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Senior Partner, Solicitor
Category: Law
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Experience:  Solicitor with more than 30 years experience
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A.Does a solicitor have to withdraw one contract for the sale

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A.Does a solicitor have to withdraw one contract for the sale of a property before issuing a contract to a second party?
We are negotiating to purchase a property which is close to being exchanged with another party. The seller's solicitor is asking us for a non returnable deposit "to stay in with a chance" of purchasing the property as the seller is "on the cusp of exchanging" with another party. We are offering a higher purchase price, but the solicitor wants £10k transferred tomorrow as a non returnable deposit as a commitment, but hasn't said that he will issue us with a contract.
1.Aren't they obliged to issue us with a contract if they accept our £10k non returnable deposit?
2.If they issue us with a contract, don't they have to withdraw the contract from the other party and pull out from that transaction.
3.What conditions should we be applying to the £10k non-returnable deposit, especially as we haven't seen the contract yet?
We are keen to purchase the property, but it is conditional on the sale of another property of ours in order to raise the funds - which the seller is aware of. we will then be purchasing the property with cash.
Submitted: 2 years ago.
Category: Law
Expert:  Senior Partner replied 2 years ago.
Hi Thank you for your question. Solicitors are required to tell the parties if they send out more than one contract - it is a contract race. However a solicitor should not be asking for a non returnable deposit. Agents sometimes ask for one but you should never pay one. No solicitor will advice you to pay a non returnable deposit.
If your purchase is contingent on another sale you will simply be putting your money at risk. You can insist on a contract being issued as a condition of paying a deposit but if they do not withdraw the contract from the other purchaser you will be in a difficult position in a contract race as you are dependent on a sale.
I would strongly advise you against paying a non returnable deposit but if you do you should insist that it is only non returnable if you withdraw but is repayable if the vendor exchanges with someone else.
Let em know if you have further questions. Like other experts I am a practising lawyer and not online all the time btu I will respond as soon as possible.
Customer: replied 2 years ago.

below is the gist of the email sent by the seller's solicitor to us directly (we haven't yet engaged lawyers as we do not have a contract):

I would be grateful if you would please clarify two points. First, are you willing to provide proof of funds? Secondly, will you put up a non-returnable deposit? Bearing in mind that we are on the cusp of exchanging contracts with the other prospective purchaser, I think it is reasonable that you provide both before my client switches horses. I want to see your protestations of good faith – a “clear and honest commitment” in your words - backed up by action.

1 day later:

I was led by my client to expect that you’d be in touch with me during the day with details of the property you’re in the process of selling and which will provide the funds for your prospective purchase of …….... I need these details urgently. If you’re to remain in with a chance I also need £10,000 in my client account tomorrow by way of a non-returnable deposit. I think you already have my firm’s client account details, but in case not I attach these for your information.


Following is the latter half of my proposed reply - (the first half deals with the proof of funds, which we are providing via a letter from the agent selling the property, which they have agreed will be acceptable in principle). I would be grateful for your comments.


"Following your client's request on …... and your recent email, we agree to provide the proposed £10,000 as a non-refundable deposit towards the purchase of the properties and land referred to and known as "….." for the sum of £x. This deposit is non-refundable conditional upon your client not withdrawing from the transaction as specified, nor discussing, nor entering into a sale with another party, in which event you will repay the deposit to us in full with immediate effect. The deposit is only non-refundable if we withdraw from the transaction. This is as discussed with and agreed by your client on Saturday.

Furthermore, the deposit only becomes effective upon our receipt of the contract of sale (as provided to the other party save for the purchase price) and the withdrawal of the said contract from the other party. Until such time, the deposit is held by you to my order and under my authority and is repayable in full immediately upon demand.

For the avoidance of doubt, the £10,000 deposit will be deducted from the balance owed by us to your client upon completion of the the transaction and may not be released to your client prior to completion with our express written authority.

My concern with the non- refundable deposit is that we haven't seen the terms of the contract and therefore do not know if there is anything in it which would be considered 'unreasonable'. The intention with providing the deposit is to show "clear and honest commitment", but we do seek reassurance that your client is also acting in good faith and will not unreasonably object to proposed amendments so as to contrive the retention of the deposit."


I am not sure if the last para is of any use, or a waste of time, or worse. I don't want to get their backs up as we are very keen to purchase their property. Please comment.

You say that the solicitor should tell each party if another contract is issued. Can these contracts be at different prices, or must they be identical?

Is the request for a non-refundable deposit by the solicitor in contravention of the Code of Conduct?

In which case, which Code?

We are not his client - can he hold monies to our order in his Client account? Where does that leave us - exposed, or better protected?

Thank you very much.

Expert:  Senior Partner replied 2 years ago.
Thank you for providing further information. Having read your reply and your draft letter I would strongly urge you to appoint a solicitor to act on your behalf before you send any letters negotiating the terms of any non- refundable deposit and especially before you hand any money over to the sellers solicitor or estate agent (who would hold the money for you on trust and as you say in your draft letter, the "holding deposit" would be deducted from the balance of the money due on completion).
As I said in my initial reply, the sellers solicitor has begun a contract race (and he must notify the other potential buyers of this in accordance with the Solicitors Code of Conduct 2011). The sellers are tempted by your higher offer and would like to keep both options open in case one of you walks away - they have clearly asked for the non- refundable offer so that they have something in case you withdraw and they also lose the other buyer. This situation is really only of benefit to the seller. The request for the non refundable deposit is not in contravention of the Code of Conduct, but the solicitor acting on behalf of the seller can be in breach if he doesn't notify the other buyer that he is sending a contract/ negotiating the sale to you. The terms of the contracts do not have to be the same (for example you are offering a higher purchase price).
As I am sure that you are aware, from selling your own property, property chains can unravel for numerous reasons and through no fault of your own. For this reason I would again strongly urge you to engage a solicitor to negotiate the terms of any non refundable deposit agreement. The agreement would set out the conditions and circumstances under which the deposit will/ will not be refunded- for example, you would only lose your money if you withdraw but the seller would not be able to retain it if he withdraws or proceeds with the other buyer. In addition, the deposit is conditional on the seller producing satisfactory title, that there are no significant issues in the survey or searches and that exchange/completion takes place within a set timetable. There may be other conditions which apply to your specific circumstances which your solicitor can incorporate in the agreement. Good luck and I hope this helps.
Senior Partner, Solicitor
Category: Law
Satisfied Customers: 13323
Experience: Solicitor with more than 30 years experience
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