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Deposit Disputes: How to Protect Yourself Before and After Signing

Whether you're buying or selling, the deposit can become a legal flashpoint if something goes wrong. From pulling out during the cooling-off period to last-minute finance issues, disputes over the deposit are more common than you think. Here's how to protect yourself before and after the contract is signed.

What Is a Property Deposit? 

In NSW, the standard deposit paid on a property purchase is 10% of the purchase price, usually held in trust by the real estate agent or solicitor until settlement. 

This deposit is not a casual payment; it’s legally binding once contracts are exchanged and can be forfeited if the buyer defaults. 

When Can Deposit Disputes Arise? 

Here are the most common causes of deposit disputes in NSW: 

• The buyer pulls out after the cooling-off period 

• The buyer waives their cooling-off rights via a Section 66W certificate, then can’t complete 

• Finance falls through after exchange 

• One party accuses the other of breaching the contract terms 

• There's confusion over when a partial or reduced deposit was agreed 

Each of these scenarios can trigger legal action or costly delays, especially if there's no clear agreement on how the deposit is to be handled. 

Buyer Protections: Cooling-Off Period vs. 66W Certificate 

Buyers in NSW typically have a five business day cooling-off period after exchange, during which they can walk away by forfeiting 0.25% of the purchase price. 

However, if the purchaser’s solicitor or conveyancer signs a Section 66W certificate, they waive this right completely; meaning if they back out, the vendor may be entitled to the full 10% deposit, plus damages.

Always get legal advice from a property solicitor before waiving the cooling-off period. Learn more from NSW Fair Trading – Cooling-off period. 

Vendor Protections: What Happens If the Purchaser Defaults?

If the purchaser fails to complete the purchase (for example, because their finance didn’t come through or they changed their mind), the vendor may be entitled to:

• Terminate the contract 

• Keep the full 10% deposit 

• Pursue additional damages if the property is re-sold at a lower price 

However, disputes can still arise if the contract terms are unclear, or if the buyer argues they were misled or pressured into signing. 

How to Protect Yourself Before Signing 

Engage a conveyancing solicitor early
They’ll help review the contract, negotiate fair terms, and advise on any deposit conditions. 

Understand your rights around the deposit
Ask: Can the deposit be reduced? What happens if settlement is delayed? Who holds the deposit in trust? 

Avoid verbal agreements
Everything should be clearly written into the contract of sale, including whether a reduced deposit (e.g. 5%) is accepted. 

Don’t waive cooling-off lightly
Only instruct your solicitor or conveyancer to provide a Section 66W certificate on exchange, once you’ve had full legal advice and are 100% confident about proceeding.

What If You’re Already in a Dispute? 

If you're caught in a deposit dispute, whether as a purchaser or vendor, act quickly:

• Contact your solicitor immediately 

• Check whether your contract includes dispute resolution clauses 

• Gather all written communication and documents 

At ClickLaw, we can review your contract, assess your legal position, and help resolve the issue, ideally before it escalates. 

Your deposit is one of the biggest financial commitments in a property deal, don’t risk it. Whether you’re about to sign or facing a potential dispute, ClickLaw’s expert property solicitors can help protect your interests.

Contact us today for fixed-fee legal advice on property contracts, cooling-off periods, and deposit protections.