Buyer misled me about paying deposit


Question: I was selling my Cronulla property and signed a contract with the first buyer who made an offer. The contract specified settlement to be made in 90 days after signing, with the condition of contract being that the buyer was to pay a $22,000 deposit (on signing). This was specifically worded in the contract.

The agent informed me as I was signing that the buyer had paid the deposit, but last week I found out that this actually wasn’t the case and that he was only going to do it sometime this week. I am now starting to reconsider the price I sold for. I think I was a little hasty in selling and might be able to get a better price. I’m considering asking my solicitor to inform the buyer that I will be terminating the contract because he breached the deposit terms.

Is there any way he could still stake a claim on the property? I’ve heard about people putting caveats on properties that bar the owners from selling to other people. In what instances would he have a case for a caveat and could this happen here?


Answer: The critical issue is to find out if contracts were exchanged. To know this you need to check a number of items. The first is whether the purchaser signed the contract. Following that, you need to check whether the contract you signed and the counterpart contract the purchaser signed are both identical and dated. You then need to check that the contract counterparts are dated the same and who conducted the exchange.

A legal issue to be determined is whether the purchaser has provided consideration. It may be argued that the contract price is the consideration, thus consideration has been provided. A further legal issue is whether the property can be validly exchanged if the deposit has not been paid. These legal issues will need further review and the answer may depend on a variety of further facts.

If contracts were not exchanged, you arguably have no rights against the buyer and the buyer has no rights against you. If contracts were exchanged, you and the buyer most likely do have rights against each other. Usually a solicitor would receive a fax or letter from an agent advising that the agent holds the deposit, or receive a cheque for the agreed deposit.

No contracts exchanged

If contracts are not exchanged, you can instruct your solicitor and agent to not exchange, telling the agent to continue marketing the property until you find a buyer offering an amount that you are willing to accept.

If what you say is correct and the agent told you a deposit was paid when this was not true, you may want to consider whether you can take action against the agent for any issue, including misleading and deceptive conduct.

Contracts were exchanged

If contracts were exchanged, bear this in mind. It is an essential term of the contract that the purchaser must pay the deposit on time. If contracts are exchanged and the purchaser has not paid the deposit of $22,000.00 on time, you arguably have the right to terminate the contract. If you do validly terminate the contract then you can forfeit or recover the agreed deposit, usually 10% of the price. In addition, you can seek to recover from the purchaser any shortfall of the difference in price on resale of the property as well as your costs of doing so – including agent fees on resale of the property, legal fees and any other costs that you incur to put yourself in the position you would have been in (had the contract with the first buyer gone through).

If you wish to do this, you should do so promptly.

Understanding caveats

If contracts have been exchanged has the purchaser provided a section 66W certificate waiving their cooling off rights? If yes, the purchaser has no right to cool off and rescind (cancel) the contract. If the purchaser has not provided a certificate waiving their cooling off rights then the purchaser may exercise these rights and rescind the contract. If the purchaser rescinds the contract before you terminate the contract you most likely will have lost the right to terminate the contract for the purchaser’s failure to pay the deposit on time.

A purchaser (of a property where contracts have been exchanged) is entitled to place a caveat on the property. This caveat will be considered subject to all other rights under the contract. If your termination is valid then failing the purchasers agreement to remove any caveat then you may seek a Court Order to have any caveat removed.

  • Answer provided by David Singh, Conveyancing & Property Lawyers Pty Ltd

Disclaimer: The information in this article is of a general nature only and should not be relied upon as legal advice. You should seek advice for your particular circumstances before entering into any transaction.

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