At Carter Notary, we take pride in ensuring that every transaction is smooth, timely, and explained clearly to our clients. That’s why I want to bring your attention to an emerging issue that’s been making waves in the lawyer and notary community—specifically regarding trust accounts and the unexpected bank holds financial institutions are now placing on client funds without notice.
Over the past couple months, I’ve heard from multiple sources, including fellow notaries and legal professionals, that there are significant issues happening with trust accounts at major banks. I believe it’s essential for everyone involved in a real estate transaction, whether you’re a client or an industry real estate colleague, to be aware of this growing issue. If you or someone you know is currently buying or selling real estate, this could affect you directly.
What’s Happening with Trust Accounts?
The initial reports involved TD Bank placing full or partial holds on deposits made into trust accounts. These holds are not always being placed at the time of deposit, but can be done several days later. At that point, the funds had already appeared in the account as cleared. In other words, the deposit showed as fully available before the bank suddenly flagged part (or all) of it and placed a hold—with no warning or notice given.
Understandably, this caused alarm among those affected. Upon further inquiry, TD Bank advised that their internal fraud-detection software automatically triggers these holds. Fraud is rampant and banks are in constant attack. TD Bank implemented these holds to protect people. But it’s uncomfortable and is causing potential issues for real estate buyers and sellers that none of us want to see.
The specific case that brought this to light involved a cheque drawn on a well-known law firm’s trust account—hardly something you would expect to be flagged as suspicious. Despite efforts to resolve the issue quickly, TD employees explained that no one within the bank had the authority to override the hold.
Why This is a Major Problem
If you’ve ever bought or sold property, you know how tightly timed these transactions are. In a real estate deal, funds need to be transferred, mortgages paid out, and disbursements made with little room for error or delay. An unexpectedly frozen portion of purchaser’s funds or sale proceeds, disrupts everything.
Here are just a few ways this situation is creating real harm:
- Breach of Contract: If funds are held without notice, a purchaser may inadvertently end up breaching their contract.
- Breach of Undertaking: As legal professionals, we’re often required to give undertakings (legally binding promises) to pay out mortgages or other financial obligations by a certain time. If funds are held without notice, we may inadvertently breach those undertakings.
- NSF Cheques: A hold can make previously available funds suddenly unavailable, leading to cheques bouncing (despite there being sufficient funds in the account at the time they were written).
This is not just a small administrative hiccup. It’s a systemic issue with serious implications for all lawyers and notary professionals, and for the clients we serve.
Are These Holds Legal?
Unfortunately, yes. Financial institutions do have the legal right to place holds on any funds deposited into any account. Even a designated trust account. That includes cheques that appear to be cleared, and regardless of your history or relationship with the bank.
What’s especially troubling is the lack of communication from the bank. In the cases I reviewed, they gave no notice when placing the hold, and there was no recourse to release it. In many cases, clients or professionals only learned about the hold when a scheduled payment failed or bounced.
What Carter Notary is Doing About It
I’ve been in touch with our professional body the Notaries Public of British Columbia and real estate firms to bring greater awareness to this issue. From my conversations, I can confirm that this isn’t an isolated incident. It’s happening to a number of lawyers and notaries, and the pattern is disturbingly consistent.
I’ve also taken steps to escalate these concerns directly to TD Bank’s regional management team. While they’ve acknowledged the issue, no resolution or policy change has been confirmed as of yet. Other major banks have confirmed they are working to do the same.
At this point, we need a coordinated approach between the notary, the realtor, and the clients. If major financial institutions like TD are making sweeping internal changes that affect how real estate funds are treated, those changes need to be reflected in the real estate documents and legal frameworks we use daily, particularly contracts of purchase and sale, as well as standard undertakings.
What You Need to Know as a Client
If you’re working with a notary or lawyer or realtor, especially during a real estate transaction, it’s important to know that we may not be able to guarantee exactly when funds will be available. This is particularly critical in back-to-back transactions where the sale of one property funds the purchase of another.
Because we can no longer rely on the old assumptions about timing, I’m now advising clients and realtors more explicitly about the potential for delays. This kind of transparency is key to preventing misunderstanding and, hopefully, to avoiding costly legal disputes down the line.
How You Can Protect Yourself
Here are a few steps you can take, whether you’re buying or selling a home:
- Start Your Documentation Early
We encourage clients to start their documentation for transactions early. For example, book signing mortgage documents with the financial advisor as early as possible. Sign any new mortgage paperwork ASAP. - Ask Questions Early
Talk to your notary or lawyer about the timing of funds and whether any financial institution policies might affect your transaction. - Avoid Tight Turnarounds
If possible, allow for a buffer between the sale of one property and the purchase of another. Even one or two business days can provide peace of mind. - Communicate with Your Bank
Order any money early. If you have a longstanding relationship with your financial institution, you may want to check if they’ve changed their policy regarding holds or times required to cash in investments..
Final Thoughts
No legal firm is exempt from these unexpected holds on funds. As someone who has built a practice around transparency, attention to detail, timeliness, and service, I find these developments very concerning. Not only because of the risk they pose to practitioners, but because they directly affect the people we serve.
One of Carter Notary’s practices is to communicate early and effectively with our clients. We set singing appointments, providing the extra time. Whereas the industry standard around real estate conveyances is to do things at the last minute and treat them as a simple transaction.
I want you to know that at Carter Notary, we’re staying on top of this issue. We’re trying to get the word out on this important news in a timely manner. I’m committed to advocating for more clarity, more consistency, and more communication from the financial institutions that hold such a central role in our professional responsibilities.
To be clear, Carter Notary (or any other Notary Public) does not control this issue. Notary Publics are working to mitigate this issue for buyers and sellers. We are trying to manage this hurdle in advance, rather than reacting to it.
If you have concerns or questions about how these holds might affect your transaction I invite you to reach out. Let’s work together to navigate these uncertain waters with as much clarity and foresight as possible. Please contact us at (250) 383-4100.