Deposit Structure Condos Ottawa

The Deposit - What, When, and How Much?

Question: What is the deposit? How much do I need for a deposit when buying a condo in Ottawa? When do I need to provide it?

Keep in mind, this is for a resale condominium in Ottawa. If you are looking for pre-construction deposit information - CLICK HERE. Also, this is not referring to your downpayment - sometimes first time buyers will get these two terms mixed up.

What is the deposit? The deposit is an amount negotiated in the Agreement of Purchase and Sale that binds the buyer to the contract, and acts as consideration for the deal. (Consideration is the legal term for the deposit, and without consideration the contract is non-binding in common law). The deposit is thought of to be as "a sign of good faith", which keeps the buyer from walking away from the deal at any time, and provide the rest of the funds to close on closing day. It can show a seller who is considering an offer, that the buyer has cash on hand, and is willing to tie it up until close.

How much do I need? The deposit amount varies per property/deal/market. Here in Ottawa, you can expect anywhere from one percent of the sale price and up. Typically there is not much weight behind having a larger deposit for the buyer, however during multiple offer scenarios the higher deposit amount can help. Often for properties in the downtown core, you will see $3,000 to $5,000 for a deposit amount on a $250,000 to $350,000 purchase. Keep in mind, outside of the city it is typical to see deposit amounts of $1,000 or even $500 on the same purchase price. Head over to Toronto, and you can expect FIVE percent of the purchase price! 

When do I need to provide the deposit? When the Agreement of Purchase and Sale is written, typically we use the "upon acceptance" wording in regards to time to provide the deposit cheque to the other agent. This means the buyer has to provide a cheque (can be personal, certified, or bank draft, wire transfer, etc) for the funds within 24 hours of acceptance. This is standard, however it can be written differently depending on the scenario.

What happens to the deposit funds? Once we provide the cheque to the other side, it gets deposited in the seller's real estate brokerages trust account (unless otherwise specified) and is held until closing when the seller's lawyer will direct the brokerage with use of the funds (typically to pay commissions).

What happens to the deposit if the deal does not come together? Many people seem to think that if the seller walks away from a deal, then the seller automatically gets to keep the deposit money. This is far from the truth! Under section 27 of the Real Estate Business Brokers Act, a real estate brokerage is not allowed to release any deposit from their trust account without either a Mutual release signed by both the buyer AND seller, or a court order. So if the buyer walks away, the money remains in trust and litigation will commence until an agreement is made.

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When Do I Have To Pay The Deposit?

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Question: When do I have to pay the deposit when I am purchasing a pre-construction condo through the developer?

Every condominium project in Ottawa will have a different deposit structure, however the typical deposit required is 20% paid in four instalments.

Example based on a $350,000 purchase price:

At time of signing - $5,000 
30 days from signing - Balance up to 5% - $12,500
90 days from signing - Another 5% - $17,500
180 days from signing - Another 5% - $17,500
Occupancy - Another 5% - $17,500

Total paid is the 20% deposit which (based on $350,000 purchase price) is $70,000.

Keep in mind that every condo development is different, and the deposit structure even might change from initial launch to nearing completion. Builders typically require higher deposits at the beginning of a project, as the bank that is financing the building will have set out requirements in order to start construction. As the project gets underway, the developer typically has more room to negotiate amounts and dates, with extensions or even reducing the amounts. 

Have a question about deposits or purchasing a pre construction condo here in Ottawa? I would love to chat!