Seller asking for deposit as agent

QuickFeet

Hi hopefully someone can give their opinion on this.

We completed on our house sale a few weeks ago and are living with family until our new house purchase goes through. All searches are complete and the contracts are currently being drafted.

Our solicitors contacted us yesterday to inform us that the sellers are buying a new build and have been asked by the developers solicitor to hold the deposit as an agent as opposed to a stakeholder when they exchange contracts. This means the developer will get access to their deposit before the completion date.

The sellers solicitor have asked to hold our deposit as agent on exchange too which effectively means our deposit will be passed through to the developer of their new build before completion. This therefore poses a risk to us if the developer goes bust or if the sellers pull out of their contract losing our deposit. I gather that the NHBC scheme covers buyers if a builder goes bankrupt but we would still be reliant on recovering the money from the sellers.

Is this type of thing common? Is it a reasonable request and should we agree to it? Should we ensure anything specific gets added to our contract?

It doesn’t sit well with us at all considering our deposit would be 60K which is a lot to lose if things go pear shaped. Without a fixed address it’s also not ideal if we were to experience a delay recovering our deposit. Please let me know your thoughts.

stator

Once you've exchanged contracts they have to sell you their house, you've already paid for part of it, so you just have to pay the balance. If they try to back out (for whatever reason) you can force them to sell you their house through the courts, so you won't lose the money. They would have to move out, even if they have nowhere to go.
Do you have a mortgage to consider on the new house?
Are you selling your house as part of the chain?

steampowered

This doesn't sound right to me. Ask your solicitor for advice but I really don't see why you should be taking an unnecessary risk on your deposit.

If the sellers pull out, does that mean the developer would keep the deposit, and you'd be left to chase the sellers (who don't have any money)? That sounds risky to me.

stator wrote: »

If they try to back out (for whatever reason) you can force them to sell you their house through the courts, so you won't lose the money.

While this is true, the court process may well take longer than the Op's mortgage offer is valid for. And the mortgage offer may be withdrawn if there is litigation involved.

QuickFeet

Thanks for the responses, we are asking our solicitor for some advice today also.

I think it’s come about because from what I hear developers make you exchange contracts 28 days after reserving a property. So instead of being forced to rush the completion of the sale of their house in the next few weeks to pay their deposit, they will forward on our deposit and then have the luxury of dragging out the sale at their leisure until after Christmas.

It definitely seems like an uncessary risk and even if we were guaranteed to get our money back we’d prefer not to have to go down that route due to the complications you’ve described above.

QuickFeet

For anyone in future who is reading this in the same situation, we went back to the sellers and refused this.

We heard nothing back on that, and they asked to exchange contracts asap instead so we got the keys on the 5th January.