Is a deposit mandatory on Exchange of Contracts ?

[Deleted User]

I'd always thought that this was the case but it seems not so.  We are selling our late mother's flat and accepted an offer way back in October last year.  The lady buying the flat also accepted an offer on her house.  Her buyer appears to be as evasive as possible.  He took over two months to get his finance together....money from here, money from there, some from overseas, commercial loan here and there.  Eventually exchanging contracts on Jan 2 with a completion date of Jan 29.
Which came.   And went.   New date of Feb 5 for completion.
Which came.  And went.  New date of Feb 19 for completion.   However we have issued a Notice to Complete but ...
...but contracts were exchanged without any deposit being made and it still has not appeared.  

The whole thing stinks to high Heaven.  
Should our solicitor have agreed to exchange without a deposit in place without consulting us first ?
Shouldn't the ladies buyers' solicitor carried out due diligence as to the funds, proof of ID, source and provenance of the funds etc of her buyer ?
Shouldn't her estate agent have carried out due diligence that funds were in place ?

davidmcn

Not sure what you mean by "it still has not appeared". Do you mean the contract says there is to be a deposit? When you went through the contract with your solicitor before exchanging, what did they say about the deposit? No, it isn't mandatory for there to be any deposit, though is normal in England & Wales (assuming that's where you're selling), but it's up to the parties whether and how much the deposit is to be.

Buyers' solicitor will have checked ID before taking on a client, they don't have to check whether they've got funds. What did your estate agent say about the buyers' funds? Again, they don't have to check whether they've got funds arranged, though it is fairly normal. There are limits as to how sure they can be - you can have money in the bank but then decide to spend it on something else, or have a mortgage in principle but later get rejected, etc.

N1AK

[Deleted User] said:

Should our solicitor have agreed to exchange without a deposit in place without consulting us first ?

No. Are you sure that nothing communicated prior to exchange mentioned that their would be no deposit? Is this a "cash" buyer and are not exchanging/completing when full payment is made? Are you sure you've actually exchanged?
I'd give your solicitor a call and ask them to outline the current position in detail just in case any details have been misunderstood; normally you haven't exchanged until the deposit is paid even if all paperwork is signed by both parties.

eddddy

londonman69 said:

Should our solicitor have agreed to exchange without a deposit in place without consulting us first ?
Shouldn't the ladies buyers' solicitor carried out due diligence as to the funds, proof of ID, source and provenance of the funds etc of her buyer ?
Shouldn't her estate agent have carried out due diligence that funds were in place ?

A deposit isn't mandatory, but it's very sensible to have one. Your solicitor should have confirmed with you that anything less than a 10% deposit was OK with you.

But even if a 10% deposit wasn't paid, it's likely that your contract says that your buyer is still liable for the 10% if she doesn't complete - i.e. you can sue her. (And if she has a house, it suggests she has assets.)

An EA should do a financial assessment of a buyer, and give feedback to the seller. Then it's up to the seller whether they proceed. (e.g. If the buyer gives a flimsy explanation of where the money will come from, the seller is free to accept that flimsy explanation.)

Similarly, a buyer can instruct their solicitor to exchange contracts before the buyer has all the funding in place - but it's obviously at the buyer's risk. For example, the buyer might say they've arranged a commercial loan. (Although I'm not sure how that works with the tighter Anti-Money Laundering rules. As the solicitor has to check that the funds are 'clean'.)

knightstyle

Are you absolutely sure contracts were exchanged by all parties?  If so you are entitled to your additional expenses caused by the delay in completing.
I would be pushing my solicitor for a clear statement of facts in writing at the moment.
Some buyers simply do not understand the law of how this works.  We have had a buyer trying to reduce the price after exchange!

AdrianC

Are you expecting the money to be transferred into your bank account at exchange...?

It doesn't work like that. In a chain, especially, it's all on a solicitors'-honour promise of passing upwards.

foxy-stoat

If the buyer didnt complete on 29th January why hasnt your solicitor suing for costs?

[Deleted User]

Thanks for all the replies and clarification.
1) This is from an email sent to me by our solicitor which makes it pretty clear that a 10% deposit was paid and/or expected.   Mrs X's Buyer is buying her property at some £xxx,000 and paid a 10% Deposit on exchange
Which we now know not to be the case. 
2) No, I'm not expecting the money to appear in my bank account.
3) Additional costs/loss of interest are accruing daily and being added to the completion 'bill'.
4) I've already emailed our solicitor for an explanation of our concerns especially the absence of the 10% deposit.

AdrianC

[Deleted User] said:

Thanks for all the replies and clarification.
1) This is from an email sent to me by our solicitor which makes it pretty clear that a 10% deposit was paid and/or expected.   Mrs X's Buyer is buying her property at some £xxx,000 and paid a 10% Deposit on exchange
Which we now know not to be the case.

Woah, hold on... That says nothing about whether there's a deposit between Mrs X and you. Mrs X is buying from you? So "Mrs X's buyer" -> 10% -> Mrs X. -> (?%) -> You

GDB2222

So, you signed a contract requiring a 10% deposit, and so did your lady buyer. Only, the deposit was not paid on exchange. Is that what happened? 

The reason is that your buyer was relying on her buyer to provide most of the deposit, which was then to be paid to your solicitor to hold. Only her buyer did not pay his deposit.

Did you really only find out about this when completion failed to take place?

You have presumably asked your buyer to provide the 10% deposit out of her own pocket, but she’s a bit short of the readies. I feel very sorry for her, as she’s clearly been badly misled. You have also been let down, but at least you have the property to resell, plus a legal suit for the 10% against your buyer, who may or may not have the money to pay you.

[Deleted User]

The good news is that our buyers' solicitors now have the deposit for the sale of her house and that the deposit for her purchase of our flat will be with our solicitor later today.  
So if her buyer doesn't come up with the readies on Feb 19 he loses a large chunk of money.  A part of me wishes this to happen.
I feel sorry for the lady as she is in her 80's. She was all packed up and ready to go Jan 29.