If I am buying a property do I have to pay a deposit?

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Most sellers will require a deposit to be paid and there is a provision in the standard Agreement for Sale and Purchase approved by the Auckland District Law Society for it (ADLS Agreement for Sale and Purchase). 

How much deposit is generally a matter of negotiation between the buyer and the seller. It can be up to 10% of the purchase price. In the ADLS Agreement for Sale and Purchase the deposit is payable upon the signing of the Agreement by both parties. However the seller and buyer can agree that the payment of deposit can be delayed until the Agreement is declared unconditional or on some other date e.g. in the situation where a buyer may have all their funds tied up in a fixed term deposit.

In terms of the ADLS Agreement for Sale and Purchase the deposit is required to be held by a stake holder, generally someone independent of the seller and the buyer. In most cases the land agent will hold it.

The deposit is held by the stakeholder until such time as the Agreement is either declared unconditional in all respects or is cancelled in the event of the conditions of the Agreement not being satisfied. Depending upon the circumstances the stakeholder must then release it to the relevant party i.e. the seller if the Agreement is declared unconditional or the buyer if the Agreement is cancelled due to the conditions not being satisfied.

In the event of a sale being declared unconditional the land agent will then be entitled to deduct his commission before paying the balance to the seller. Sellers are liable to pay commission to the land agent upon the Agreement being declared unconditional. The fact that an unconditional buyer subsequently defaults under the Agreement will not relieve the seller from their liability to pay commission.

From a seller’s point of view it is recommended the land agent obtain a deposit from the buyers as soon as it is required to be paid.

From a buyers point of view, you should ensure that you do not agree to paying a deposit which you cannot pay.