Retaining deposit when the buyer fails to complete (Solid Rock Investments v Reddy)

Retaining deposit when the buyer fails to complete (Solid Rock Investments v Reddy)

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When must a property sellerreturn the contractual deposit when the buyer fails to complete? Kate McCall, partner at Shoosmiths, says a recent ruling clarifies how the courts will approach a buyer’s application for the return of a deposit where it failed to complete—and only in exceptional circumstances will the deposit be returned.

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What are the implications of this case for lawyers?

The case does not create new law, but serves as a useful reminder of how the courts will approach an application by a buyer for the return of a deposit, in circumstances where the buyer has failed to complete a property acquisition.

The case reiterates that a subsequent price rise and/or the fact that the sellerwill receive a financial windfall, will not of itself, justify the return of the buyer’s deposit. Similarly, the fact that the buyer has taken steps to rectify its breach by attempting to complete and pay any associated costs/interest, will not necessarily sway the court. Fundamentally, deposits serve as a guarantee for performance of the obligation to complete and only in truly exceptional circumstances will they be returned to a buyer who has failed to honour his side of the bargain.

What was this case about? Why is it significant?

The case concerned the acquisition of a property for £430,000. A 10% deposit had been paid by the buyer. Due to difficulties in obtaining funds from abroad, the buyer failed to complete the acquisition on the completion date. On the expiry of a notice to complete, the sellerrescinded the contract, and retained the deposit, as it was entitled to do under

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