A buyer's deposit cheque for $20,000 is accidentally made out to 'ABC Realty Ltd.' instead of 'ABC Realty Ltd. In Trust.' The real estate associate submits this cheque to their brokerage. What is the brokerage's obligation regarding this improperly designated cheque?

Question: A buyer's deposit cheque for $20,000 is accidentally made out to 'ABC Realty Ltd.' instead of 'ABC Realty Ltd. In Trust.' The real estate associate submits this cheque to their brokerage. What is the brokerage's obligation regarding this improperly designated cheque?

Answer options:

• The brokerage can deposit the cheque as is, assuming the intent for it to be a trust deposit. ✅ The brokerage should return the cheque to the buyer to be re-issued correctly, as 'in trust' is a legal necessity for trust account deposits.
• The brokerage must immediately notify RECA about the error but can still deposit the funds.
• The brokerage can hold onto the cheque until closing, then have the buyer swap it for a correctly worded one.

Correct answer: The brokerage should return the cheque to the buyer to be re-issued correctly, as 'in trust' is a legal necessity for trust account deposits.

Explanation: RECA Rules Section 56(3) mandates that deposits must be deposited into a real estate trust account. For proper legal and trust accounting, cheques must be designated 'in trust' or similar, requiring correction if omitted, to ensure proper handling within the trust accounting framework.