The Taylor&Emmet Blog

Ask Ross: Paying deposits and purchasing freeholds.

rossward colOur eminent residential property expert, Ross Ward, answers your questions about moving home. If you are buying or selling and you’d like his advice, email your query to

This month, Ross explains why you will be asked to pay a deposit at exchange and how to purchase a freehold.

I have to 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 that a deposit is paid on exchange, as the vendor is usually able to keep it as compensation if you default.

Ten per cent of the purchase price is generally regarded as a standard deposit and is used by most solicitors. Clearly, it is to the vendor’s advantage to obtain this amount, but if it will cause you difficulty, your solicitor will try to negotiate a reduction. If this is acceptable, the contract is still likely to state that, should you default after exchange, the vendor is 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 owners of the property you are buying are purchasing another house simultaneously, they may want to pass the deposit up the chain. If not, their solicitor will hold the money until completion.

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

We want to purchase the freehold on our leasehold home. We were informed the fee should be around 25 times the annual ground rent, but the landlord has requested 90 times! We know we can appeal, but fear the risks – what should we do?

Although there are some exceptions, in general terms you have a right to buy the freehold, but what is not so straightforward is the price you must pay.

By law, a freehold’s worth is defined as the amount it would fetch on the open market, should the house and premises be sold, assuming no compulsory power of acquisition has been obtained and you are a “willing but not anxious purchaser.” You would also be expected to pay the reasonable costs incurred by your landlord.

Valuing a freehold is a complex business. There are two methods – the ‘original valuation’ and the ‘special valuation’ – and deciding which is applicable depends on your circumstances.

If the landlord demands what you consider to be an excessive amount, you should seek advice from a chartered surveyor with experience in valuing freeholds. If you are still unable to reach an agreement, then an application can be made to a Leasehold Valuation Tribunal, which will decide on the amount to be paid. You will incur costs in making the application, but you are not usually required to pay any of the landlord’s fees relating to the tribunal.

Hopefully this goes some way to clarifying the options available. Should you require further information, or assistance in making a tribunal application, seek the advice of a solicitor.

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