How binding is a contract

diving_moose

Hi,
Advice please on the following,
new house for sale by smallish building company local to me, basically the house is for sale but the builder does not want to sell until April, ( Obviosly something to do with tax ). This suits me fine and have made an offer and said we will wait till april to complete, he has accepted. Estate agents states everything will be set up from now till April and last thing on the arranged date would be for completion, she states that everything would be binding and that he would legally have to sell to us and we would have to buy it once everything has been arranged, The builder has stated he wants a 1000 pound deposit to be held by the estate agents so that if we pull out then we would lose it, why does he need a deposit if she has said its all legally sorted and that he would have to sell and we would have to buy.
Cheers Lee

ukmike

Untill you have exchanged contracts,nothing is legally binding.

david29dpo

Sounds like the agent is on about an exchange now with a delayed completion.

silvercar

CGT liability is triggered on the date of exchange not completion.

I would guess the estate agent will hold that deposit as evidence of your intention to exchange. Until exchange happens you could walk away, at least with a deposit held you have a financial incentive to stay with the purchase.

(Though if prices fall between now and April, you would want to renegotiate the price.)

Rafter

Suggest if you have any concerns you consult a solicitor.

You may want them to hold your deposit rather than an estate agent too as I think there are stricter rules about handling clients money by solicitors than estate agents.

R.

Jonbvn

Companies are not subject to CGT. However, they are probably delaying sale, for tax reasons (financial year end in April).

IMHO, a non refundable reservation fee of 1k seems like too much to me. Furthermore, house prices bewteen now and April are more likely to fall than rise. Therefore, I do not believe it would be a good idea for you.

The above notwithstanding, if you really like and want the house, then go for it. From what you have written, it would seem that the builder is suggesting you exchange now. It is quite normal to pay some money for a new build at exchange of contracts. 1k seems quite small in this regard (10% is quite comnmon).

HTH.