Holding deposits for 10 days

 

Holding deposits for 10 days 
We have had queries recently about whether the 10-day holding of deposit rule applies to unconditional offers.

Your obligations under the Real Estate Agents Act 2008
Section 123 of the Real Estate Agents Act requires an agent who receives money in respect of a transaction to hold that money for 10 working days after the day on which they receive it. The only exceptions to this are if: 
  • there is a court order requiring the agent to pay the money before the 10-working-day period expires or
  • there is an authority signed by all the parties to the transaction requiring the agent to pay the money before the 10-working-day period expires.
If a notice of requisition or objection to the title is made while the agent holds the deposit, the agent must not pay the deposit to anyone except for in accordance with a court order or an authority signed by all the parties to the transaction.

Your obligations as a stakeholder under the sale and purchase agreement
Under the REINZ/ADLS sale and purchase agreement, an agent who receives deposit money must hold it as stakeholder until all of the following matters have been satisfied:
  • The requisition procedure is completed without either party cancelling the agreement (purchasers have 10 days from the date of the agreement to give notice of requisition). 
  • Any conditions expressed in the agreement have been fulfilled or waived.
  • All disclosure requirements and timeframes under the Unit Titles Act have been complied with by the vendor.
  • The agreement is otherwise cancelled or avoided or the purchaser having the right to cancel gives notice to the vendor that they waive their right to cancel and complete settlement. 
So what does this mean?
The agreement being unconditional is just one element that must be satisfied before an agent as stakeholder can release the deposit under the sale and purchase agreement. As noted above, the requisition period must also have expired without a claim being made, and if the property is a unit title, the Unit Titles Act disclosure requirements must have been met. It’s important to note that, in the case of unit title properties, disclosure requirements can go as late as five working days before settlement.

A licensee who is seeking early release of a deposit from the parties to a transaction in accordance with s 123(2) should ensure that the parties’ legal representatives are involved in the discussion and decision making around authorising the early release. This will ensure that you are complying with rules 6.1 and 6.2 of the Code of Conduct.