The Standard Conditions of Sale (5th edition - 2018 revision) provide that the deposit paid by the buyer on exchange of contracts must be held by the seller's lawyer in a particular way. Which of the following is true?

• A. All or part of the deposit may be used as a deposit on a related purchase by the seller, with the balance held as stakeholder
• B. Deposit must always be held in separate client account
• C. Deposit returned if sale falls through
• D. Deposit used to pay off mortgage

Answer: (A)

The key idea is that the deposit from the buyer can be managed in a flexible way to keep a property chain moving. Under the Standard Conditions of Sale, the seller’s lawyer holds the buyer’s deposit but can apply all or part of it as the deposit on a related purchase by the seller, with the balance then held as a stakeholder. This setup is designed to help the seller fund their own next purchase without tying up extra cash, while still safeguarding the buyer’s funds until completion.

Why this is the best fit: it directly reflects the standard’s allowance for recycling the deposit into a related purchase in the seller’s chain, with the remaining funds placed in a stakeholder arrangement to await the next steps.

Why the other options aren’t correct in this context: the deposit isn’t required to always be kept in a separate client account in every case; the standard allows the related-purchase use and a stakeholder balance. The deposit isn’t automatically returned if the sale falls through—the outcome depends on the contract and the reasons for failure. And it isn’t inherently used to pay off the seller’s mortgage unless the parties specifically agree or the contract provides for that arrangement.