Overview

Contracts and deposits
Contracts for the sale of land will often require the buyer to pay a deposit on exchange of contracts. The deposit will usually, but not always, be 10% of the purchase price (see Why 10%?).

The deposit is paid to the seller's solicitor, who will hold it as either "stakeholder" or "agent" until completion (see Agent or Stakeholder? to find out what the practical differences are).

The contract will generally provide for the deposit to be retained by the seller in the event the buyer does not complete the purchase. In view of this, deposits are often seen to provide the seller with a degree of security, protecting the seller if the buyer fails to complete. The threat of losing its deposit is seen as an incentive to a buyer to comply with its obligations under the contract.

However, sellers may not always be able to keep the deposit, even when there has been a clear breach of contract by the buyer. There have been a number of recent cases where this point has been considered (see Can I have my deposit back?)

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