I am almost at the stage of exchanging contracts on a property and have been asked to provide a deposit of 15% of the agreed purchase price. Is this normal and if I question it could I be in danger of losing the house?
It is a standard contractual obligation that the buyer is required to provide a deposit of 10% of the purchase price on exchanging contracts – but not 15 per cent. In fact, it is common these days for sellers to accept a reduced deposit as contractual terms will cover the vendor in the event of the matter proving abortive and the seller having to request the balance of the 10% from the buyer.
It is also commonplace that whatever deposit is available at the bottom of the chain, this will be passed up the chain or, indeed even more common these days, the deposit is held by the solicitor at the bottom of the chain to the order of those higher up the chain.
It is a specific condition of the contract that, in the event of the buyer failing to complete, the seller is entitled to forfeit the deposit. If however a deposit of less than 10% is handed over on exchange, this would potentially prejudice a seller and, accordingly, all sale contracts contain a Special Condition whereby the seller can compel the buyer to pay the balance of the 10% deposit in the event of the buyers’ failure to complete.
Only in extreme circumstances, often where a protracted completion date of, say, 6-12 months is agreed, could the buyer be asked to provide a larger deposit. In the absence of such circumstances, any request for a deposit in excess of 10% should be refused.
• Emyr Pierce is Managing Partner of Emyr Pierce Solicitors in Rhiwbina, Cardiff, Western Mail Conveyancer of the Year, specialising in Domestic and Commercial Property. Contact www.emyrpierce.co.uk or email law@emyrpierce.co.uk