Plate 5 of 6 · The deposit
The deposit and the trust account
In Victoria and Queensland, when an agent manages a sale, the deposit is paid to the agent and held in the agent’s trust account. In NSW, money in that account cannot be used for anything other than the client it belongs to. The agent’s commission can come out of that money, on the terms the agreement sets, and in Queensland not before the transaction is complete.
General information, not legal or financial advice. For a deposit in a particular sale, the contract and the seller’s solicitor or conveyancer govern. The official places to check are NSW Fair Trading, Consumer Affairs Victoria and Queensland’s Office of Fair Trading.
1. Before the contract: NSW expression of interest deposits
In NSW, a buyer may pay an expression of interest deposit before contracts are exchanged. NSW Fair Trading says it shows the vendor the offer is serious, obliges neither side to go ahead, and is refundable.
The rules of conduct set duties for the agent acting for the vendor. Before taking the deposit, the agent must tell the person in writing that the vendor need not sell, the buyer need not buy, and the deposit is refundable if no contract is entered into, and must get their signed statement that they understood. The agent must promptly tell the person if a subsequent offer is made to buy the property. The vendor’s agent must also tell the person they can make further offers until exchange, refund the deposit within 14 days once a contract is entered into with someone else, and promptly tell the vendor that an expression of interest deposit has been paid.
2. The contract is signed and the deposit is paid
In Queensland, the Office of Fair Trading says the contract should set the deposit’s payment date, usually 2 to 3 days after the contract is finalised, and that the deposit is paid into the agent’s trust account. It suggests asking the agent to say straight away if the deposit does not arrive on time.
In Victoria, there is no law setting the amount of a deposit, and a buyer may pay it in full or in part, with the rest due by a date in the contract. Where an agent manages the sale, the buyer pays the deposit to that agent. A Victorian agent must tell the seller immediately if, contrary to the contract, a deposit is not received.
3. While it waits: the trust account
| Question | NSW | Victoria | Queensland |
|---|---|---|---|
| What goes in | Clients’ funds, which may be used only for the client they belong to and are paid out on that client’s direction. Sales money and rent must sit in different general trust accounts. | Money received in advance from a client, including sales deposits and fees for advertising, deposited in a trust account with an authorised financial institution. | The buyer’s deposit, and any marketing money the seller pays in advance. |
| Who may pay it out | Only the licensee in charge of the business may authorise a withdrawal, and cannot delegate that authority. | Payments go only to the person entitled to the money, usually the seller, by cheque or electronic transfer. | The money stays in the trust account until the whole transaction is finished, and the agent may not draw it out before then even when the sale falls through. |
| Checked by | An auditor: trust records for each year to 30 June in which trust money was held are audited and submitted by 30 September. | Consumer Affairs Victoria, which may inspect trust account records; breaches carry penalties of up to 120 penalty units. | The Queensland seller pages this guide read do not say. |
4. Early release, in Victoria
A Victorian buyer may give the seller the deposit before settlement, but only once the contract is unconditional and the buyer is satisfied with the seller’s proof about debts secured against the property, and not until a minimum period after the contract was signed. Consumer Affairs Victoria’s page on property deposits for sellers sets out the exact conditions.
A Victorian agent may also move the deposit to a conveyancer’s or legal practitioner’s trust account instead of holding it to settlement. Deposit money goes from an agent’s trust account to a PEXA source account only if the client expressly directs it.
5. Settlement: the commission comes out
In Victoria, the agent deducts commission from the deposit at settlement, pays the seller the balance and gives an account for the sale; Consumer Affairs Victoria’s guidance for agents says commission and expenses may be withdrawn when money is paid out of trust. In NSW, whether the agent may deduct commission from the deposit is one of the payment terms the agency agreement must state. In Queensland, the Office of Fair Trading suggests setting the buyer’s deposit at no less than the agent’s commission.
If trust money goes missing
Each state has a route for money an agent fails to account for: NSW’s Property Services Compensation Fund, the Victorian Property Fund, and Queensland’s claim for financial loss. Who can claim, and when, is on When something goes wrong.