When purchasing real estate, a company or another asset, you will be asked to provide your lawyer or notary with the purchase price by way of “guaranteed funds”. Guaranteed funds, also known as certified funds, is a type of payment which is guaranteed to clear. This means that the funds will be honoured by a financial institution, either by setting aside the funds or depositing such funds into the intended account without the possibility of recourse.

If funds are guaranteed, all parties to the transaction can rest assured knowing that the money needed to complete the transaction will be available on the closing date. If funds are not guaranteed, issues may arise that could delay the completion of the transaction past the closing date thereby causing the purchaser to be in breach of the purchase contract.

Personal cheques are not guaranteed funds. This is because, when using a personal cheque, there is no certainty that the money will still be sitting in the purchasers account when it needs to be withdrawn.  We buy things every day and a simple miscalculation could cause the personal cheque to bounce and delay the completion of the transaction. Further, financial institutions will usually hold these amounts for a period of up to 10 business days, holding up all parties. Credit cards are also not guaranteed funds, as amounts already paid to the vendor can be disputed and reversed.

It is in the clients best interest to provide guaranteed funds.   Guaranteed funds give peace of mind and aid in a seamless transaction. It also reduces risk for the law firm. The purchaser’s solicitor will be required to undertake to pay out the purchase price when due. If the funds provided by the purchaser are not available on the closing date, your lawyer or notary will still be required to honour their undertaking and come up with the funds required to close the transaction.

Bank drafts and wire transfers are all examples of guaranteed funds accepted by Touchstone Law Group LLP. A bank draft is a cheque drawn from the financial institutions own account. Here, the necessary funds are taken from the purchaser’s account in advance and kept in the banks own account until payment is completed. A wire transfer is an electronic transfer of money and generally considered a form of guaranteed funds. However, wire transfers that use intermediary transfer agents such as Automatic Clearing House (ACH) are not recommended as they can take back the money after it has been deposited into the applicable account.

Please let us know if you have any questions regarding guaranteed funds and why we require them to complete real estate and commercial transactions. We would be pleased to answer any questions you may have with regards to the above or any other legal matter.

Author: Sasha Platz

This information is general in nature only. You should consult a lawyer before acting on any of this information. This information should not be considered as legal advice. To learn more about your legal needs, please contact our office at (250)448-2637 or any of our lawyers practicing in the area of business law, real estate law, and wills and estates law at the following: