When you submit a deposit on a home purchase in Ontario, the funds are held in a regulated trust account, usually maintained by the listing brokerage. That deposit is further protected by consumer deposit insurance administered through the Real Estate Council of Ontario, which covers up to $200,000 per claim in cases of brokerage fraud, theft, insolvency, or misappropriation.
A deposit received by the brokerage named as the deposit holder in the Agreement of Purchase and Sale must be put into that brokerage's real estate trust account within five business days of receipt, under section 17(1) of Regulation 567/05. Business days exclude Saturdays, Sundays, and holidays. In some transactions, particularly private sales where no listing brokerage is involved, the deposit might be held by the seller's lawyer. The Agreement of Purchase and Sale specifies who the deposit holder will be, and that designation matters because it determines which regulatory protections apply.
When your deposit is described as being 'in trust,' it means the funds are sitting in a regulated trust account, completely separated from anyone's personal or business money, and protected by the rules of the Law Society of Ontario. For brokerage-held deposits, real estate brokerage trust accounts are regularly audited and heavily regulated. Deposit monies can only be paid out of the statutory trust account 'in accordance with the terms of the trust.' That means the brokerage cannot release your deposit to either party without mutual written consent from both buyer and seller, or a court order.
Beyond the trust account structure itself, RECO administers a mandatory insurance program that includes consumer deposit coverage at no cost to buyers or sellers. The consumer deposit coverage provides up to a maximum of $200,000 per claim and up to a maximum of $4 million for all claims related to a single event, for example insolvency of a brokerage. There is no deductible under this coverage. The coverage responds in events such as brokerage theft, fraud, insolvency, or misappropriation of funds, subject to the terms and conditions of the policy.
There are limits to what this insurance covers. In cases of a failed transaction where the parties simply cannot agree on the disbursement of a deposit held in a real estate statutory trust account, this coverage does not respond. Deposit disputes between buyers and sellers are a contract matter, not an insurance matter, and must be resolved through a mutual release or the courts.
If your deposit exceeds $200,000, the insured portion is capped at that amount and you would need to cover any shortfall yourself. For larger deposits common in Toronto's higher-priced market, this is worth understanding before you finalize your offer. To better understand how your deposit fits into the broader payment structure, read What Is the Difference Between a Deposit and a Down Payment in Ontario Real Estate?