Conveyancing trap watch out
Homebuyer leaves vendor out of pocket
ANDREW is keen to purchase Kay’s property and after obtaining pest and building reports, he wishes to proceed.
Andrew’s solicitor obtains and reviews the contract.
Andrew informs his solicitor that he does not have the usual 10% deposit available and enquires as to whether he can pay a 5% deposit.
The vendor wishes to secure the sale as soon as possible and reluctantly agrees to accept a 5% deposit.
The contract includes a “special condition” to the effect that if Andrew defaults under the contract, the vendor can claim the full 10% deposit.
Andrew pays 5% of the purchase price, being $30,000, to the Real Estate Agent, as deposit holder and contracts are exchanged.
On the scheduled day of settlement, Andrew does not have the balance of the purchase price available. Andrew advises the vendor on a number of occasions during the course of the following month that he will have the funds available “any day now”.
The vendor’s conveyancer serves a “notice to complete” on Andrew, giving him a final 14 days to raise the funds.
The 14 days expire and when Andrew is still unable to come-up with the funds, Kay terminates the contract and makes a claim on the deposit.
After receiving legal advice, Andrew authorises the release of the 5% deposit, but resists Kay’s demand for the further 5%, claiming that the clause is invalid because it is a “penalty”.
Kay retains a solicitor and is informed that given the wording of the “special condition” there is a significant risk that if she were to commence litigation to recover the additional $30,000, she may not be successful.
If Kay had only accepted a 10% deposit or had asked Andrew to obtain a 10% “deposit bond”, she could have retained an additional $30,000.
If you would like Manny to address a particular legal issue, send your request to manny.wood@ticliblaxland. com.au or call him on (02) 6648 7487.
Vendors beware of accepting deposits of less than 10%.