Who keeps the deposit when a property sale falls through? Which case won?
Property owner enters into contract to sell parcel of land
A parcel of land in Fairfield, Sydney, was sold at auction for $1.46 million. The buyer and seller entered into a contract for sale and the buyer paid a 10 per cent deposit of $146,000. The contract stated that the “completion date” was to be 20 June 2015.
Some time prior to entering into the contract, the seller had performed earthworks on the property. The local council had declared the earthworks illegal and issued an order requiring that the seller reinstate the property to its previous condition.
By a special condition contained in the contract, the seller agreed to reinstate the property as required by the order “before completion”. The contract stated that the buyer would be entitled to terminate the contract and be repaid the deposit if the seller failed to do so.
Buyer cancels contract and seller refuses to refund deposit
When the completion date of 20 June 2015 arrived, the seller had not complied with the special condition. The buyer issued a notice requiring the seller to complete the work by 29 July 2015 and when that date came and went without the work being done, the buyer terminated the contract and sought repayment of his deposit. The seller refused.
Some months later, the seller finished the work and approached the buyer to complete the contract. When the buyer failed to comply with a notice to complete, the seller terminated the contract and declared that the buyer had forfeited his right to the deposit.
It was up to the court to determine who had validly terminated the contract and who could keep the deposit – the buyer or the seller?