thanks for the responses so far - all really helpful. I should have mentioned the province, apologies. We're moving to southern Ontario (K-W).

@JonBoyE - yes, understand the point on the deposit. We're happy to go ahead with the property and would stick with the decision as long as the property is taken off the market asap.

The (perceived) risk we're trying to mitigate is paying out a deposit, having to wait weeks for the landlord to agree to take the property off the market and then at the last minute, they decide to get in another tenant (as mentioned, we arrive in March, and the property's available now, so if someone rocked up and wanted the property sooner it would be in their financial interest) and we're racing to find a property at the last minute. Hope that makes sense...

@ShirtBack - Whenever I've transferred money via the bank abroad (mainly to the USA), it's generally been same day/next day to clear. So four weeks was a surprise.

HGerchikov

Hello! What JonboyE says above is correct. Your money is safe in a genuine Brokerage Trust Account, after an offer is accepted there is a period of time by which the deposit must be in the Brokerage account. In Ontario a buyer (or renter) generally has 24 hours from acceptance of the offer to get the money to the listing brokerage who then by law must have it deposited in his account within 5 days. What Province are you going to? I have had deposits wired in from out of country buyers before and it takes a couple of days at most. I don't understand the four week thing at all, as it doesn't take that long to clear a personal cheque, I would have thought wired transfer was guaranteed funds (maybe a financial expert can chip in here).
Is it possible you have misunderstood something? You say you are working with a realtor, do you mean the listing agent? Or do you have someone specifically working for you to help you find a place. Whichever way ask them for clarification of why they need four weeks, also ask your bank whether wired funds are guaranteed

JonboyE

Again, I think this is an excess of prudence rather than anything to worry about.

As well as the Real Estate Council rules, real estate brokers are bound by the Proceeds of Crime (Money Laundering) and Terrorist Financing Act. One way dodgy people get clean money in Canada is to wire it into a lawyer's or real estate broker's trust account. They then use this money for a real transaction or even just say they have changed their minds and ask for a refund. Money from a dodgy person at a dodgy bank in a dodgy country has now become a trust cheque from a reputable lawyer/broker. An entity that operates a trust account has a duty to verify the source of foreign funds it receives.

HGerchikov

Mine and your post just crossed. I have to be a little careful here because I don't want to be accused of interfering with another realtors client, if you have your own representation.

So general comments for anyone else looking to buy or rent in Ontario, if you have a signed agreement to lease or buy accepted by all parties and no conditions in it, and you have given the deposit within the timeframe stated in the agreement, then, you have a firm deal and the place is yours, regardless of what they want to do to check the funds are clear. Obviously if it turns out that the funds are not good then you are in breach of contract and the deal is off.
Again, if you have your own realtor working for you, call them and get them to explain exactly what is going on, it's their job to be sure you understand this stuff, and I am sure they would be happy to do so. If you don't and want more detailed help, then let me know and I can answer more specific questions. I can't answer any more specific questions for you if you already are someone's client, as it's against code of ethics.

Shirtback

My karma button seems to have gone AWOL, so just want to say thanks to Jonboy & HGerchikov for those detailed & clear posts.

S

diswell

No, we don't have representation - the realtor/listing agent (sorry, I'm unclear on the difference, being a newbie) in question is acting for the landlord. Would be great to connect and catch up on more specific questions. Maybe you could PM me when convenient?

HGerchikov

PM sent.

I can see why you are confused. It is common here to have a buyers agent and a sellers agent. The sellers agent does all the stuff an estate agent in England does in terms of listing and marketing the property, and represents the seller in negotiating the contract. The buyers agent helps a buyer (or renter) select houses, takes them to see them, (any agent can show any MLS listing regardless of which company has the listing) and then they negotiate on behalf of the buyer. It's a bit like location, location, location, the buyers agent is Kirsty and Phil.

HGerchikov

Fintrac requirements don't apply to rentals, only purchase and sale. Although I think some brokerages do apply the same principles.

JonboyE

One lives and learns.

The OP shouldn't read the following as it will further confusion but for those heading out west we use different terms here.

The agent acting for the seller is called the listing agent. Presumably because they list the property for sale on the MLS.

The realtor acting for the buyer is, confusingly, called the selling agent. Presumably because they sell the property to the buyer.