A call we get most weeks
A few weeks after closing day, the phone rings. The caller is one of our sellers. Sometimes, they sound frustrated.
They sold their house at the end of the month. Most of the proceeds landed in their account that day. But there is still a chunk of money missing. Where is it?
While we always try to prepare our clients for this eventuality ahead of time, selling a house is a complex process, and there's a lot to keep track of. It's not unusual to hear from clients who are wondering why it's taking so long.
The answer is almost always the same: The money is sitting safely in our trust account. However, until certain things happen after closing, we can't release it.
This is one of the most common questions we get in our Peterborough office. Let me explain what actually happens after closing day. I'll walk through why a slice of your money sits in trust for weeks or months, and when you can expect to see the rest.
The short answer
Closing day is not the end of your real estate file. After we register the transfer, several things still need to happen. The most common reasons your lawyer is still holding some of your money are:
- The seller's old mortgage has been paid off, but the bank has not yet registered the discharge on title. We are required to hold back funds until it is registered.
- Some adjustments, like final tax bills or fuel oil top-ups, were estimates at closing. We hold a small reserve until the real numbers come in.
- A buyer's new construction purchase has a statutory holdback under the Construction Act. The law requires ten percent of the price to sit for sixty days.
- The file has not yet been formally reported and closed. Lawyers hold a small amount until the final reporting letter goes out.
Each one has a different timeline and a different release date. Let me walk through them.
Buying or selling in Peterborough or the Kawarthas?
Bussey Ainsworth has handled residential real estate closings since 1988. Flat fees, quoted upfront.
Reason one: the mortgage discharge holdback
This is the big one for sellers. It is responsible for most of the calls Lynda, our lead legal assistant on real estate, answers.
On closing day, your lawyer wires the mortgage payout to your bank from the sale proceeds. The mortgage is paid off in full, and the bank acknowledges that.
What the bank does next is register a formal discharge of the mortgage on title. That registration is what makes the title clean. Until the discharge is registered, the title still shows the old mortgage in place.
Our professional rules require us to hold back funds from your sale until the discharge is on title. The amount is usually equal to the mortgage payout, plus a small buffer.
Here is the part that frustrates sellers. The bank's discharge timeline is not under our control. With the major banks, it usually takes between thirty and ninety days. Some are faster. Some are slower. We follow up. We push. But generally we cannot make them go much quicker than they go.
Once the discharge shows up on title, we release the holdback to you, usually within a few business days. You will see it land along with a copy of the registered discharge in your reporting letter.
Reason two: adjustments still being finalised
The statement of adjustments at closing is built on the best information available that day. Some numbers are estimates. We hold back a small reserve to cover any difference once the real numbers arrive.
The most common items reconciled after closing include:
- Final municipal property tax bills, which can land weeks after closing.
- Fuel oil or propane top-ups, which depend on a final tank reading.
- Final water or utility bills.
- Condo fees or special assessment items in a condominium sale.
These reserves are usually small. A few hundred dollars, sometimes a thousand or two. Once the final numbers arrive, the difference is reconciled and any leftover money is released to you.
Reason three: the new construction holdback
This one applies mostly to buyers of brand new homes.
Under Ontario's Construction Act, ten percent of the price of a new build must be held back for at least sixty days. The holdback exists to protect you from the contractors and trades who built the home. If any of them registers a lien for unpaid work, the holdback is what gets used to clear it.
If you are buying a resale home, this rule does not apply to you. If you are buying new construction, expect ten percent of the price to sit in trust for at least sixty days after substantial completion.
Reason four: trust account rules and the reporting letter
Even after the mortgage is discharged and the adjustments are finalised, your lawyer's office needs a little time to wrap up the file properly.
Your file is not formally closed until you receive a reporting letter. The reporting letter is the final accounting for your file. It includes the registered transfer, and the registered discharge if you sold. It also includes a full statement of every dollar in and out. Plus any insurance policies or other documents we are required to give you.
Until the reporting letter is ready, our trust accounting rules require us to keep a small amount in reserve. This is standard practice in every Ontario real estate file, set out in the Law Society's By-Law 9 on trust accounts.
Once the reporting letter goes out, the file is closed and the last of the trust money is disbursed.
What your lawyer is actually doing during the holdback period
From your seat, the holdback period can feel like silence. From our seat, it usually looks like this:
- Following up with the discharging bank, sometimes weekly.
- Following up with the municipality on final tax bills.
- Confirming any condo fee or property manager adjustments.
- Reconciling the trust ledger.
- Preparing the reporting letter and the final statement.
If you are mid-holdback and you have not heard from us in a while, it usually means the discharge has not yet landed. We will reach out the moment it does.
When can you expect the rest of the money?
The truthful answer is that it depends on what is in trust and why. A few rough timelines from our day-to-day Peterborough practice:
- Mortgage discharge holdback: thirty to ninety days, sometimes longer with the slower banks.
- Adjustment reserves for taxes or utilities: usually two to six weeks.
- Construction Act holdback for new builds: at least sixty days from substantial completion.
- Final reporting letter and last trust disbursement: usually within two to three months of closing for a clean file.
If your file is mostly clean, you should have a reporting letter and the last of your money within three months. If something is unusual, expect longer.
What you can do to make this go smoother
A few things help.
- Make sure we have your current mailing address, your direct deposit information for any trust release, and a working phone number.
- Respond quickly when we email you with a question or a missing document.
- If you are selling and you have the option to discharge your mortgage in advance of closing rather than from the proceeds, talk to us about whether that makes sense.
- Be patient with the bank. We push them, but they move at their own pace.
Your money is safe
If a portion of your money is still in our trust account, it is safe.
Trust funds in Ontario are protected by several layers. The Law Society of Ontario regulates how lawyers handle trust money, including mandatory monthly reconciliations and audits. The Lawyers' Professional Indemnity Company insures every Ontario real estate transaction. The trust account is segregated from the firm's operating account.
The money in trust is not earning interest for the firm. It is not being used by anyone. It is just waiting until the conditions for its release are met.
The short version
After closing day, your lawyer is still working on your file. The most common reasons a portion of your money sits in trust for weeks or months are:
- Waiting for your old mortgage to be discharged from title (the big one for sellers).
- Reconciling final adjustments for taxes, utilities, or condo fees.
- The Construction Act holdback for new builds.
- The last small reserve required by trust accounting rules until the reporting letter goes out.
If you are buying or selling a home in Peterborough or anywhere in the Kawarthas, I am happy to talk through what happens after closing day. Book a consultation, and we can review the timeline together.
Barry W. Bussey, Ph.D. (Leiden), has practised law for over 30 years. During that time, he served for ten years as Director of Legal Affairs for a national charity-sector association, argued cases at every level of the judiciary, including five times before the Supreme Court of Canada, and taught as an adjunct law professor. He practises real estate, wills and estates, charity, and non-profit law in Peterborough with Bussey Ainsworth.
This article is for general information only and does not constitute legal advice. Every real estate transaction is unique. Please consult with a lawyer about your specific closing.
