Vendors pull out AFTER exchange of contract

mystic_trev

GDB2222 wrote: »

Just to look on the black side for a minute, the OP's deposit will have been used by the vendors as their deposit on the place they are buying. If the vendors have defaulted on their purchase, then they have lost their (ie the OP's) deposit. I was really surprised to find that this is how the great British house purchase machine works. In fact, I am surprised that it works at all.

Not an expert, but I don't believe it works that way. If it did the Vendor could be in very serious trouble for obtaining money by deception.

maninthestreet

mystic_trev wrote: »

Not an expert, but I don't believe it works that way. If it did the Vendor could be in very serious trouble for obtaining money by deception.

The law that applies will be contract law, not criminal law.

Imlovingit_2

Hippychick wrote: »

Usually to exchange contracts you only need to pay your solicitor a 10% deposit. If you are having a 25% deposit say then you pay 10% to exchange and the remaining 15% before you complete.

We did it this way as well in order to maximise our interest on the savings rather than have the money languishing in our solicitors accounts for 4 weeks.

Oh is that how it works, I suppose that our 10% deposit is the equity we have in our current property then because we havent physically gave them anything yet. However we will transfer it well before we need to

But could this have happened to the OP, it has come to the day before completion and all of a sudden they havent got the necessary extra funds to complete on their next purchase, therefore they have no option but to stat put

JayZed

GDB2222 wrote: »

Just to look on the black side for a minute, the OP's deposit will have been used by the vendors as their deposit on the place they are buying. If the vendors have defaulted on their purchase, then they have lost their (ie the OP's) deposit. I was really surprised to find that this is how the great British house purchase machine works. In fact, I am surprised that it works at all.

No, surely that can't be right. The OP's deposit will be held by his [her?] solicitor - the vendors won't have access to it until completion.

peachyprice

GDB2222 wrote: »

Just to look on the black side for a minute, the OP's deposit will have been used by the vendors as their deposit on the place they are buying. If the vendors have defaulted on their purchase, then they have lost their (ie the OP's) deposit. I was really surprised to find that this is how the great British house purchase machine works. In fact, I am surprised that it works at all.

Sorry, that doesn't make sense, OP's solicitor still has their deposit, they didn't complete so it was never sent to the vendors solicitor.

Are you saying that now OP's solicitor has to give their money to the vendors solicitor, even though it's the vendor that has pulled out?

That can't be right

GDB2222

As you guys don't believe me, let me give an example - not the same as this case.

A is a FTB, buying a house for £100k from B. His deposit is £10k, which he gives to his solicitor on exchange of contracts.

B is buying a house for £120k from C. His deposit is £12k, but he only needs to give £2k to his solicitor on exchange of contract, as he can use A's deposit to make up the difference.

It's in the standard conditions of sale that everyone uses. At least, that's how it was explained to me by my solicitor.

I am happy to hear from people. Who has traded up here, and how much cash deposit have you had to find (not talking about the equity in your existing house)?

Gwhiz

Spot on GBD222. The money moves up the chain staying with the relevant solicitor.

GDB2222

Thank you.

I don't have a copy of the Standard Conditions, but this extract from the Law Society's explanatory note on an earlier copy makes the point pretty clearly, and I think it is almost universally done.

Condition 2.2. 2. adopts the practice (dealt with by Law Society formula C) whereby a seller who receives a deposit on his sale contract may use it in paying the deposit on his purchase contract. Cases in which the deposit is used in that way will form an exception to the general principle that the seller's solicitor holds the deposit as stakeholder (see condition 2.2.3).

You can see it here:http://www.lawgazette.co.uk/news/standard-conditions-sale-introductory-note

Welshwoofs

peachyprice wrote: »

Sorry, that doesn't make sense, OP's solicitor still has their deposit, they didn't complete so it was never sent to the vendors solicitor.

No, deposit is held with the vendor's solicitor (part of vendor's offer is to 'pay back' our deposit plus interest accrued whilst it was held with solicitors) but it doesn't get released to them until completion. So I'd guess there's nothing stopping a vendor counting the deposit their solicitor is holding from the buyer towards any deposit they have to pay on a purchase property.

peachyprice

Well that's just bloody awful.