Deposit Interest to the Buyer or Seller

The buyer and seller may enter into a written agreement as part of their trade in real estate, directing that interest earned on the investment of deposit funds held in trust is to accrue to the buyer or seller. This may be significant in cases where the deposit is a substantial amount and held in trust for an extended period of time.

To properly set up this situation, the brokerage in receipt of trust monies transfers the monies from the real estate trust account into a special trust account in favour of the buyer or seller. On maturity of the special trust, the principal amount returns to the real estate trust account. Interest earned is paid directly to the buyer or the seller by the financial institution along with T-5 documentation for income tax purposes. The brokerage may charge an administration fee of up to $50 for costs involved in setting up and collapsing of these special trust agreements.

NOTE: Interest earned from Special Trust accounts may be paid direct to the beneficiary (client) by the financial institution. The issues to be concerned with are:

1. all parties to the transaction aware of the interest payment provisions as this was likely written into the Contract of Purchase and Sale; and
2. the interest paid generates a T-5 and must be reported to Canada Customs and Revenue Agency in the year received.

The Saskatchewan Real Estate Commission holds registrants responsible for the accuracy of trust account information.