Trust is the invisible currency of professional life. When you hire a lawyer, an insurance broker, a financial advisor, or a real estate agent, you’re not just buying a service — you’re buying confidence. Confidence that your interests will come first, that your money will be safe, and that the rules of the game will be followed.
Most of the time, that trust is well placed. But every so often, it isn’t just strained — it breaks.
Fiduciary Duty in Real Estate
In Ontario, the Real Estate Council of Ontario (RECO) regulates the industry. At the core of that framework is a principle called fiduciary duty — the highest obligation one person can owe another.
In plain terms, it means a realtor must put their client’s interests ahead of their own. Always. These duties include:
- Loyalty
- Confidentiality
- Obedience to lawful instructions
- Full disclosure
- Skill and care
- Accounting for money
That last one — handling client money — is where the stakes become very real.
Why Trust Accounts Exist
Brokerages manage trust accounts, where buyer deposits are held until a deal closes. The rules are strict by design:
- The deposit goes in when the purchase agreement is signed.
- It comes out only at closing (with mutual consent) or by court order.
The purpose is simple: to assure consumers that their money is safe, protected, and untouched.
A Breach of That Trust
Earlier this month, RECO shut down a major GTA brokerage after discovering a shortfall of nearly $8 million in its trust accounts.
This wasn’t a small player. The firm had 17 offices and roughly 2,400 agents. Nor was this a bookkeeping slip — it was misappropriation of client funds.
The fallout was immediate: thousands of buyers and sellers suddenly faced uncertainty about their deposits, wondering if their money would follow them to closing.
Fallout and Safeguards
RECO does operate a Compensation Fund, designed to protect consumers when a brokerage fails. That fund will help cover losses. But the damage extends beyond dollars:
- Transactions delayed or disrupted
- Legal disputes over deposits
- A sharp erosion of public confidence
When a brokerage of this size collapses, it isn’t just an internal problem — it shakes the foundation of the entire industry.
What Buyers and Sellers Can Do
While most brokerages operate responsibly, consumers can protect themselves with a few simple steps:
- Interview agents carefully — ask for references from past clients.
- Check RECO’s registry (registrantsearch.reco.on.ca) for disciplinary history.
- Look for fiduciary care — is the agent putting your interests first, or just chasing a commission?
The Takeaway
In over 40 years of practice, I’ve seen several Real Estate brokerages and a few lawyers offices closed due to trust account issues. The vast majority of brokerages operate with integrity. But even rare breaches are catastrophic when they occur.
Real estate isn’t just about property. It’s about entrusting your largest financial transaction to someone who must treat your money as if it were more valuable than their own.
When trust holds, the system hums quietly in the background. When it breaks, the consequences are public, painful, and lasting.
If you are in the market and would like 40 years of experience backing you up, I can be reached at lindsay@buyselllove.ca or 905-743-5555