Early release of deposit monies request from vendor

Hi guys,

We bought a house in a VIC metro suburb from an Auction as our PPOR last Saturday. The vendor is a fairly old couple and they are moving to a retire village nearby. Since they've been living in that house for more than 30 years, there is no mortgage on the title and the vendor has control of the title deed.

Today we got an email from our conveyancer saying the vendor is requesting an early release of the 10% deposit money that we paid to the RE agent last Saturday. Talked to my conveyancer this morning and she advised that we could lodge a caveat to prevent anyone dealing with the title except the purchasers which are us. But the caveat will cost us ~$140.

My understanding is, the vendor is not permitted to sell the property to someone else at this stage, because the contract has been signed and gone unconditional after the auction, although the vendor has control of the title as there is no mortgage on the tile.

If the answer is yes, it will not make any difference for us when the vendor get the deposit and a caveat will not be necessary.

Appreciate any thoughts!

 

I would listen to the legal advice, take a caveat out, get the vendor to pay the $140 and release the deposit early which will help them which is also a nice thing you can do.

I would take the caveat out because behind every nice old couple lurks children etc etc and anything is possible. If there is a layer of protection available and advised, i would take it. Yes it might be overkill but if things went sour (although unlikely) you'll be more than glad you had done it. Just what i would do.

 

Thanks for the prompt reply. I may get a quote of the caveat first then past the cost to the vendor before I say yes of the early release.

Appreciate your help again!

 

The issue with releasing the deposit, even if it goes from one REAs trust account to another REA or solicitor trust account for the vendor's next purchase is a scenario where the vendor's next purchase goes unconditional &/or settles OK and your purchase does not complete for some reason. How do you get your deposit back???

The vendor may pass away between exchange and settlement. The vendors of the property your vendors are buying may take the deposit to use on another purchase. It gets very messy trying to get your deposit back. But it is common practice even though I'd advise against it.

Lodging a caveat won't get your money back. But you'd do this or take out Title Insurance for a different reason unrelated to releasing your deposit.

As an alternative, perhaps suggest that your vendors use a Deposit Bond for their next purchase rather than using your cash deposit?

 

no problem. Your probably right and its going to be fine. But i always like to plan for the "what ifs"...

 

@CraigD

title search/ lodge caveat / Produce title at vendor's solicitor/ release the deposit!

 

Don't do it. This is why conveyancers are a bad idea.

What if the vendor dies before settlement?

 

Unfortunately this is a very common clause and should have been highlighted to you as part due diligence by your conveyancer before the auction. One way to avoid it would be to settle early if both parties are ready.

 

I don't think its a clause in this case? I just think they are just requesting it.

 

If they are seeking to amend the contract after it is binding on both parties then there is no advantage in doing so for the purchaser but a significant disadvantage.

 

Could ask for 15k reduction in price to allow....hehe yes,,yes.. i'm evil .

 

@Propertunity is right and personally you are entering into some risk for no further gain.

I would not do it.

 

Yeah that's not going to happen after an unconditional exchange Also $15K is hardly compensation for something that actually goes pear-shaped. As TerryW said - don't do it.

 

It could happen from savings.

But I agree with you its just not worth the risk.

 

Ahhh...I just assumed that was the case since it had happened to me.
If its not already in your contract then it absolutely is a no brainer...don't do it...why take the risk unnecessarily.

 

Talk to them (possibly through their solicitor) and tell them why you would prefer not to - for all the good reasons here. Let their legal team come up with some reasons and methods why you can feel comfortable and they can get some or all of the deposit - if they can't cover your concerns enough, don't do it, but at least it's not you who is saying "no" but rather it's their legal team who is failing to deliver an appropriate method!

 

If you do nothing, the deposit will still be released 29 days after you were served with the deposit release request. Get a caveat - I strongly advise all my clients to do so in these circumstances. A caveat is your only leverage to get your deposit back if settlement doesn't occur.

 

I agree with Terry. DO NOT agree to it. DO get a caveat. $140 is peanuts.

Kate is correct about the 29 day thing. But seeing as most auction contracts are 30 days, it almost doesn't matter.

I'd get a caveat and then instruct my legal rep on day 28 day decline the request to release deposit earlier. Not enough time for them to argue with you about it before settlement happens naturally anyhow.

No good deed goes unpunished. I'm sure they are nice people, but you are not buying a $1 KitKat at Woolworths here. There are big bucks at stake for you. Just remind yourself how many times you had to wake up to an alarm clock up and dress up in a work outfit and go to work to gather that deposit money. It would be most unfortunate if the vendor did not play nicely. You are correct, they can't sell it to someone else, but defending something in court is not free. A $140 caveat is a no-brainer. Get it done.

I am disappointed to hear that by the sounds of it, your legal rep has focussed on the fact that the caveat will "cost you" $140, compared to what you stand to lose if the vendor doesn't choose to play honourably. I would absolutely expect my legal rep to say to me that they feel that getting the caveat is a no-brainer and strongly advised, and to explain to me the reasons why without explicitly being asked (and to explain to me how much I stand to lose if I did not get the caveat and the vendor did not play nicely).

 

Just as a side-note, this is an example of why I am not a fan of contracts of sale that have a settlement period that is longer than the finance/buildingpest period plus 28 days. Going for long settlements essentially puts you in the position that if the vendor asks for early deposit release, unless you have a good reason why they can't have it, there is absolutely nothing you can do. It'l happen. They'll get the deposit early. Poof. Goodbye money and cross fingers so tight that they turn white that all goes smoothly through to settlement.