What Is a Solicitor's Trust Account and Why It Matters for Sellers

When your Canterbury property is sold, significant amounts of money - the deposit, and eventually the full sale proceeds - pass through formal trust accounts before reaching your bank account. Understanding how this works helps you track your funds and know what protections you have.

How the Deposit Is Held

When a buyer pays a deposit on your property (typically 5-10% of the purchase price), that money does not go directly to you or your agent. It is held in the real estate agency's statutory trust account - a dedicated account required by law to be separate from the agency's operating funds and subject to regular audit. The deposit stays in the agency's trust account until either: the sale becomes unconditional and settlement proceeds (in which case it is paid to your solicitor and included in the settlement funds); or the agreement is cancelled and the buyer is entitled to a refund. Agencies are legally prohibited from spending trust account funds on their own expenses - the money is held on behalf of the parties to the transaction.

Settlement Funds Through Your Solicitor's Trust Account

On settlement day, the buyer's solicitor transfers the full purchase price (minus the deposit already held) to your solicitor's trust account. Your solicitor then processes all the payments: they pay the deposit held by the agency to themselves; they discharge your mortgage and send funds to your bank; they pay the real estate commission to the agency; they deduct their own legal fees; they process any rates or water adjustments; and they transfer the net balance to your nominated bank account. This typically all happens electronically on settlement day with settlement confirmed once all funds have cleared.

What Protections Exist

Real estate agency trust accounts are subject to mandatory annual audit requirements and regulation by the Real Estate Authority. Law firm trust accounts are regulated by the Law Society and also subject to regular auditing and professional indemnity insurance requirements. These frameworks provide substantial protection for property transaction funds, though they are not unlimited - any serious concerns about a specific agency or law firm should be discussed with the relevant regulatory body.

Information from the Real Estate Agents Act 2008, the Real Estate Authority, and the New Zealand Law Society. For general information only.