Selling The Units | Deposits & Trust
Deposits and Trust Accounts
A deposit on a presale unit is the buyer's money sitting in someone else's hands for a year or more before there is a home to take title to. REDMA section 18 decides whose hands. On a project below five units, the contract decides instead.
Key takeaways
- Section 18(1) requires prompt placement of a deposit with a brokerage, lawyer, notary public, or prescribed person.
- That person holds it as trustee in a trust account at a savings institution in British Columbia.
- The developer cannot spend it on construction while it sits in trust.
- Below five units none of this applies. A four-unit developer may lawfully hold deposits directly.
- The fix on a small build is contractual. Name the trust account and the trustee in the purchase agreement.
What section 18 requires
Section 18(1) states that a developer who receives a deposit from a purchaser must promptly place the deposit with a brokerage, a lawyer, a notary public, or a prescribed person, who must hold the deposit as trustee in a trust account in a savings institution in British Columbia.
Three things follow from that sentence. The money leaves the developer's control promptly rather than eventually. It is held by a regulated third party in a defined role, not by a friend or a related company. And it sits in a BC trust account, which is a specific kind of account with its own rules about what may be withdrawn and when.
The effect is that a buyer's deposit is not construction funding. A developer who wants to use deposits to pay for the build cannot do so on a project the section applies to. That constraint is the protection: if the project fails, the deposit was never spent.
The four-unit gap
Section 18 sits inside REDMA, so it reaches only development properties. A four-lot strata is not one. On a fourplex the developer may lawfully receive a deposit and put it in an ordinary business account, and no statute says otherwise.
Buyers rarely expect this. Presale deposit protection is discussed publicly in the context of condo towers, where every project is well above five units and the trust requirement is universal. A buyer moving from that reading to a four-unit purchase carries the assumption across without checking whether it still holds.
The exposure is real and easy to state. If the developer holds the deposit directly, spends it, and the project does not complete, the buyer is an unsecured creditor of whoever holds the money. Recovery then depends on that party's solvency rather than on a trust account balance.
How to close the gap by contract
A four-unit purchase agreement can require what section 18 would have required. Name the trustee, whether that is the developer's lawyer, the buyer's lawyer, or a brokerage. State that the deposit is held in trust and specify the conditions under which it may be released. Both parties are free to agree to it, and once agreed it binds.
For a seller this is worth doing voluntarily. A deposit clause naming a lawyer's trust account is the fastest way to answer the question a buyer's lawyer will ask, and it removes the objection before it stalls the deal. It also costs nothing beyond the drafting, because a lawyer is already involved in the conveyance.
For a buyer, the deposit clause is the single most important paragraph in a four-unit agreement. Read it before signing. If it does not say where the money goes, that is the question to ask, and the answer belongs in writing in the contract rather than in an email.
Deposit against downpayment
These get conflated and they behave differently. The deposit is paid when the purchase agreement is signed and is held for the length of the build, which on a multiplex can run well over a year. The downpayment is the buyer's equity at completion, paid when the mortgage funds and title transfers. The deposit is normally credited toward it.
The distinction matters because the risk periods differ. Downpayment money moves at completion, when there is a finished home and a title to register against. Deposit money sits exposed for the entire construction period, against a building that does not exist yet. That is the exposure section 18 is written to address.
A buyer assessing a presale should think about the deposit as the sum genuinely at risk during the build, and ask about it accordingly.
Why capitalisation is the real signal
The trust requirement forces a question that is worth asking on any project, covered or not: where is the construction money coming from? A developer whose build proceeds on construction financing and equity is indifferent to deposits sitting in trust, because the budget never assumed them.
A developer who resists a trust arrangement on a four-unit build is telling you something about the capital stack. The resistance may be innocent, because holding the money is simpler and the seller may not have thought about it. It may also mean deposits are working capital, which is the situation where a buyer stands to lose the most.
Asking is cheap and the answer is informative either way. A seller who agrees readily has confirmed the build is funded independently. A seller who will not agree has explained why the question needed asking.
What release conditions should cover
A trust arrangement is only as useful as the terms that govern when the money comes out. The clause should say what releases the deposit to the seller, which is normally completion of the sale and transfer of title, and what returns it to the buyer, which normally covers a failure to complete by a stated date or the exercise of a cancellation right.
Leaving release conditions vague reproduces the problem the trust account was meant to solve. Money that a trustee may release on the seller's instruction alone is not meaningfully protected. Name the events, and name who instructs the trustee when they occur.
Best for, fails when, verify before
A trust deposit works when
The developer funds construction from financing rather than from buyer money, which is how a properly capitalised project is structured anyway.
It fails when
A developer is relying on deposits as working capital. If the build cannot proceed without spending buyer deposits, the problem is the capital stack.
Verify before you sign
Which named party holds the deposit, in which account, and what conditions release it. Get all three in the contract.
