The deposit is a part payment of the purchase price made by the buyer on exchange of contracts. It ensures that he will go ahead. If he backs out without proper reason, the deposit is taken by the seller.

The deposit is ten per cent of the purchase price. Often the buyer will not have that much. He may be borrowing more than ninety per cent, or may be buying and selling, and not putting in any cash at all. He will ask to pay less than ten per cent, but he still agrees to pay the rest on demand. Such a promise may not mean much since, if he had the rest in cash, he would be paying it.

Deposit are received in either of two ways:

• The seller's solicitor holds the deposit independently, as 'stakeholder', and ensures it is paid out to the seller only after completion, or repaid to the buyer as necessary.
• Usually, he receives the deposit as 'agents for the seller'. He is told how to use the deposit by his client. The standard contract provides that he can only use it for a deposit on a linked purchase. The same money can then be used more than once in a chain; a seller's solicitor will pass on what he received on his own client's sale. If a seller has to repay the deposit, he would first have to recover it, from someone who has probably himself passed it on, in the same way, or he may have lost the right to recover it. It is rare for a chain to collapse, but a buyer takes a real additional risk when he agrees to pay the deposit to the seller's solicitors 'as agents'.

There is therefore (usually) give and take:-

• The seller accepts a deposit smaller than ten per cent, and takes the risk that his buyer cannot find the rest. In return, he does not have to find a full deposit himself - but can use what his buyer provides.
• The buyer does not have to find the full 10% deposit, and takes the risk that the seller might not be able to repay to him what he does find.

This system provides very considerable convenience to both parties, but that is offset by increased risks to both. The risks can be increased where for example there is a delayed completion. You must be sure that you understand and consent to these risks. The alternative is that you find, and pay, a full deposit on your purchase, and/or you may find it difficult in turn to sell your own house.

Save for good reason, or you say not to, we will agree on your behalf, as seller or as buyer, that a short deposit is paid, and is used 'as agents'. If this concerns you, then you must tell us immediately. This is a complicated subject, but please take time to understand it, and be sure that we know what you want us to do.

If expect to be unable to find your own full ten per cent deposit, please let us know immediately.

It is sometimes said that solicitors make money from the interest on these deposits. This does not normally happen. Only one sum of money, a small one, is passed quickly from firm to firm, and completion takes place very shortly. Any interest earned is payable to client in accordance with Law Society Rules.