Deposit Protection (REDMA)

The Real Estate Development Marketing Act (REDMA) is a BC statute that governs the marketing and sale of development properties, including presale condominiums and strata lots. REDMA requires that deposits paid by purchasers be held in trust by the developer's lawyer, notary public, or an approved trustee until closing or until the Act permits release, specifically to protect purchasers if a developer becomes insolvent before the project completes. This trust requirement ensures that deposit funds are not commingled with or used as general operating capital by the developer. The BC Financial Services Authority (BCFSA) oversees compliance with REDMA.

Under REDMA, presale deposits must be held by a qualified trustee, which includes a lawyer, a notary public, or another person approved under the Act and its regulations. The trustee must maintain the funds in a trust account separate from the developer's own funds. Purchasers should confirm the identity and qualifications of the trustee before signing a presale contract, as only REDMA-compliant trustees provide the statutory protection the Act intends.

REDMA sets out specific conditions under which a trustee may release deposit funds to the developer before the transaction closes, such as when the developer has obtained satisfactory financing for the project or when other conditions prescribed by the Act and its regulations have been met. The trustee is responsible for verifying that the release conditions are satisfied before transferring funds. Purchasers should review their presale contract carefully, as the specific release triggers must comply with REDMA's requirements and any contrary contractual term that circumvents the trust obligation is unenforceable.

Because the deposit is held in a statutory trust account rather than in the developer's general operating account, the funds are generally protected from the developer's creditors in an insolvency proceeding. This means a buyer stands a significantly better chance of recovering their deposit than they would if the funds had been handed directly to the developer. The protection is not absolute and can depend on how correctly the trustee has maintained the trust account, so purchasers are encouraged to verify trustee compliance at the time of contracting.

REDMA applies to the marketing and sale of 'development property,' which includes strata lots, non-strata residential units in a development, and other prescribed property types offered for sale before or during construction. Whether a particular detached home within a phased development qualifies depends on how the project is structured and whether a disclosure statement is required under REDMA. Buyers of any presale property in BC should confirm with legal counsel whether REDMA's trust protections apply to their specific purchase.

Real estate licensees in BC are regulated by the BC Financial Services Authority (BCFSA) under the Real Estate Services Act (RESA) and its Rules, which impose duties of honesty, disclosure, and acting in the client's best interests. While the direct obligation to establish and maintain the trust account rests with the developer and the appointed trustee under REDMA, a licensee acting for a buyer should inform the client of their right to have the deposit protected in a REDMA-compliant trust and should not facilitate arrangements that circumvent this statutory protection. Licensees who facilitate non-compliant deposit handling may face disciplinary action by the BCFSA under RESA.

Yes. REDMA provides purchasers of development property with a statutory rescission period during which they may rescind the contract without penalty, and the deposit held in trust must be returned to the purchaser upon valid exercise of that right. The length of the rescission period is set out in REDMA and its regulations; consult current BC Government or BCFSA guidance for the exact period in force in 2026. Because the deposit is in a statutory trust account, the trustee is legally obligated to return it to the purchaser promptly once a valid rescission is confirmed.

No. Any contractual arrangement that directs a presale deposit away from the REDMA-required trust account and into the developer's own hands before the Act's release conditions are met is contrary to REDMA and is therefore unenforceable and potentially exposes the developer and any facilitating parties to regulatory consequences. Purchasers who are asked to pay deposits in a manner inconsistent with REDMA should seek independent legal advice before proceeding. The BCFSA can receive complaints about developers or licensees who contravene REDMA's deposit protection requirements.

REDMA's deposit trust obligation and the BC Property Transfer Tax Act operate independently of each other. Property Transfer Tax is assessed on the fair market value of the property at the time of registration of the transfer, and on presale assignments it is generally assessed on the full purchase price being assumed by the assignee; consult the BC Ministry of Finance for current rules applicable in 2026. The fact that the deposit has been held in a REDMA trust does not reduce, defer, or otherwise affect the Property Transfer Tax obligation that arises on closing or on registration of an assignment.

The primary source is the Real Estate Development Marketing Act itself and its associated regulations, both of which are publicly available through BC Laws (bclaws.gov.bc.ca). The BCFSA publishes guidance, bulletins, and educational resources on REDMA compliance on its website (bcfsa.ca) and is the regulatory body responsible for administering the Act. Developers, purchasers, and licensees should also consult qualified BC legal counsel to ensure their specific presale arrangements meet all current REDMA requirements.