An Article From Our Solicitor, Susanne Namrawi, Located At Our Narellan Office.
I have always made a particular effort to ensure my Vendors give me as much information as possible as to how they believe it will work when their home is sold. I want them to tell me where they see themselves living (do you need to find a rental or are you buying?), Do we need to match a settlement date or use the deposit? This information enables me to draft a contract suitable to the needs of our Vendor however, not all professionals are this concerned, and the consequences can be disappointing!
I had an enquiry recently from a Vendor who engaged another solicitor/conveyancer to sell their home. This Vendor signed a contract to sell their house, but the Purchaser did not settle in the end for reasons that are irrelevant for these purposes but what it is important is that the Vendor believed that as a result of failing to settle, the Purchaser forfeited their 10% deposit when the contract was terminated. Right? No, not in this case.
In this case this enquiring Vendor had no idea the Contract they signed had provided the Purchaser with the right to use a 5% deposit and the front page of the Contract was amended to reflect this reduced deposit. This meant that a 10% deposit was NOT forfeited by the defaulting Purchaser, the 5% deposit was. This Vendor told me that they ‘simply didn’t read’ the contract and wanted to sue the Purchaser for the balance of the deposit. Unfortunately, this reduced deposit was not dealt with by way of special condition which would normally be the case. Such special condition would ordinarily say the Vendor agrees to have 5% deposit paid on exchange and the balance of the deposit (being the remaining 5%) paid on settlement or termination of the contract and the 10% deposit would have remained noted on the front page of the Contract. This would have given the Vendor a right to sue the Purchaser on termination for the balance of the deposit. Unfortunately, as the 5% deposit was written on the front page as the deposit payable on this transaction and it was evident when the Vendor signed it (it wasn’t changed after the Vendor signed it) they were only entitled to the 5% deposit on termination of the Contract.
Accepting a reduced deposit must be dealt with adequately in the special conditions of the Contract to enable a Vendor to recover 10% of the purchase price in the rare case a Purchaser does not/ can not settle the matter. Make sure you always read the contract or have an experienced practitioner such as one of our solicitors read the contract before signing it even in the event you are selling!
This article was published on 13/02/23 and the information is valid only to the date of publishing. This article should be considered merely general and non-specific on the subject matter and is not and should not be considered or relied on as legal, advice. Meehans Solicitors is not responsible in the event this information is relied upon by the reader in the absence of specific legal advice.