Holding amounts paid
To ensure that later you will be able to obtain the goods and services you pay for today, the law stipulates rigorous rules for holding funds.
The vendor must:
- deposit 90% of the amount you paid him in a trust account within 45 days of collecting it.
He need not deposit amounts corresponding to goods and services provided immediately, i.e. an urn or tombstone reserved for you when the contract is signed. The 10% kept by the vendor covers his sales and administrative fees.
The financial institution holding the funds must:
- advise you in writing within 30 days of receiving the first deposit in the trust account. If you do not receive notification within the prescribed time period, contact the vendor, ask for the name of the depositary and request written confirmation of the deposit. This is your only guarantee that the money has actually been deposited in a trust account.
Since the depositary is obliged to inform the consumer of the first deposit only, it would be a good idea to contact the financial institution from time to time to make sure the vendor is really making payments into the account.
The funds must be invested in safe vehicles that are easily convertible into cash, i.e. T-bills and federal, provincial or municipal bonds.
Finally, to offset price increases and guarantee that, even many years down to road, you will receive the same quality of goods and services, some of the interest earned by the amounts deposited in trust is used to increase these amounts and offset inflation (calculated using Statistics Canada's consumer price index).
Since the capital deposited increases at the same rate as inflation, the law prohibits vendors from including an indexation clause in the contract.