A 'trust'-worthy tale - the case of Singh v Singh

This newsletter is a cautionary tale about deposits paid for assignment contracts.

Earlier this month, Raminder Arora, Associate Counsel with Arora Zbar LLP, obtained a judgment for our client in the amount of $100,000.00, being the client’s entire deposit paid per an assignment of Contract of Purchase and Sale of a new construction townhouse in Surrey.

This case serves as a reminder to realtors of what not to do when handling real estate deposits. Protect yourself, and your clients with the information below.

The case of Singh v Singh, 2024 BCSC 425, started in January 2022 when our Plaintiff client paid a $100,000 deposit to the Defendant pursuant to an assignment agreement for a townhouse being built in in Surrey, BC. The Defendant acquired his rights to purchase the property pursuant to an earlier assignment from the original purchasers in March 2021.

In 2023, a mortgage holder over the development project was granted conduct of sale after commencing foreclosure. The property was sold to a third-party purchaser around March 2023. Thus, the Defendant had no way of holding up his end of the contract and therefore the Plaintiff’s deposit was found to be returnable.

The BC Supreme Court, In deciding in favour of our client, emphasized that the deposit was paid by the Plaintiff directly to the Defendant, and the terms of the assignment agreement required the Defendant to return the deposit if completion did not occur by a specific date. Notably, even though the original purchasers were not able to recover their deposit against the developer, our client was successful against the Defendant assignor.

This case is a great reminder for realtors – always ensure all deposit money is paid into a trust account in accordance with the Real Estate Services Act. If you have a question about how to handle a deposit, reach out to us and ask.

Although our client was not represented by a realtor, the Defendant and original purchasers were represented and yet they paid the deposit directly to the developer, eventually losing their money. This could leave the original purchasers’ real estate agent open to lawsuit because realtors have a professional obligation to advise their clients against payment of deposit directly to the seller/assignor.

If you know someone who may need legal advice with respect to their real estate matter, either as a party to a contract or as one of the agents, please get in touch with Raminder Arora at [email protected] or book a free consultation here: https://calendly.com/rpsarora/consult.

More info: 

1. BCFSA Deposit Guidelines

2. BCFSA Assignment Guidelines

3. BCFSA Assignment Terms

Sincerely,

Raminder Arora and Eli Zbar

Lawyers

Arora Zbar LLP