Solicitor wants 10% deposit?

Major

I am just about to purchase a house for £238,000.00 and the solicitor wants a 10% deposit prior to the completion date. If the date of completion is 6 weeks (conservative estimate) away then in simple maths the solicitor will get 6 weeks of interest i.e. (£23,800.00 + 4%(again conservative estimate on interest rate)) = £952.00 divided by 52 weeks x 6 weeks = £110.00.

So the questions:

1. Is this fair?
2. Can I ask for the interest to be paid back?

courtjester

This 10% deposit is the consideration payable to the vendor on exchange of contracts for the purchase of their property by you and is a legal requirement for property sales - any interest due on monies held by their solicitor would go to the vendor, so forget any option to ask for the interest back!

You might be able to negotiate a lower percentage for the deposit with agreement between the parties, say 5%, as the amount itself is not fixed in law, but 10% is usual.

Rachman_2

Major, the solicitor must account for interest at that level. The Solicitors Account Rules and the Law Society guide to Professional Conduct require it.

also, if you are concerned, why not tell the solicitor that you are happy for an obligation to pay 10% deposit at exchange but that you will only put him in funds for say the stamp duty - most solicitors will understand why - in effect if you fail to complete then the seller only has a smaller amount and has to sue you for the remainder, which is not the same as you trying to get it back off them....

you will find more detail here

http://www.lawsociety.org.uk/professional/conduct/guideonline/view=page.law?POLICYID=714

As for the money being held by sellers' solicitor for seller's account and whether or not interest payable on that sum is for buyer or seller's account - that's negotiable - but often the amounts being negotiated over are not worth the effort.

[I have done this on every single house purchase I have made]

virgo149

If you check your small print on the contract you should have been given, it should mention you will have to pay 10% if you pull out after exchange anyway. So if you negotiate a lower deposit the full amount would still be paid if you did have to pull out. Not sure if it is normal or not on 'used' property exchanges (i've never had to do it). Is it the vendors just being very cautious? BYW why is it taking so long between exchange and completion?

Jem8472

I just got the info from my solicitor and I was wondering is this 10% deposit paid from the mortgage? because I dont have anywhere near that amount of money laying about.

toontastic

If you don't have the cash then basically from what I know (which ain't much) you can try and negotiate a smaller amount or exchange and complete on the same day. If you going to do this though then you'll need to tell your solicitor so they can make sure the other party are happy to do this.

silvercar

if you are selling as well as buying, the 10% passes up the chain, so the 10% you receive from your buyer becomes part of the 10% you pay to your seller.

If you are not selling then you either need to arrange for the mortgage company to release some funds on exchange (some will; most won't) or arrange to pay a lower deposit (most people should accept 5%).

The other option is to use some of the money you set aside for stamp duty and fees as you will get access to your full mortgage amount on completion.

roger56

toontastic wrote:

If you don't have the cash then basically from what I know (which ain't much) you can try and negotiate a smaller amount or exchange and complete on the same day. If you going to do this though then you'll need to tell your solicitor so they can make sure the other party are happy to do this.

10% is a typical amount at exchange of contracts (typically 4 weeks prior to completion). You could try to negotiate a smaller amount, I've accepted 6% in the past, but it's up to the seller. Your solicitor will need the agreed money in his/her client account before exchange can go ahead. Once contracts are exchanged, backing out will cost you.

Rachman_2

roger56 wrote:

10% is a typical amount at exchange of contracts (typically 4 weeks prior to completion). You could try to negotiate a smaller amount, I've accepted 6% in the past, but it's up to the seller. Your solicitor will need the agreed money in his/her client account before exchange can go ahead. Once contracts are exchanged, backing out will cost you.

As I said, the way to resolve this one is to say, I will pay you 1% (or whatever) and I will have the obligation to pay you the 10% if we fail to complete.

We had 40% deposit for the current house, I still only put down 1% as deposit - why take a risk you don't have to ?

Your solicitor will want to know you are good for the completion monies and the stamp duty and fees, mine has no problem because he knows me and how i work - I doubt a conveyancing bucket shop will do the same.

illmonkey

I just said we only have 5% and they accepted that.

Intrest wise, i think the firm i work for gives you the intrest back.

Jem8472

this just strikes me as odd. I am getting a 100% mortgage because I done have any serious cash for a deposit so how come I have to find this sort of money? I would have thought as we were getting a 100% mortgage the lender would pay that for us or something.

But as there is no chain with what we are buying the solicitor is going to ask if we can exchange and complete on the same day.