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The Facts
Buyers and sellers enter into property sale contract
In November 2020, two parties signed a contract for the sale of
a residential property in Sydney. The purchase price was set at
$2,350,000. On the front page of the contract, that both parties
agreed to and signed, it was accepted that the buyers would pay a
deposit of 10% of the purchase price, being $235,000.
Contracts were exchanged conditionally, subject to a ten-day
cooling off period. The cooling off period was subsequently
extended at the request of the buyers, but nevertheless expired on
12 January 2021.
From the date of exchange of contracts to the date for
completion, the owners had only received $15,875 from the buyers
($219,125 less than the stipulated deposit). The buyers did not
provide a valid explanation for their failure to pay the full
deposit.
Property owners issue Notice to Complete
The agreed date for completion was 29 January 2021. On 1
February 2021, the owners of the property served a Notice to
Complete upon the buyers, stating that ".should you fail to
complete the contract for sale of land. [by 15 February 2021] then
you shall be in breach of contract and the vendors shall exercise
all other rights and remedies as are available to them".
When the sellers had not received payment by that date, they
served a Notice of Termination on the prospective buyers and
subsequently relisted their property on the market.
New buyers were found and the property was sold for $180,000
more than the price the original buyers had agreed to pay.
Sellers sue buyers for unpaid amount of deposit after deal
falls through
Despite the gain they had realised in this favourable
transaction, the property sellers sued the original prospective
buyers in the Supreme Court of NSW, seeking to recover the unpaid
amount of $219,125 of the deposit money from those buyers.
For their part, the original buyers argued the court should
grant them relief against forfeiture of the deposit, as the minimal
inconvenience suffered by the property sellers would make
forfeiture of the deposit unjust.
CASE A
The case for the sellers
CASE B
The case for the buyers
We never agreed to accept anything less than a ten per cent
deposit. The buyers agreed to this and signed the contract, which
emphasised that they were "required to pay the deposit on the
making of the contract, with time being essential in that
regard".
We agreed to allow several extensions of the cooling-off period
to give the buyers ample time to organise their finances and we
have been more than accommodating in our dealings with them. Their
failure to complete the contract is not due to anything we did or
failed to do.
Even though we sold the property, we incurred an additional fee
of $7,000 in marketing costs as a result of the buyers reneging on
their agreement.
The buyers failed to respond to many emails from our solicitors
requesting updates and clarification of their position. This gave
us no choice but to take the steps we did.
The price we ultimately sold the property for is irrelevant.
The buyers agreed to pay the deposit under the contract and they
should be held to that agreement.
The property owners did agree to accept a deposit of less than
ten per cent of the purchase price.
The owners initially raised no complaint when we paid only a
portion of the deposit and made no demands for the unpaid amount of
the deposit to be paid.
We made genuine efforts to organise our finances and to
complete the contract within the stipulated timeframe.
It does not matter that we failed to pay the deposit, as the
owners managed to sell the property anyway. The owners suffered no
loss as a result of our conduct - they even managed to make a
profit of $180,000 on the sale, compared to what they would have
received if we had bought the property as initially agreed.
In view of the windfall profit achieved by the sellers, it only
fair that we should be released from the obligation to pay the
unpaid amount of the deposit.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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