Lost Interest

goodies_2

I have recently gone through the dreaded house selling/buying procedure. It was long and drwan out, however we exchanged contracts between ourselves and and the vendor of our to be new property (not a new build) 2 months before we completed. We handed over our deposit on exchange of contracts, a considerable amount £85000. I followed up with our solicitor after completion to question where the interest on the £85000 had gone. I was informed that it had gone to the vendor. I find this very hard to swallow, it is quite a large sum of interest and I feel we should have been informed that we would have lost the interest on this amount. I believe we could have delayed the exchange of contracts and the interest would have been in our pockets. Can any one advise on the legalities on this

thesaint

The deposit was to secure the sale, why would you receive interest on money that was no longer yours?

djm1972

Ouch! I've thanked you for that post as it's something to bear in mind for the future, and something i'd not considered - I'm about to pay a deposit of £20,000 or so.

I'm not really sure if there's anything you can do about it now though other than chalk it up to experience, but if you've got to do it to secure your purchase whilst waiting for your buyer then I suppose it's just another of the costs involved (albeit in lost interest rather than out of pocket).

silvercar

if you exchanged on your sale and purchase at the same time, some of that money would have been your purchasers deposit passed up the chain so I can't see that you would be entitled to the interest.

At that level of purchase I negotiated a 5% deposit.

Generali

I'm not an expert but I thought that money like this was held in an Escrow account - the funds can't be placed in the money market by the bank so they attract no interest.

pollyanna24

I would have assumed that as the money was not yours anymore, you simply would not have received interest on it.

Doozergirl

The deposit is given to the vendor to secure the sale, therefore it's their money.

However, I think that Generali might be right regarding the Escrow account. I've never seen any interest on a deposit, whether it be mine or a purchasers.

benood

I believe that your solicitor holds the cash in their client monies account on which they don't earn interest (or very little) - basically the bank takes advantage as usual - they have the £85k interest free and use it to secure lending (of probably £2m!) at XX%.

Generali

benood wrote:

I believe that your solicitor holds the cash in their client monies account on which they don't earn interest (or very little) - basically the bank takes advantage as usual - they have the £85k interest free and use it to secure lending (of probably £2m!) at XX%.

If it's client money you can't place it in the money market so it doesn't earn interest for the bank according to the treasury dept at Big Bank Ltd where I work. As a result, it's very unlikely that the bank is giong to pay interest to their client and thus make a loss!

deary65

The actual law on this matter is, an agent holding money in escrow cannot profit from their position as a fiduciary (trust). Of course, whether they do or not is an other matter.

goodies_2

I should have mentioned that previous to the deposit paid on exchanging of contracts, I had agreed to pay £10,000 and to enter into a lock out agreement to secure the sale of this property. I would certainly have held off the exchange of contracts if I had known that I would have lost out on the interest. Certainly one to remember for the next time.