Failure To Complete - Can I Have My Deposit Back Please?
With banks and building societies restricting the number of mortgages to buyers there is a risk that people may find themselves unable to complete their purchase if they have not secured a mortgage offer or if the mortgage offer has lapsed between exchange and completion. The lapsed mortgage offer situation often happens when the purchaser has to wait some time for the property to be built.
The deposit is normally 10% of the purchase price, although that is a matter of negotiation between the seller and purchaser.
Traditionally the issue of deposits on the purchase of properties is regulated by a contract between the parties. Failing to complete the contract for the purchase of a property by the completion date agreed in the contract means the seller can serve on you a “Notice to Complete” and, after ten working days, can keep your deposit and cancel the contract.
So the deposit is lost and so is the opportunity to buy the property.
However it is not widely know that the courts can order a repayment of a deposit paid by a purchaser when it has been forfeited.
A recent Court case of Aribisala v St James Homes (Grosvenor Dock) Limited reinforced the position that irrespective of what the contract says a purchaser is always able to seek to recover the deposit if it has been forfeited.
The Court has the discretion to look at the justice of the case and what is fair in all the circumstances.
As deposits are usually part of conveyancing transactions it is important to understand the consequences of paying a deposit. The starting position for the Courts is that the deposit should not normally be returned.
What the Court will look at is how close the purchaser came to fulfilling the contract, what alternatives were put to the seller and how advantageous those alternatives would be compared to what is required under the contract.
In short therefore, refunding a deposit is a remedy only granted in exceptional circumstances and only then when the purchaser has done absolutely everything to try and resolve the situation. The moral of the story must therefore be if you enter into a contract make sure you have finances in place and that your mortgage offer is not likely to lapse before completion. If you do not, do not expect a huge amount of sympathy from the Court…
For more information or advice, contact Richard Bagwell on 01392 685382 or email richard.bagwell@foot-ansteys.co.uk
Thursday, 24 April 2008
