In most Deeds of Sale, i.e. property sale legal documents, there will be a clause to the effect that the deposit required to secure the sale must be paid by a certain date. So far so good. This is ensures that the buyer takes the Deed of Sale that he has signed seriously, intends to go ahead with it and is not just stringing the seller along. If a deposit is not paid by the specified date, this automatically results in the buyer being in breach of contract and the seller then has the right to cancel the sale or take legal action.
Occasionally if the buyer is receiving a 100% bond, the deposit stipulation will be waived. However, by and large it is a useful means of ensuring that the buyer is genuine. On registration of the sale, the deposit will be paid to the seller, but the interest it has accrued is paid back to the buyer.
If the buyer’s offer to buy is dependent on his getting a bond, this can usually be stipulated in the offer to buy. If a bond is then not awarded to the applicant, this too can be grounds for cancelling the sale.
These arrangements are, however, often mistrusted by buyers who will go to great lengths to avoid fulfilling them.
Deposit to secure house purchase: Reasons for mistrust
One reason for this might be due to the fear of misuse of trusts by an estate agent. In practice, the trust system is very safe, especially as the law makes it impossible to pay over the cash unless transfer has taken place. No matter how desperate the need for cash may be on the part of the seller or the estate agent, no sums can be released to them until the transfer goes through.
Supposing, however, the lawyer himself is dishonest and absconds with some or all of the cash, is the buyer still protected? (This might be another reason for the mistrust of buyers.)
Yes, because the legal fraternity carries funds to protect clients in these instances. A delay may ensue, but any case of misuse by a registered member of the legal fraternity will be refunded. This is one of the reasons why it is very important when handling these large sums of money to deal with a qualified and registered lawyer.
Deposit to secure house purchase: The alternative
Should the buyer still feel wary of paying over a deposit, there is one fairly expensive alternative option open to him: he can get the bank to issue a bank guaranteed cheque in favour of the conveyancer’s account. The guarantee is a legal document and once the transfer has been achieved and the conveyancer presents proof to this effect, the bank is legally advised to effect the payment. If this is not done within 30 days, the sales agreement becomes invalid and the guarantee is withdrawn.
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