deposits on new condos
A slew of changes affecting the way developers handle purchase agreements, trust funds and much more took effect due to the passage of the Condominium Property Amendment Act and supporting regulations. These changes were introduced to tackle numerous issues faced by new condominium buyers, one of which was developers going bankrupt without adequate protection of the purchasers’ deposit.
Effective April 1, 2018, if a purchaser buys a new condominium in Alberta, their deposit must be held in trust while the condominium is being built. All trust funds must be held by a prescribed trustee, who must be a lawyer who is an active member of the Law Society of Alberta. That means, a developer must deposit the purchasers’ deposit into their lawyer’s trust account within 3 business days of receipt. Once the builder’s lawyer receives the deposit, they have 10 days to notify the buyer that the funds are in their trust account. Alternatively, a buyer may elect to get their own lawyer to hold the deposit in trust, given the developer approves. Again, the buyer’s lawyer has 10 days to notify the developer that funds are in their trust account.
However, Service Alberta states that purchase deposits that are covered under a Purchaser’s Protection Plan approved by the Minister of Service Alberta, or that are held as security in relation to the unit under another enactment, are not required to be held in a trust account. For example, deposits covered under a Protection Plan offered with Alberta New Home Warranty Program, Aviva Insurance Company of Canada, The Guarantee Company of North America and Travelers Insurance Company of Canada do not need to be held in a developer’s lawyer’s trust account. To confirm whether a builder has deposit protection from an approved Protection Plan, it is best for a buyer or their representative to reach out to the builder and get that confirmation in writing.
Lawyers can release a purchasers’ deposit from trust in any of the following circumstances:
- Title to the unit is transferred to a purchaser and the common property is substantially complete;
- The deposit money is secured by an approved Purchaser’s Protection Plan;
- The deposit money is secured by a security provided under another statute or regulation;
- The purchaser cancels the purchase agreement for a reason allowed under the Condominium Property Act;
- A condition imposed by the purchaser in the agreement has not been satisfied or removed in time, as allowed in the agreement;
- The developer terminates the purchase agreement according to that agreement;
- The purchaser and developer mutually agree to the release of the deposit;
- Money paid to a trustee in error; or
- Court order or where money is paid into court.
If you have any questions concerning the payment of deposits during a new condominium build, please don’t hesitate to contact Khemka Law or counsel of your choosing. If there’s a topic you’d like us to cover, please let us know! We are always here to assist you. Thank you for taking time to read this Thursday Tidbit.
Pranav Khemka, Barrister & Solicitor T: (403) 457-9577 | F: (403) 457-9578 E: email@example.com
LEGAL: The Thursday Tidbit provides general information and does not constitute legal advice. Circumstances may vary and no lawyer-client relationship is established from the use and reliance of this information. You are strongly advised to seek any legal advice by directly contacting Khemka Law or counsel of your choosing. Khemka Law does not warrant or guarantee the quality, accuracy or completeness of any information found within this Thursday Tidbit.