Deposits, Dilemmas, and Dancing: Navigating the Non-Refundable Deposit Hokey Pokey

In a competitive market, sellers or their estate agents may require a non-refundable deposit or reservation fee before accepting your offer to buy a property. This is often to ensure that the buyer is serious about the purchase and to minimise the seller's risk of incurring costs or losing other potential buyers if the buyer withdraws. While it's best to avoid paying an initial deposit if possible, there are some steps you can take to protect yourself if you do need to pay one.

Understanding the Rules

Most residential estate agents adhere to the Property Ombudsman Code of Practice, which generally discourages pre-contract deposits. 

However, if a deposit is taken, the terms under which it will be held, refunded, forfeited, or used towards the purchase must be clearly stated in writing and agreed upon by all parties involved.

Protecting Your Deposit

If you're required to pay a deposit, request that it be held by the seller's solicitors as stakeholders, which ensures that they'll return the money if the transaction doesn't proceed to exchange of contracts. Alternatively, consider an exclusivity or lockout agreement, which can offer additional protection.

Exclusivity or Lockout Agreements

These agreements grant the buyer exclusivity for a fixed period of time in exchange for the deposit. They also require the seller and their representatives to abide by the terms of the agreement, provide necessary documentation promptly, and refrain from seeking other buyers or actively marketing the property during the exclusivity period. Both the buyer and seller have specific obligations and termination rights under these agreements, which can help protect both parties' interests.

Conclusion

While exclusivity or lockout agreements aren't perfect, they offer a higher level of protection for buyers who must pay a non-refundable deposit. It's essential to seek legal advice before paying any deposit or signing an agreement to do so. If you have questions about the status of an agreement, contact a conveyancing professional for guidance.