The Facts

Buyers and sellers enter into property sale contract

In November 2020, two parties signed a contract for the sale of a residential property in Sydney. The purchase price was set at $2,350,000. On the front page of the contract, that both parties agreed to and signed, it was accepted that the buyers would pay a deposit of 10% of the purchase price, being $235,000.

Contracts were exchanged conditionally, subject to a ten-day cooling off period. The cooling off period was subsequently extended at the request of the buyers, but nevertheless expired on 12 January 2021.

From the date of exchange of contracts to the date for completion, the owners had only received $15,875 from the buyers ($219,125 less than the stipulated deposit). The buyers did not provide a valid explanation for their failure to pay the full deposit.

Property owners issue Notice to Complete

The agreed date for completion was 29 January 2021. On 1 February 2021, the owners of the property served a Notice to Complete upon the buyers, stating that ".should you fail to complete the contract for sale of land. [by 15 February 2021] then you shall be in breach of contract and the vendors shall exercise all other rights and remedies as are available to them".

When the sellers had not received payment by that date, they served a Notice of Termination on the prospective buyers and subsequently relisted their property on the market.

New buyers were found and the property was sold for $180,000 more than the price the original buyers had agreed to pay.

Sellers sue buyers for unpaid amount of deposit after deal falls through

Despite the gain they had realised in this favourable transaction, the property sellers sued the original prospective buyers in the Supreme Court of NSW, seeking to recover the unpaid amount of $219,125 of the deposit money from those buyers.

For their part, the original buyers argued the court should grant them relief against forfeiture of the deposit, as the minimal inconvenience suffered by the property sellers would make forfeiture of the deposit unjust.

The case for the sellers

The case for the buyers

  • We never agreed to accept anything less than a ten per cent deposit. The buyers agreed to this and signed the contract, which emphasised that they were "required to pay the deposit on the making of the contract, with time being essential in that regard".
  • We agreed to allow several extensions of the cooling-off period to give the buyers ample time to organise their finances and we have been more than accommodating in our dealings with them. Their failure to complete the contract is not due to anything we did or failed to do.
  • Even though we sold the property, we incurred an additional fee of $7,000 in marketing costs as a result of the buyers reneging on their agreement.
  • The buyers failed to respond to many emails from our solicitors requesting updates and clarification of their position. This gave us no choice but to take the steps we did.
  • The price we ultimately sold the property for is irrelevant. The buyers agreed to pay the deposit under the contract and they should be held to that agreement.
  • The property owners did agree to accept a deposit of less than ten per cent of the purchase price.
  • The owners initially raised no complaint when we paid only a portion of the deposit and made no demands for the unpaid amount of the deposit to be paid.
  • We made genuine efforts to organise our finances and to complete the contract within the stipulated timeframe.
  • It does not matter that we failed to pay the deposit, as the owners managed to sell the property anyway. The owners suffered no loss as a result of our conduct - they even managed to make a profit of $180,000 on the sale, compared to what they would have received if we had bought the property as initially agreed.
  • In view of the windfall profit achieved by the sellers, it only fair that we should be released from the obligation to pay the unpaid amount of the deposit.

So, which case won?

Cast your judgment below to find out

Nathan Stack
Buying a house
Stacks Law Firm

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.