Deposits

There are no specific requirements regarding the due date for payment or the quantum of a DEPOSIT payable on a purchase of real estate. The only definite implication is that if a deposit has not been paid within three working days of it being due and demanded, the contract may be cancelled by the Vendor.

Generally, we suggest you follow these basic rules when it comes to paying a DEPOSIT on the purchase of a property:

1. Pay as small a deposit as possible. This is because if you end up defaulting on an unconditional purchase, you will definitely forfeit the deposit paid but your immediate loss will have been minimised;
2. Only pay the DEPOSIT when the contract goes unconditional, i.e. when all the conditions have been satisfied. There is no real need for you to pay the deposit before this time as the contract may never eventuate to an unconditional contract if one of your conditions is not met.
3. Preferably, ensure that the DEPOSIT is held on trust until settlement of the purchase, rather than simply being released due to the contract being unconditional. This protects you as much as possible in case the Vendor has difficulties settling the property, i.e. the Vendors are not able to discharge their mortgage on the property due to insufficient settlement funds. If the deposit has already been released (and probably had the Real Estate Agent’s commission deducted) it may be difficult to retrieve it back if you have to cancel the contract due to the Vendor’s default.

CONTACT US to organise an appropriate DEPOSIT CLAUSE for your SALE AND PURCHASE AGREEMENT.