Is this right - sellers have to agree to reduced deposit?

[Shefliesonherownwings]

This is my first ever post in MN but interested in views on this and previous experiences. Posting here for traffic. Husband and I are first time buyers. Offered on a house in mid May, mortgage all agreed on the basis of a 5% deposit so 95% mortgage. Solicitors were given the mortgage offer in June 2018 with this information. There is only us and the sellers in the chain, the sellers are not buying anywhere else.

Finally (after numerous delays) we are ready to exchange and completion is proposed for a couple of weeks time. Over the last week, we received a couple of documents from our solicitor which referred to the deposit being 10%. Each time we have corrected him on this. Last week, we transferred the 5% deposit to the solicitors.

Received an email from our solicitor this morning in which he has said that whilst our lender has agreed to lending us 95% of the purchase price, as the standard deposit in a property transaction is 10% all of the parties in the chain need to accept a reduced deposit and they are not obliged to do so. He has said he will ask 'our buyer' (I presume this is an error as we are the buyers) if they will accept the reduced deposit.

Is this right? I don't understand what it has to do with the sellers, as long as they get the full purchase price what does it matter if the deposit is 5% or 25%. I wonder if the solicitor has got us confused with another transaction given he has referred to there being a chain and asking 'our buyer'. I am waiting for him to call me back about this.

We are really concerned this could mean everything falls through if the 5% is not accepted, not to mention being concerned that the solicitor has not raised this previously. Our mortgage broker said he has never heard of this either, anyone know what this is about?

The Standard Conditions of Sale usually have a 10% deposit stipulated but it's common for it not to be available (ours wasn't 10 years ago as we had 5%). If you pull out between exchange and completion though I think the seller can ask for the other 5%.

www.blandy.co.uk/blog/buying-a-property-the-deposit-explained

Summary there.

The deposit is what the buyer would keep if you pulled out of the purchase after exchange, so yes, 5% vs 10% would make a difference. I imagine your sellers will be ok as it's a common scenario but as PP said you'll probably be liable to pay the difference between the actual deposit and the 10% if for some reason you can't complete.

It’s usually a 10% deposit and if you pull out after exchanging contracts the seller keeps the deposit. The seller would have to agree to accept only 5%. I don’t see it being an issue as there are only two of you in the chain and it’s unlikely to collapse.

Your solicitor has known since at least June that you only had 5% though. And you’ve mentioned it several times in the last week. Keep all communication as proof! The solicitor is at fault - if the sale falls through I’d sue the solicitor for your expenses.

As you haven’t yet exchanged, if you pull out the seller can’t sue you for any costs they have incurred. DO NOT exchange without written confirmation that they will accept 5%. Once you’ve exchanged they can sue you for their expenses if the sale falls through (eg if they say they didn’t know you only had 5% and they don’t accept it).

Yes, that's standard I think. While you have always stated 5 per cent, did the initial letters from the solicitor/conveyancer state 10 per cent?

If your vendors are not buying anywhere else they may well accept a smaller deposit. If they were buying somewhere else, they might be depending on your deposit as part of theirs if you see what I mean!

It can go ahead if the seller agrees - are they really not buying anything themselves?
The people at the bottom of our chain had similarly dippy solicitors who forgot to tell anyone their clients were getting a 100% mortgage. The whole chain had to agree to exchange with no deposits. It was utterly terrifying - but it can happen.

It's normal for there not to be a complete 10% up the chain but they can ask for it. In my last sale/purchase our sellers suddenly wanted the full 10% from me on exchange day. They just had what had come up the chain which was 40k less than 10% of their sale price.

They were persuaded otherwise but it could have scuppered the whole chain.

We have just exchanged and our buyers had to offer 7% as it’s what they had available. We accepted it. If they pull out between exchange and completion they are still liable for the full 10% though. Your sellers will probably accept it as they will be advised that in the event it falls through they can still pursue you for the remainder.

When we sold and bought a more expensive property, we had to add in the remainder of the 10%. It didn’t occur to us to ask for a smaller deposit. I assumed 10% is the standard to protect the sellers from buyers abandoning the sale between exchange and completion. However, in your case your solicitor should have been more alert to you being first time buyers and more thorough in guiding you through the process. It sounds like you’ve corrected the solicitor multiple times so he/she should have clued in.

Your solicitor sounds like an idiot. I sometimes wonder what they do for the money. They will have all the documentation. Obviously you aren’t going to give 10%. They need to sort this out urgently. Is this an online solicitor or local one?

As PO explained the deposit you send to your solicitor is separate from the agreement you have with your mortgage provider as it's the amount secured that the vendor would keep if you suddenly pulled out (to compensate them for the money and time they've wasted). If I was the vendor I'd accept the offer with the reduced deposit as I'd assume the sale will almost definitely go through.

Yes this is true and happened to me- it was very stressful!

We ended up borrowing the 5% from my other half’s dad and then transferring it back to him once we got the mortgage payment through.

Very irritating though, and if we had been in the position of not having my OH’s dad we would have lost the property.

I really don’t understand why they don’t tell people this!

Pragmatically, I would be annoyed in the sellers' position but if I wasn't buying anything else and didn't need the deposit to make my own deposit on another property for myself, I would grit my teeth, put up with it and sue you for the other 5% if the deal fell through.

It's not a legal requirement for everyone to accept the 10% deposit.

Last time I bought a house we agreed to a 5% deposit from our buyer - in fact I think we might have agreed a slightly lower %. But our lawyer kept telling us that the buyers would only accept 10% from us. It turned out that their solicitor hadn't even asked them. We spoke direct and agreed 5%. The solicitor was either lazy or stupid. Or both.

The sellers not buyers. Who am I calling stupid!

i had no idea you could do this, and have bought loads of houses in the past.
I just thought you had to have the 10% deposit, but I suppose you still do because the extra 5% would be payable if it fell through

Thanks all, I have spoken with the solicitor now. He hasn't been particularly helpful during the whole transaction, we have had to chase him so much, the communication has been shocking.

The sellers live abroad and as I understand it are not planning to move back to the UK so hence selling this place and not buying another. I can understand the need to get agreement with a chain but I couldn't work out why with no chain but as you've all said and our solicitor confirmed it's standard for all transactions and if we do pull out after exchange we are liable for the full 10%.

I am annoyed he didn't raise this with the sellers sooner, he didn't think it would be a problem as they will get their money and we are so far down the line it's probably not worth them refusing but it is annoying for them. Everything else is good to go in terms of exchange so fingers crossed.

We had no trouble buying with a 5% deposit. We transferred the 5% over that we had. Our sellers were absolutely fine about it.