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21 March 2016 | Comment | Article by Peter Hurn

Stakeholder or agent?

On the sale or lease of a property, except in exceptional circumstances, a deposit being a proportion of the price agreed will be payable to the seller’s solicitors on exchange of contracts. This proportionate part is usually 10% of the purchase price.

The deposit will be held by the seller’s solicitor as either “stakeholder” or “agent”.

If it has been agreed that the deposit will be held as stakeholder the seller’s solicitor will hold the deposit on behalf of both parties. They cannot pass it to either the buyer or the seller without consent of the other, at least until completion or if there is default by either party.

If the parties have agreed that the deposit is held as agent for the seller, the solicitor may pass the deposit to the seller at any time, usually as soon as it has been paid.

In residential transactions the Standard Conditions of Sale (Fifth Edition) provides that the deposit shall be held as stakeholder save where the seller is purchasing another property in England and Wales, in which case the seller may use all or part of the deposit as the deposit on that purchase.

In commercial transactions the Standard Commercial Property Conditions (Second Edition) provides that the deposit shall be held as stakeholder.

If the deposit were held as agent this could obviously cause issues if the seller defaulted and the buyer wished to recover the deposit paid.

Whether the deposit is held as stakeholder or agent is a negotiating point which needs to be considered on a matter by matter basis.

Author bio

Peter Hurn


Peter heads up the fastest expanding real estate team in Wales. He was responsible for negotiating the lease for one of the biggest pre-let office deals in Wales, the firm’s new landmark headquarters at Two Central Square.

Disclaimer: The information on the Hugh James website is for general information only and reflects the position at the date of publication. It does not constitute legal advice and should not be treated as such. If you would like to ensure the commentary reflects current legislation, case law or best practice, please contact the blog author.


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