Don't Lose Your Deposit

By Property Department, Friday, 17th February 2017 | 0 comments

Q: What is a Stakeholder?
A: A third party who temporarily holds money or property while its owner is still being determined

It is a condition of the standard contract for the sale of property that any deposit paid by a buyer to the seller’s solicitors or auctioneer is to be held by them as stakeholders—not as agents for the seller. Neither party has a right to the deposit until the sale is completed or terminated and only then should the stakeholder release the deposit.

However, if you pay over a deposit to an auctioneer or solicitors for the seller, without a stakeholder agreement in place, it’s like you just handed over your money directly to the seller—because, they are his agents. And here’s the thing—if the seller goes bankrupt or is put into liquidation, before the seller has signed up to a standard contract, you will likely lose your deposit.

In a High Court case on the issue, the court heard that a buyer paid over monies to the seller’s solicitors by way of a pre-contract deposit. The seller went into liquidation before signing a contract and without having returned the deposit monies to the buyer. The liquidator maintained that the deposit monies became assets in the liquidation—that the buyer became an unsecured creditor and that his deposit monies could be used to pay secured creditors.

The High Court held in favour of the liquidator. The court decided that in the absence of a contrary agreement, the monies paid to a seller’s solicitor, by way of a pre-contract deposit, were paid to solicitors as agents of the seller, not as a stakeholders, and were in effect monies paid to the seller. The formal written contract, with the stakeholder protection clause, even if signed by the buyer, did not bind the seller until it was signed by the seller.

An auctioneer selling property is an agent for a seller. Any money paid to an auctioneer, in the absence of a contrary agreement and prior to a binding contract with stakeholder protection, is money paid to the seller and therefore money at risk.

So, the moral of the story—see your own solicitor before you part with any of your money. Have your own agent on your side. 

Comment on This Article

HTML is disabled and your e–mail address won't be published. Comments will be deleted if commenters leave a keyword instead of a name in the name field, if sites linked in the URL field are commercial in nature and not related to the blog, or if the comment simply doesn't add substance to the discussion.

Spam Prevention

In order to submit this form successfully, you must complete this question

Please match the colour       black
Please match the colour
© 2018 McEntee & O'Doherty
  • 20 North Road Monaghan Co Monaghan Ireland
  • Phone: +353 (0) 47 82088
  • Fax: +353 (0) 47 83486
  • Email: law@mceodsolicitors.ie

Search

Search - Use spaces to separate your keywords