Q Last year, I agreed to buy a flat in a new development in Bristol and paid a deposit of £18,500. Now the development is finished, my lender will not lend me the rest of the money that I need. The developer has threatened to keep the deposit under the terms of the sale agreement. I know that I have signed a contract, but is there anything I can do to get my deposit back?

A The contracts used by most solicitors in England and Wales incorporate the Law Society's Standard Conditions of Sale (4th Edition). The Standard Conditions say that if a buyer does not pay the purchase price, the seller can serve a notice to complete by a specified date. If the buyer does not complete, Standard Condition 7.5.2 allows the seller to end the contract and forfeit the deposit.

The main statutory protection for the buyer is Section 49 of the Law of Property Act 1925. This states that a “court may, if it thinks fit, order the repayment of any deposit”. This gives the court the power to intervene in any case where a deposit is forfeited.

It is quite common for sellers' solicitors to try to include a specific provision in the sale agreement saying that section 49 will not apply. However, this kind of exclusion clause will not work.

In the 2007 case of Aribisala v StJames' Homes, the High Court considered very large deposits paid by a Nigerian chief for two flats in Docklands. The judge held that the parties could not agree to exclude the court's discretion to order repayment of a deposit under Section 49. Having said that, it is clear that the usual position is always that a buyer loses his deposit if he fails to complete. When Chief Aribisala returned to court earlier this year, the judge gave him very short shrift and allowed the developer to keep the deposit. The High Court decided that it could look at factors such as the financial impact on both the seller and the buyer, the attempts made to find the rest of the completion moneys and the conduct of the parties. However, the mere point that the seller received a substantial unearned windfall was not enough by itself. The default position is always that if you do not pay the balance of the purchase price, you lose your deposit.

The writer is a barrister at Tanfield Chambers. E-mail your questions to: brief.encounter@thetimes.co.uk

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