A deposit is a part payment of the purchase price payable by the Purchaser when signing the contract.
In New South Wales, the deposit is normally 10% of the purchase price unless the Vendor agrees to accept a different amount.
The deposit must be paid to the deposit holder by contracts exchange, unless the Contract specifies another time as agreed by the parties. If a cooling off period applies, the vendor generally accepts the deposit to be paid as follows:
To avoid being in default, ensure you pay the deposit around the time you sign the contract.
Ordinarily, the deposit holder is the real estate agent.
If there is no real estate agent or the agent does not operate a trust account, the deposit holder is usually the vendor’s legal representative.
The Vendor can terminate if:
This right to terminate is lost as soon as the deposit is paid in full.
If the Vendor terminates, the Vendor may also be able to sue you for damages and any deficiency on resale (if the Vendor resells the property within 12 months after the termination).
If you miss the deposit deadline, you should urgently let your legal representative know to request for an extension to the deadline with the Vendor’s legal representative. This is to minimise the risk of the Vendor terminating the contract.
Missing the deposit deadline can have serious consequences. Not only can the Vendor terminate the Contract, but the Vendor may also be able to sue you for damages and any loss on resale (if the Vendor resells the property within 12 months after the termination).
Depending on your and deposit holder’s preference, the deposit can be paid by way of:
To avoid being in breach of the Contract, pay the deposit to the deposit holder on or before the deposit due date.
If you are paying by cheque, deliver the cheque directly to the deposit holder and ensure you have sufficient evidence of when the payment was made.
If you pay by EFT or DEFT, ensure you keep records of the successful transaction.
Proper documentation is key to avoiding any disputes. When paying by cheque, make sure to get a receipt from the deposit holder. If paying electronically, ensure that you save the transaction confirmation and send a copy to the deposit holder immediately.
You should not rely on any directions or relaxations about payments that are contrary to the requirements of the Contract. If there are uncertainties, you should contact your legal representative for clarification.
If you are unsure about any terms in the Contract or need clarification on the payment process, you should seek legal advice. A legal professional can guide you on the correct procedures and help ensure that you comply with all contractual requirements.
Under the NSW standard contract, the deposit can be invested if you and the Vendor both tell the deposit holder to do so. Any interest earned is to be reinvested.
Under the NSW standard contract, any interest earned on the deposit investment after deduction of all charges and proper government taxes is paid to you and the Vendor equally.
The deposit holder may request for yours and the Vendor’s Tax File Number for the purposes of investing the deposit.
Disclaimer: Every property transaction is different, and the information provided may not be relevant to your circumstances. By using this site you agree that the information provided is for general purposes only and does not constitute legal, financial, or professional advice.
