Family Forum: Lost Money

Where do lost deposits go?


My grandson, in 2018, paid a sizeable deposit on a block of land on the understanding that his parents would go guarantor for him with the NAB Bank, but they would not accept this. The real estate salesperson was not that helpful and my grandson lost his deposit. My question is, where does the money go? There’s an argument here that it was a completely new development and there was plenty of time to sell the block, which did sell. As his grandparents, we feel for him as a young man.


The Legal Services Commission says real estate contracts can include a variety of terms and conditions. They sometimes include a special clause that makes the contract “subject to finance”.

This means the purchaser must get finance approved by the specific date agreed between the vendor and the purchaser. The clause may also include conditions such as the amount, the name of the lender and the interest rate. The contract should also state what happens if the purchaser does not get finance. This is important to protect the purchaser’s ability to cancel the contract and get any deposit back. Some purchasers fall into the trap of thinking that the contract is at an end if they do not get approval for finance. As your story demonstrates, this may be a costly error to make.

Failure to get finance by the agreed date may result in the contract becoming unconditional. This means that the “subject to finance” clause no longer applies to the contract. To avoid this, the purchaser should cancel the contract or ask for an extension of time to get finance. If the contract is unconditional, the vendor can keep the deposit and insist on settlement. A purchaser who cannot settle can also be liable to pay any damages for loss incurred by the vendor.

This may explain what happened to your grandson. If he did not cancel the contract or ask for an extension of time to get finance, depending on the terms of the contract, the vendor was able to keep the deposit.

The terms and conditions of each contract are different. Anyone signing a contract “subject to finance” should get independent legal advice first. You can get free legal advice from the Legal Services Commission of SA on 1300 366 424.

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