What "promptly" means in practice
Section 18(1) requires the developer to place the deposit with the trustee promptly. It does not set a number of days. The absence of a fixed deadline is not licence to hold the money while arrangements are made, it is a standard that expects the transfer to happen as part of receiving the deposit rather than as a separate later step.
The clean way to satisfy it is to have the buyer pay the trustee directly. If the deposit cheque is made out to the lawyer's trust account, the developer never receives the funds and the question of how promptly they were passed on does not arise. Set this up before the first unit is marketed rather than at the first signing.
Common mistakes
- Taking a deposit before the acknowledgement is signed. On a covered project the rescission clock under section 21(2) has not started, and the money is already in hand.
- Holding deposits in a numbered company account. Section 18(1) names a brokerage, lawyer, notary public, or prescribed person. A related entity is not one of them.
- Writing a deposit clause that omits the account. Stating that a deposit is payable, without stating where it is held, leaves the buyer no better off than silence.
- Assuming a fourplex works like a condo presale. The trust duty, the filed disclosure statement, and the seven-day right all arrive together at five units and are all absent below it.
- Budgeting deposits as construction cash flow. On a covered project this is not available, and on an uncovered one it is the practice that puts buyer money at risk.
Where to go next
- The five-unit threshold explains which side of section 18 you are on.
- Filing a disclosure statement covers the document that accompanies a covered deposit.
- Pre-sale multiplex deposits goes deeper on deposit sizing.
Frequently asked questions
Where must a presale deposit be held in BC? +
REDMA section 18(1) requires a developer who receives a deposit to promptly place it with a brokerage, lawyer, notary public, or prescribed person, who holds it as trustee in a trust account at a savings institution in British Columbia. The developer does not hold the money and cannot spend it on construction while it sits there.
Can a developer use presale deposits to fund construction? +
Not on a project REDMA covers. Section 18 places the deposit with a third-party trustee in a trust account, which takes it out of the developer's control. A developer who needs deposit money to build has a capital problem rather than a paperwork problem, and on a five-unit-plus project the Act forecloses that route.
Does the deposit trust rule apply to a fourplex? +
No. Section 18 sits inside REDMA, which reaches only development properties of five or more strata lots. A four-lot strata falls outside it, so the developer may lawfully receive a deposit and hold it in an ordinary business account. Any trust arrangement on a fourplex exists because the purchase agreement created one.
Who can act as trustee for a presale deposit? +
Section 18(1) names a brokerage, a lawyer, a notary public, or a prescribed person. Each is a regulated party with professional obligations around trust money. A related company, a business partner, or the developer's own numbered company does not qualify, which is the point of listing specific roles.
What happens to my deposit if the developer goes under? +
Money genuinely held in a trust account under section 18 was never the developer's to spend, so it is not available to the developer's creditors in the way an operating account balance would be. Where a deposit was held directly by the developer on an uncovered project and spent, the buyer's position is that of an unsecured creditor.
How large is a typical presale deposit on a BC multiplex? +
Deposit size is set by the purchase agreement rather than by statute, so it varies with the project and the negotiation. What matters more than the percentage is where the money sits and what releases it. A smaller deposit held in a lawyer's trust account is a better position than a larger one held directly by the developer.
Should a fourplex seller use a trust account anyway? +
Yes, and it costs almost nothing to arrange. A deposit clause naming a lawyer's trust account answers the first question a buyer's lawyer asks and removes an objection that otherwise stalls the deal. A lawyer is already involved in the conveyance, so adding the trust arrangement is drafting work rather than new cost.
What should a deposit clause actually say? +
It should name the party holding the money, state that it is held in trust, identify the account, and set out the conditions under which the deposit is released to the seller or returned to the buyer. A clause that says a deposit is payable without saying where it goes leaves the most important question unanswered.
Can I get my deposit back if I change my mind? +
On a REDMA-covered project you have seven days to rescind under section 21(2) by serving written notice on the developer, measured from the later of the agreement date and the date you acknowledged the disclosure statement. Outside that window, and on any project below five units, the answer is whatever the contract says.
Is a deposit the same as a downpayment? +
No. A deposit is paid at the time the purchase agreement is signed and is held pending completion, subject to the trust rules where REDMA applies. A downpayment is the buyer's own equity contribution at completion, when the mortgage funds and title transfers. The deposit is normally credited toward it at that point.
Does the trust requirement apply to a deposit paid to a REALTOR®? +
A brokerage is one of the parties section 18(1) names as a permitted trustee, and brokerage trust accounts carry their own regulatory requirements. A deposit paid into a brokerage trust account on a covered project satisfies the section. The buyer should still see the arrangement recorded in the purchase agreement.
How soon must the developer move the deposit into trust? +
Promptly. Section 18(1) uses that word rather than setting a fixed number of days, so the deposit is not meant to sit in the developer's hands while arrangements are made. In practice the money should go to the named trustee as part of the same transaction in which it is received.
Sources and references
Trust obligations quoted from REDMA section 18(1), read 6 September 2026.
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