Release deposit to vendor?

[CHAOS]

The vendor has requested we release the deposit (currently in trust) to them. We are 6 weeks from settlement. I have been advised to allow as their is no mortgage on the property and sufficient equity.

Am I correct that there is a huge risk to me by allowing this. For example the vendor chooses not to settle and as they have the deposit I will then have to fight them through the courts to get the deposit back.

They agreed to a 90 day settlement instead of 60. So part of me feels I should be accommodating in return (although if they said no to 90 days that wasn't a deal breaker for us). The other part is saying you I have to look after my own interests.

2 cents welcome

 

[Propertunity]

Am I correct that there is a huge risk to me by allowing this. For example the vendor chooses not to settle and as they have the deposit I will then have to fight them through the courts to get the deposit back.

This is a risk certainly, especially in the event of the death or incapacity of one of the vendors.

 

[DaveM]

If you release the deposit, then as a precaution lodge a caveat on the property first.

You wouldnt want your cash and the property being used to, say, pay out or be used as security for another finance transaction (eg business gone bad).

 

[CHAOS]

The vendor is in his eighties.
Does a caveat also protect you if the vendor dies?

 

[Terry_w]

a caveat notifies the world that you have an interest in the property. This can allow you to take priority over others who may have a claim. But if the old vendor dies you will be tied up for years possibly. I would suggest a clause which allows you to rescind the contract if he dies. You will then be able to get out of the contract but still have to recover your money.

Legal advice would be not to release.

 

[CHAOS]

a caveat notifies the world that you have an interest in the property. This can allow you to take priority over others who may have a claim. But if the old vendor dies you will be tied up for years possibly. I would suggest a clause which allows you to rescind the contract if he dies. You will then be able to get out of the contract but still have to recover your money.

Legal advice would be not to release.

Thanks Terry. I also don't think I should release.
Now I am more worried that he may be ill. I do not want the contract rescinded if he dies. I want this property! Unfortunately not wealthy enough to hand over a cheque and settle early.

 

[Terry_w]

Thanks Terry. I also don't think I should release.
Now I am more worried that he may be ill. I do not want the contract rescinded if he dies. I want this property! Unfortunately not wealthy enough to hand over a cheque and settle early.

Ifyou have already entered the contract then there is no benefit to you releasing early - just risk

 

[HotRod]

Could the price be renegotiated to account for this risk?

e.g. If the deposit is $20K then release it but the purchase price gets likewise reduced $20K.

You might want to ask for a bigger drop in the purchase price if you perceive the risk to be high.

 

[keithj]

Why does the vendor want early release of deposit ?

Last month I sold one & requested early release of part of the deposit for payment of land tax. The purchaser agreed.

 

[HotRod]

Why does the vendor want early release of deposit ?

Last month I sold one & requested early release of part of the deposit for payment of land tax. The purchaser agreed.

I don't think it really matters. He could say one thing and it might be another. Maybe he wants to flee the country and go live in Thailand or pay off his son's drug debt.

The risk is still the same for the purchaser.

 

[RPI]

If there is a commercial reason to do so then you balance it up with the risk. We do this from clients continuously and I often do this personally.

If you can release a deposit to secure a 12 month settlement it can often be the difference between getting over the line or not. Often owners are not in need of the entire amount of cash now, but $20-$50k is all they need.

 

[CHAOS]

No reason given.

It is a section 27 statement - saying that as there is no mortgage and no caveat lodged they are requesting release of the deposit. I rang the REA to see if he knew of any reason. He said they are releasing a lot of deposits and it seems to be the in thing for solicitors and is becoming more and more common. REA's are happy to support this because it means they can get paid before settlement.


I haven't spoken with my conveyancer yet but I'm not happy with the cover letter saying "that in the circumstances it is appropriate for you to authorise release of the deposit monies".

 

[HotRod]

If the contract is water tight, why do it?

If you are doing them (vendor and agent) a favour, then they can do you a favour.

That seems fair.

But them getting you do do something that exposes you to the risk of losing your deposit and not being duly compensated in return?

That seems unfair.

 

[Peterw]

From my time living in Victoria, it was common for deposit to be released to the Seller, when the sale was unconditional. I believe a notice is served advising that it is being done. Also, my understanding was, that once the seller had signed the transfer form, the sought they pass away, their executor could act on that signed transfer and settle. Happy to be corrected.

 

[Propertunity]

.... I do not want the contract rescinded if he dies. I want this property!

If the vendor dies, the contract normally collapses anyway. Nothing you can do about this except hope the beneficiaries stitch the sale to you, back together.

 

[Terry_w]

From my time living in Victoria, it was common for deposit to be released to the Seller, when the sale was unconditional. I believe a notice is served advising that it is being done. Also, my understanding was, that once the seller had signed the transfer form, the sought they pass away, their executor could act on that signed transfer and settle. Happy to be corrected.

Yes this is true, but an executor doesn't have power to act unless appointed by the court, ie probate, and this could be 6 to 12 months away.

 

[CHAOS]

If the vendor dies, the contract normally collapses anyway. Nothing you can do about this except hope the beneficiaries stitch the sale to you, back together.

Its going to be a long 6 weeks!