Return or forfeiture of a deposit

The following Property Disputes practice note provides comprehensive and up to date legal information covering:

  • Return or forfeiture of a deposit
  • Buyer’s right to return
  • Forfeiture by seller
  • Court’s discretion
  • Deposit as a penalty
  • Non-payment of deposit
  • Void contract

Return or forfeiture of a deposit

Buyer’s right to return

A buyer’s right to the return of their deposit is a legal right arising out of breach of contract by the seller.

The fact that the buyer has, by delay, lost the right to specific performance does not prevent them from recovering it. The Standard Conditions (SCS) (5th edition) and the Standard Commercial Property Conditions (SCPCs) (2nd and 3rd editions) (‘Second Edition’ and ‘Third Edition’ respectively) provide that if the seller fails to comply with a notice to complete the buyer can rescind the contract and if they do so they are entitled to repayment of the deposit with accrued interest. The buyer is also entitled to the return of the deposit plus interest if either party rescinds the contract, unless the rescission is due to the buyer’s breach of contract. A buyer under a conditional contract (eg on planning) will often seek a specific provision confirming that, provided it has complied with its contractual obligations, if the condition is not fulfilled and the contract is terminated it is entitled to the return of the deposit, plus interest. For more information in respect of rescission, see Practice Note: Termination for breach of property contract.

Forfeiture by seller

Under condition 6.8.3 of the SCS and 9.8.3 of the Third Edition, on receipt of a notice to complete, the buyer must

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