Ross Ward on deposits

I have been told that I must pay a deposit on the house I am buying at exchange of contracts. Is this necessary?

A deposit has two purposes – to act as part payment of the purchase price and to indicate your intentions to complete the transaction. It is important for the vendor to ensure a deposit is paid on exchange, as they are usually able to keep it as compensation if you default.

A deposit of ten per cent of the purchase price is standard practise and is the amount referred to in the contract most solicitors use.  

Clearly, it is to the vendor’s advantage to obtain a ten per cent deposit, but if this will cause you difficulty, your solicitor will try to negotiate a reduced amount. If your vendor accepts this, the contract is still likely to state that, should you default after exchange, they are entitled to pursue you for the full ten per cent. It is very rare for exchange of contracts to take place without any deposit being paid.

If the vendor of your property is buying another house simultaneously, they may want to utilise the deposit for their own purchase. If not, their solicitor will hold the money until completion.

Under no circumstances, should you pay the deposit direct to the vendor. It should be passed through a solicitor so there is a full record of the money being paid.

I have just exchanged contracts on the house I am buying and my solicitor says he needs time to do searches before completion. I thought these were carried out before exchange. Please clarify?

Your solicitor will normally carry out a local council search and a mining search before you exchange contracts to make sure nothing is registered against the property at the council and that there has been no mining activity you should be aware of. However, just before completion, your solicitor will want to carry out a land registry search to make sure there have been no recent changes affecting the vendor’s title deeds. For example, they have not taken out another mortgage against the house and legal ownership has not changed.

If you need a mortgage, your solicitor will also carry out a bankruptcy search on behalf of the lender to make sure you, as both the purchaser and the borrower, have not recently been declared bankrupt. No bank or building society will lend money to someone who is bankrupt and they require a clear bankruptcy search before releasing the mortgage advance you need to buy the house.

These searches only take a few days and do not normally hold up the moving date, unless any adverse results are revealed.

I have been told that, although the property I am buying has fences on both sides, I will only be responsible for the maintenance of the right hand boundary. Is this true?

Not necessarily. You should check the plans for the property against the title deeds, looking out for ‘T’ marks on the boundaries. The house builder will have originally allocated responsibility and a ‘T’ on your side of a boundary indicates that you are obliged to maintain the fence, whereas a ‘T’ on your neighbour’s side means it is their responsibility.

If the ‘Ts’ are not shown on the deeds, the easiest solution is to come to a compromise with your neighbours and treat your boundaries as a party fence whereby maintenance is shared equally.