Question: We’re selling our London house for £2 million to cash buyers who say they don’t need a mortgage or a survey and want to exchange in three weeks — but they don’t want to complete until December.
They’ve offered us a 10 per cent deposit, which we’d like to invest in equipment for a small farm we own after contracts are exchanged. We don’t want to wait until completion in midwinter. Can we use the deposit in this way?
Answer: You may well have a problem here. The usual process is that your solicitor will hold, on your behalf, the deposit paid by the buyer. Generally, the Law Society standard conditions of sale, which govern most contracts for the sale of residential property, say that the seller’s solicitor should not part with the deposit until completion.
Thus your solicitor should retain the deposit of £200,000 paid by your buyer upon exchange of contracts in their client account and should not release the funds to you until completion takes place in December. However, there is an exception: the deposit can be used prior to completion if it is used as a deposit on a related purchase of a residential property.
In your case your buyer must agree to the standard conditions being amended so that your solicitor can pass the deposit on to you early and prior to completion.
Your buyer is at risk if you fail to complete but have spent the money and can’t return the deposit.
Do not be surprised if the buyers’ solicitor advises against the deposit being used in this way. You will have to convince the buyer you are absolutely trustworthy.
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Fiona is a partner in the residential real estate team at Thring LLP (www.thrings.com).
These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.