EXPERIENCE. TRUST. SOUND ADVICE.
Buyer’s deposit obligations
In Queensland, if you, as the Buyer, enter a standard contract of sale for the purchase of a house and land (using, most commonly, the ‘REIQ Contract for Houses and Residential Land (15th Ed)’ or in respect of the purchase of an apartment or townhouse, the ‘REIQ Contract for Residential Lots in a Community Titles Scheme (11th Ed)’) (‘Contract of Sale‘), you will generally be required to pay a ‘Deposit‘.
If a Deposit is payable, the amount of Deposit generally cannot exceed 10% of the ‘Purchase Price‘. The Deposit is payable in two parts, i.e. an ‘Initial Deposit‘ and a ‘Balance Deposit‘. The amount of the Initial Deposit and the Balance Deposit payable will be recorded in the ‘Reference Schedule‘ of the Contract of Sale (which is located at the front of the document). The Initial Deposit is payable on the day the Buyer signs the Contract of Sale, unless another time is specified in the Reference Schedule, and the Balance Deposit is payable on the date specified in the Reference Schedule.
Clauses 2.2 and 2.4 of the ‘Terms of Contract‘ (which is a section containing the standard terms and conditions of a Contract of Sale) deal with the issue of the Deposit payment and the parties’ respective entitlements to the Deposit under the Contract of Sale in the event of a default. In essence, the Buyer must pay the Deposit to the ‘Deposit Holder‘ as specified in the Reference Schedule (which is usually held in trust by the Seller’s real estate agency) at the times specified in the Reference Schedule.
The Deposit Holder will hold the Deposit until a party becomes entitled to it. The Buyer will be in default if the Buyer does not pay the Deposit as required. If the Contract of Sale settles, the Seller is entitled to the Deposit (plus any interest, if the Deposit was invested in an interest-bearing account by the Deposit Holder pursuant to clause 2.3 of the Terms of Contract). If the Contract of Sale is terminated without the default of the Buyer, the Buyer is entitled to a refund of the Deposit. However, if the Contract of Sale is terminated due to the Buyer’s default, the Seller is entitled to the Deposit, and to the extent that the Buyer has not paid any part of the Deposit as required, the Seller may recover from the Buyer that part of the Deposit as a liquidated debt. Depending on the nature of the Buyer’s default or breach, the Seller may also be entitled to claim damages and/or other relief against the Buyer.
Given the prices of properties these days, a 10% Deposit can be a substantial sum of money.
Accordingly, as a Buyer, understanding precisely what your obligations are under a Contract of Sale, both generally and in respect of the Deposit obligations, is vitally important, if you wish to avoid the unfortunate and potentially devastating consequence of having your Deposit forfeited or worse, being sued by the Seller for other breaches. Speaking with, and obtaining the assistance of, an experienced conveyancing lawyer with your Contract of Sale is highly recommended. Please contact AdviiLaw today to obtain an obligation free quote. Contact us on 07 3088 7937 or email us at [email protected].
This commentary is of a general nature only, containing nothing more than some general information for the reader. It is not intended to be legal advice, nor cannot it be relied upon as legal advice. To this end, please read our Website Terms including the disclaimer contained therein carefully. Laws, rules and principles may be subject to sudden and unexpected changes and you should always consult a lawyer about your specific circumstances.