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. We suggest you follow these basic rules when it comes to paying a DEPOSIT on the purchase of a property:
Pay as small a deposit as possible. This is because if you end up defaulting on an unconditional purchase, you will forfeit the deposit paid but your immediate loss will have been minimised.
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. 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.
As of 1 June 2015, the KiwiSaver withdrawal rules were amended to allow eligible purchasers to withdraw KiwiSaver amounts to cover the payment of the deposit on a property, not just for utilisation at the settlement date. This has clearly opened up better access for those who have been saving their funds into Kiwisaver, rather than having readily available cash at hand.
There are documents required to be signed around the Kiwisaver Withdrawal for this process, and as part of this Prudentia Law would be providing undertakings to your provider. We are happy to assist with this process to help you access to deposit funds that may just provide you with the leg-up to get into your property.
Remember, it is important to understand that these withdrawals are only able to be used towards your purchase and must be returned to your provider if the property purchase does not proceed.
CONTACT US to organise an appropriate DEPOSIT CLAUSE for your SALE AND PURCHASE AGREEMENT.