Deposit Payments – An essential term of the Sale Contract

Posted on Apr 27, 2021 by Jason Dunn   |   Categories: Property & Conveyancing

How important is it to pay your deposit on time when buying a property? The recent Supreme Court of New South Wales decision in Alexakis v Wan [2021] confirms that it is very important indeed, and failure to do so could be extremely costly.

 

The purchaser Theo Alexakis, not only lost his $241,500 deposit, but also lost his opportunity to own a $4,830,000 five-bedroom home with water views in the exclusive Sydney suburb of Vaucluse because he missed the payment date for the second instalment of his deposit by just two days.

 

Mr Alexakis paid an initial deposit of $150,000 and exchanged contracts on 4 April 2019. The contract included a special condition that provided for a total deposit of $241,500, with $150,000 payable on exchange and the balance of $91,500 payable “on the fourth month after the contract date”.

 

Mr Alexakis believed this meant he was required to pay the balance of the deposit any day in August 2019. However, the vendors, Chi Hing Wan and Kwan Yee Chan believed otherwise. They interpreted the special condition as requiring the balance of the deposit to be paid on or before August 4, 2019, exactly four months from the contract date.

 

The deposit balance of $91,500 was paid by Mr Alexakis on 7 August 2019 following his return from overseas. The vendors subsequently terminated for breach of the contract and forfeited the full deposit of $241,500. Mr Alexakis commenced proceedings in the Supreme Court seeking specific performance of the contract and repayment of the deposit.

 

The Court dismissed Mr Alexakis’s claim and ruled that the vendors were indeed entitled to keep the full deposit of $241,500. The Court also noted that while the language in the deposit condition was “awkward”, Mr Alexakis had misunderstood the contract and breached its terms. The Court further noted that the forfeiture of the deposit was not unjust or inequitable in the circumstances. In addition to losing his deposit, Mr Alexakis was also ordered to pay the vendor’s legal costs.