When the sale of a property falls through, things can get complicated, especially if the buyer and seller cannot agree on who is to blame for the cancellation.
This kind of disagreement is called a disputed cancellation, and it can create legal and financial headaches for everyone involved.
So, what’s the big issue?
Navigating the Finances of a Disputed Property Sale Cancellation
When a sale is cancelled, there is usually a deposit or other funds already paid by the buyer. Naturally, both the buyer and the seller may feel they are entitled to that money especially if one party believes the other didn’t stick to their side of the deal.
This is where things can get tense. Enter the Conveyancer.
A conveyancer is the legal professional handling the property transfer. If a dispute arises, the Conveyancer has a legal duty to be neutral and to protect the money involved. The Conveyancer may not simply refund the money, or any portion of it, to the buyer, nor may the Conveyancer pay the money to the seller simply because they demand it.
It is a common misconception that if the Agreement of Sale is cancelled as result of a breach by the buyer, the seller is automatically entitled to receive the deposit held in trust. This is not so.
Quantifying and Proving Damages
Before payment can be made to the seller, the seller must first quantify and prove the damages which have been suffered as a result of the buyer’s breach: in simple terms, the seller shall have to sue the buyer for these damages if the buyer refuses to co-operate in this regard.
The deposit paid by the purchaser is not a liquidated amount and cannot be presumed by the seller to be approximated to the damages, if any.
A direct consequence of this is that while the dispute continues between the seller and the buyer, the Conveyancer is obliged to hold all monies paid by the purchaser in the trust account of the Conveyancer, until the dispute has resolved or an Order of Court is issued directing the Conveyancer as to the disbursement of such monies in Trust.
Unfortunately, in order to get an Order of Court, at least one of the parties, the seller or the buyer, has to approach a High Court by way of an Application. This is an expensive procedure, relatively speaking, but at least applications bring finality to a dispute reasonably quickly.
The rule requiring the Conveyancer to hold the monies in the Conveyancer’s trust account exists to protect both parties until resolution of the dispute. This process can be slow and frustrating, but it is designed to be fair.
If you find yourself in this position at some time, it is useful to contact your attorney to get independent legal advice on your position and how you might proceed.
Remember, the Conveyancer must take a neutral position in the dispute, so the Conveyancer’s advice will not necessarily be supportive of your specific rights. Of course, the same applies to the other party involved, too.