I am acting in the purchase of a house – the buyer has not trusted the seller throughout; you know the case where the seller says he will move into temporary accommodation but then finds somewhere to buy and decides he will tie up the transactions.
It happens all of the time and I always tell my clients that it is unlikely that the seller will move if there is the chance that he can only move once! This is that type of case but with the added delay in that the house that the seller was buying as being sold by a deceased’s Estate and they needed to wait for the Grant of probate to move. There has also been some issue over wardrobes – I directed that one back to the estate agents! But as I said, my client has not trusted the seller throughout.
So we are now ready to proceed. I have sent the documents to my client for signing and asked him to transfer the deposit monies to me. Now those of us who do this job every day know that it is rare that clients change their minds between exchange of contracts and completion but for some reason, my client really does not trust the seller. I have explained to him what happens if completion does not happen once we have exchanged contracts, but he has got himself into a flap about the deposit monies. Initially, he just wanted me to reassure him that the deposit monies would not go to the seller direct – that was easy to do. But he now wants to know what happens if the seller’s solicitor has the deposit monies, exchanges contracts on the purchase of his new house and then does not go ahead. Despite all of my reassurances and how I have never known that to happen, my client is very concerned about it. And now I think about it, so am I.
So this is what happens on exchange – it is likely that I will hold the deposit monies to the order of the sellers’ solicitor. They will use that deposit monies to exchange on their related purchase and I will then be holding those deposit monies to be sent ultimately to the top of the chain for a house that my client does not believe the seller of the house he is buying really wants to buy. There is a real danger that my client could in fact lose his deposit monies…I know that he would then be able to claim the monies back from his defaulting seller but what if that seller has no other monies as his deposit (as is often the case) is in fact in the equity of his house.
It would be a real mess and I am at a loss to reassure my client that this is going to be alright other than to say that his concern does not happen – but what if his is the one case where it does? I don’t see what the seller has to gain by not proceeding but is it a risk or am I overthinking a scenario?
One Response
Luckily I’ve never seen this happen and hope I never have to.
Ways to overcome it;
a) simultaneous exchange and completion?
b) There is insurance for most things these days but is there insurance for a lost deposit?
c) Who wins the deposit first in a fight between your buyer client and his seller? I would suggest certainly that the deposit is held to order and does not disappear up the chain, at least there might be an element of ‘control’. I imagine that if there is a breach, a litigation solicitor will be instructed and there will be a fight over who gets the deposit. I might be entirely wrong but as if this is your clients money, would he will be entitled to a refund of his money. The sellers seller will need to sue the seller directly? Having said that, it would end up being tied up in litigation and there would no doubt be someone step in to prevent it being transferred to a client
d) Worst case scenario; the deposit is lost but you take the seller to court and win. You get an order for sale and effectively the property is repossessed? But then what if the property is mortgaged up to the eyeballs and there is still no money left – Important to keep an OS1 in place and a Notice.
Standard condition of sale; If the seller fails to complete in accordance with a notice to complete, the following terms apply; The buyer may rescind the contract and if does so, a) the deposit is to be paid to the buyer with accrued interest b) the buyer is to return any documents he received from the seller and is, at the seller’s expense to cancel any registration of the contract.
Having said that there are provisions also for a buyer rescinding and a seller keeping the deposit.
I think my brain just exploded thinking about it.