Under the Standard Conditions of Sale, how is the deposit held on exchange of contracts?

• A. In the buyer's client account to be released to seller at completion.
• B. As security for the buyer's own performance.
• C. As agent for the seller to be utilised on the client's related purchase.
• D. Held in a joint escrow with the lender.

Answer: (C)

The key idea here is that the deposit paid on exchange acts as security for the buyer’s performance under the contract. In practice, it is usually paid to the seller’s solicitor and held on trust as a stake until completion, to be applied toward the purchase price when completion occurs. If the buyer breaches, the seller can generally keep the deposit as compensation for losses; if the seller breaches, the buyer can typically recover the deposit. This safeguards the seller while incentivising the buyer to complete. It isn’t held in the buyer’s own account, nor is it meant to fund a related purchase or be held jointly with the lender.