Deposit amount within contract

HouseBuyer77

Given you're so close to exchange I'd be surprised if this caused the chain to collapse (doubtful anyone would want to pull out over this issue when they're days away from exchange).

Though it's a bit poor of your solicitor to not have highlighted this earlier. Is it possible they've sent you their standard contract when they had meant to amend it to specify a 5% deposit?

I believe in such situations you hand over less than 10% but the vendor could still sue you for the whole 10% if you fail to complete. Perhaps this is expressed by saying the deposit is 10% in the contract with a clause somewhere else saying only 5% will be handed over in cash but the rest of the deposit is still payable if you fail to complete?

eddddy

lowfoon wrote: »

Thanks, however upon agreeing on the offer I would of thought that the deposit amount would have been put forward to the vendors by the estate agents - Am I wrong in thinking that?

If you are selling a property, do you typically presume that you will be received at least 10%?

We're getting into fine grain detail now - but there are many possibilities.

- Sale contracts say 10% deposit by default. The vendor's solicitor probably won't have discussed this with the vendor.

- Assuming the EA knew you needed a 95% mortgage there is no guarantee they told the vendor. (Many EAs would not tell their clients things that might worry them.)

- Even if the EA told them, many vendors might not understand the implications of a 95% mortgage - until their solicitor explained the risks to them.

eddddy

HouseBuyer77 wrote: »

I believe in such situations you hand over less than 10% but the vendor could still sue you for the whole 10% if you fail to complete. Perhaps this is expressed by saying the deposit is 10% in the contract with a clause somewhere else saying only 5% will be handed over in cash but the rest of the deposit is still payable if you fail to complete?

That's incorrect.

The vendor can sue you for all their consequential losses. They are not limited to the10% deposit - in fact, the amount is unlimited. It could be tens of thousands or even hundreds of thousands, in theory.

(Which is why they might be unhappy with a 5% deposit)

lowfoon

Well I guess the sense of security I'm looking for at this particular road hump, does not exist throughout the whole 'buying a property' transaction... I'll sit tight and see what happens...

McTaggus

I stumbled over this issue too myself, just this morning when I met my solicitor to hand over my ID. We have a 5% deposit too, plus a huge stamp duty bill, and this is the basis on which we had made our offer. Similarly had a panic when discussing the deposit with our solicitor when she said it was normally 10%, regardless of what you had agreed with the mortgage lender.


She said, however, that its absolutely normal to have 5% deposits and that she will raise it with the vendors solicitors just to make sure everything is aligned. She mentioned the normal process was to agree that 5% value from us would be passed up the chain, but that we will normally maintain liability for the full 10% plus additional costs if we were to retract following exchange.


Again, she said the only real issue that would likely to be of concern for the vendors would be if they were dependent on our deposit to fund their own. However, she said that shouldn't be an insurmountable hurdle for them, given we already know they have substantial equity in the property.


From her feedback, its not an abnormal situation, but that its more about cash-flow and making sure your vendors are aware of what will be moving up the chain. My solicitor is going to speak to the vendors this week to double-check, so probably worth just asking your own to do the same.


Good luck! Do let us know the outcome!!!!!

lowfoon

Thank you McTaggus. Sounds like we are exactly in the same boat right now!

HouseBuyer77

eddddy wrote: »

That's incorrect.

The vendor can sue you for all their consequential losses. They are not limited to the10% deposit - in fact, the amount is unlimited. It could be tens of thousands or even hundreds of thousands, in theory.

(Which is why they might be unhappy with a 5% deposit)

Fair enough, I may have remembered incorrectly.

Could it be something like you are just entitled to 10% regardless of why completion failed and regardless of any losses you suffered and then you can sue for losses on top of that (or for losses in excess of that)?

The other thing to bear in mind that along chains deposits are often tied up in equity so the deposit at the bottom just gets passed up the chain. As people tend to move up in price this means the deposit as a % reduces at each step.

I suspect they'll be a bit of frantic discussion amongst the solicitors in the chain if this 5% from the bottom thing hasn't already been realised, but should all work out

McTaggus

Just found this on an old post somewhere, which may be useful... wish I had read this before I had started!!!!


http://fidler.co.uk/blogs/legalmove/category/conveyancing-deposit/

McTaggus

Hi Lowfoon,


Hope things are going well. I contacted our sellers last night (we're lucky to be in direct contact with them) and they told us that it won't present a cashflow issue for them even if someone further up the chain requires 10%. They knew we were FTB on HTB mortgage guarantee, so had already factored that in when we made our offer apparently. Our solicitor is going to confirm the arrangement with their solicitor today - 5% cash deposit on exchange, but with guarantee to be liable for the further 5% also should we pull out after exchange.


Definitely worth speaking to your solicitor and, if you can, to the sellers to get some closure about whether its an issue or not sooner rather than later. Good luck!

lowfoon

Hi McTaggus,

Thanks for the update. We have had news back from their solicitors and they said the sellers is fine with reducing the deposit from 10% to 5% on the basis that the property they are buying will accept a deposit of similar amount. Although I am going with it for the moment, I don't quite understand where we stand here, and how this is any of our concern.

The fact is our mortgage agreement is 95% LTV, so we cannot possibly pay a deposit of anymore than 5%.