Under the standard terms of a Contract, a Buyer must pay the deposit by the due date (usually on signing). If the Buyer fails to pay, the Seller may terminate the contract and/or sue the Buyer for any damages they have incurred and claim recovery of the deposit due to the Buyer’s failure to pay.
We have seen instances where Sellers will rely on the standard terms to terminate a contract where a Buyer has delayed paying the deposit.
Typically the deposits payable under contracts are for only a nominal amount (often $1,000). Because the deposit is nominal, we find Buyers sometimes have a relaxed attitude towards paying the deposit on time. As noted above, this can be dangerous to a Buyer due to the strictness of the standard conditions of the Contract.
Ensuring that the deposit is paid on time adds protection for the sale to proceed. A terminated contract can be avoided by ensuring a Buyer has brought a cheque or made a transfer to the deposit holder before the offer is submitted. Alternatively, the contract may allow 2-3 business days from the date the Buyer signs the contract to pay the deposit.
If there is a split deposit payable we recommend contacting the Buyer several days before the balance deposit is due to give them warning about how and when to pay the balance deposit.
Prepared by Byron Hunter
This publication has been carefully prepared, but it has been written in general terms and should be viewed as broad guidance only. It does not purport to be comprehensive or to render advice. No one should rely on the information contained in this publication without first obtaining professional advice relevant to their own specific situation.