Vendor wants us to release some of the deposit before completion

Findyourbacon

We're buyers and we're just about to exchange contracts - at the last minute, our vendor has requested that we release £10k of our deposit to him to allow him to finance his deposit on a rental property, after exchange but before completion. Naturally, we're talking to our solicitors about this, but has anyone heard of anything like this - or done anything like this?

What are the main risks and should we even consider it? Thanks

princeofpounds

There are two meanings of the word deposit. There is a deposit on a house for the purpose of a mortgage, which is what people normally think about.


Then there is a deposit on exchange, which is 10% by convention but is actually negotiable.


http://www.thisismoney.co.uk/money/mortgageshome/article-2656455/What-expect-exchanging-How-complete-property-purchase.html


So just be clear on that when you have a discussion with the solicitor.

Findyourbacon

Sorry if I wasn't clear - This is a portion of the exchange deposit that the vendor wants us to release to him - ie part of the 10% that will go to the solicitor.

dc197

Are you first-time buyers?
It's not uncommon to expect cold hard cash to be transferred from the buyer to the seller at exchange - this is the second type of deposit that princeofpounds mentions.
If you are not a FTB it is less common to exchange real cash at exchange, instead it is deemed to be held in the sale of your existing house.

What does the proposed contract say?
Normally it will say this:

2.2 Deposit
2.2.1 The buyer is to pay or send a deposit of 10 per cent of the purchase price no later than the
date of the contract.
2.2.2 If a cheque tendered in payment of all or part of the deposit is dishonoured when first
presented, the seller may, within seven working days of being notified that the cheque has
been dishonoured, give notice to the buyer that the contract is discharged by the buyer's
breach.
2.2.3 Conditions 2.2.4 to 2.2.6 do not apply on a sale by auction.
2.2.4 The deposit is to be paid:
by electronic means from an account held in the name of a conveyancer at a clearing
bank to an account in the name of the seller's conveyancer or (in a case where
condition 2.2.5 applies) a conveyancer nominated by him and maintained at a
clearing bank or
2.2.5 If before completion date the seller agrees to buy another property in England and Wales
for his residence, he may use all or any part of the deposit as a deposit in that transaction
to be held on terms to the same effect as this condition and condition 2.2.6.
2.2.6 Any deposit or part of a deposit not being used in accordance with condition 2.2.5 is to be held by the seller's conveyancer as stakeholder on terms that on completion it is paid to
the seller with accrued interest.


https://www.lawsociety.org.uk/Support-services/documents/Standard-conditions-of-sale-5th-edition/

princeofpounds

OK so it's effectively a matter of the custody of the exchange deposit then. I don't know the standard way to consider this, but I would imagine your lawyer will.


Vendor must be tight for money if they can't finance a rental deposit. Mind you, 10k is much more than the normal rental deposit.

pinkteapot

£10k for a rental property?

Do you mean one that he is buying? (Surely that's not for a deposit to rent a place!)

If it's one he's buying, his solicitor should be able to negotiate a lower deposit if he doesn't have the full 10%. In a chain, the FTB's deposit is passed up the chain, and each buyer adds a bit to it to make it up to 10% of their purchase price. However, if people don't have cash savings to do this, a lower deposit is often acceptable on exchange.

This might not be what's happening here - it's not really clear from the post. Your solicitor should be talking to his solicitor and sorting it out. Don't deal with the vendor directly on this - get your solicitor to find out what's going on and take their advice on what you should or shouldn't agree to.

Findyourbacon

Thanks for your advice - I'm not dealing with the vendor on this at all - this has come via our solicitor, and I have asked her to explain the risks - I just wanted to see if anyone had been through something similar.

G_M

Are you doing the conveyancing yourself?

If yes, stop! You do not know enough.

If no, ask your conveyancer for legal advice. That's why you are paying him.

Findyourbacon

No, we have a solicitor - as I've said - just seeing if anyone else has experienced this.

CLAPTON

Findyourbacon wrote: »

No, we have a solicitor - as I've said - just seeing if anyone else has experienced this.

I've had the situation where my buyer asked to pay only 5% rather than 10%

I asked my solicitor what their best advice would be : they said refuse: although the risk was small, I had nothing to gain but something to lose

G_M

CLAPTON wrote: »

I've had the situation where my buyer asked to pay only 5% rather than 10%

I asked my solicitor what their best advice would be : they said refuse: although the risk was small, I had nothing to gain but something to lose

That is a different issue.

You were asked to accept a lower deposit (5% instead of 10%).

OP is being asked for the deposit (or some of it) to be released early (ie not held by the seller's solicitor till Completion, but given to the seller to spend)