The Deposit on a Quebec Purchase Offer: Where It Sits, What Releases It, What Holds It

The deposit that comes with a promise to purchase is often described as a sign of good faith, and it is one. But once it is paid, many buyers are no longer sure where it is, who can touch it, or what happens to it if the deal goes wrong. This article follows its path, from the signing of the promise to one of three possible outcomes. It covers resale of an existing home; deposits for new construction fall under a different regime. For how an offer works overall, see our purchase offer guide.

The deposit doesn't go to the seller

That is the first point to keep in mind, and a reassuring one. The deposit paid with a promise to purchase is not handed to the seller. It goes into a trust account, usually the real estate agency's or the notary's, depending on what the promise provides.

For the whole transaction, the seller therefore cannot use it. The money waits, in an account that belongs to neither the buyer, nor the seller, nor the holder, until an event set out in advance decides what becomes of it.

A trust account, and why it protects you

A trust account holds money on behalf of others. Funds deposited in it are kept separate from the holder's own: the agency or the notary cannot use them for its own business. Real estate agencies and notaries are each subject to rules governing how these accounts are kept.

For the buyer, the benefit is concrete. Their money is exposed neither to the seller's financial troubles nor to the holder's, and it can only leave according to what was agreed. That separation is what makes it reasonable to pay a significant sum at a stage when nothing has yet been signed at the notary's.

What releases it: closing, or an unmet condition

Two events normally move the deposit out of the account. The first and most common is the sale closing: when the deed is signed, the deposit is transferred to the notary and applied to the price. The buyer doesn't pay it on top of the price; it is part of the price, paid in advance.

The second is the promise ending because a condition isn't met. If the promise was conditional, for example on obtaining financing or on the result of an inspection, and the buyer relies on that condition within the deadlines and in the form provided, the promise becomes null and the deposit is in principle returned to the buyer. Deadlines are not a detail: a condition exercised late doesn't have the same effect.

What holds it: a dispute

The third outcome is the one nobody plans for: buyer and seller disagree about what happened. The buyer believes a condition released them; the seller believes they walked away without a valid reason. Each claims the deposit.

In that case, the holder doesn't decide. It doesn't hand over the money at the request of one party alone: it keeps it until both parties agree in writing, or a court rules. The deposit therefore stays frozen for as long as the dispute lasts, which can take time. It is the flip side of the protection described above: the same rule that stops the seller from taking it also stops the buyer from getting it back alone.

Deposit or earnest money: the difference that decides what the buyer risks

You often read that a buyer who backs out "loses their deposit". The legal reality is more nuanced. The Civil Code presumes that a sum paid with a promise of sale is a deposit on the price, not earnest money, unless the contract provides otherwise.

The difference matters. Earnest money is a sum a party agrees to lose in exchange for being able to back out. A deposit is only an advance on the price: on its own, it does not set what the buyer owes if they don't complete the transaction. A seller who believes they suffered a loss has to assert their rights, and it is that loss, not the amount of the deposit, that determines what they are owed. Meanwhile, the deposit stays in the trust account.

None of this makes walking away a light decision: a buyer committed without conditions remains bound, and their exposure can exceed the deposit. But the idea of an automatic, fixed forfeit does not match the default rule.

What to read in your promise before paying

Everything above depends on what the promise provides, and four points are worth checking before paying anything: who will hold the deposit, by when it must be paid, whether it is described as a deposit or as earnest money, and what the promise says if it isn't paid on time.

Your broker can show you where these points appear in the form. Knowing them before you sign means knowing exactly where your money will wait and what will move it out, in one direction or the other.