In the world of property transactions, the language can often seem complicated. But don’t worry, we at Perth Legal Property and Settlements are here to guide you through this process.
Today we’re shedding light on deposits and defaults in conveyancing, breaking down the jargon into simple, easy-to-understand terms.
The Role of the Deposit during the conveyancing process
Picture your deposit as the key that unlocks the door to your property transaction. It’s the initial payment you make when signing the offer and acceptance form. This payment goes to the Seller’s Agent (the real estate agent), the Seller’s Representative (settlement agent), or directly to the Seller if they haven’t appointed an agent.
But what happens if the cheque for your deposit is dishonoured, or you don’t pay the full amount as required by the contract? Picture the seller knocking on your door, giving you 48 hours to rectify the situation. If you don’t comply, they have the right to terminate the contract.
What about earning interest on your deposit? Provided it’s permitted by law, you can request that your deposit be held in an interest-bearing trust account, allowing you to earn interest, less any bank fees.
When Special Conditions Fail
Imagine you’ve found your dream home, but your home loan application falls through. In such cases, the contract doesn’t proceed due to the failure of a condition. The good news? You’re entitled to a refund of your deposit, depending on the terms of each condition.
What Happens in Case of Buyer Default?
Let’s say your contract has become unconditional, but for some reason, you default. In this scenario, you forfeit your deposit. However, if your deposit exceeds 10% of the purchase price, the seller can only retain 10% and hold the rest as an instalment pending re-sale of the property. Any surplus after applying the instalment to court damages must be returned to you.
What if the Seller Defaults?
If the seller fails to comply with the contract, they must promptly repay the deposit, any other moneys paid, and you’re entitled to an interest rate of 9% from the date it was paid until it’s repaid.
The Deposit at Settlement
Picture settlement day. The real estate agent deducts their selling fee and expenses related to the sale from the deposit. The remaining balance is usually provided to the seller’s conveyancer for disbursement. If there’s a balance owing, those funds will be paid by the seller’s conveyancer to the real estate agent at settlement.
Claiming the Deposit
In the event that the contract is terminated, a party can claim the deposit by serving notice on the other party and the holder of the deposit, providing proof of entitlement. If there’s a dispute about the deposit, the holder of the deposit may seek legal advice, commence interpleader proceedings, and deduct the cost from the deposit.
Remember, we’re here to help you navigate this maze. If you have any questions, don’t hesitate to contact our office. At Perth Legal Property and Settlements, we turn the complex world of conveyancing into a pleasant and straightforward experience.