In residential Conveyancing, a retention is usually a part of the purchase money which is held back on completion and retained by one of the party’s solicitors until some further action is completed.
For instance, the seller may be required to complete some work to the property, or if the seller has an outstanding insurance claim for damage to the property, money may be retained until the insurers have arranged completion of any repairs or otherwise settled the claim. Another possibility is that the seller may have to get a document signed by someone else, such as a release by a third party or a landlord’s consent to alterations, which was not available on completion.
Retention and Leasehold Property
When leasehold properties are sold, it is often impossible to know the exact amount of service charges due at completion. This is because although the freeholder may have estimated the amount at the beginning of the accounting year, the final amount cannot be ascertained until the end of that year, when the final accounts are prepared. It may therefore be agreed prior to completion that one of the party’s Conveyancing Solicitors will retain a sum of money to cover any final apportionment due once the accounts become available.
When the buyer receives the accounts they may show that a further sum is payable for the year during which the sale took place. If this happens then the buyer will be legally liable to pay the outstanding sum, but the seller should contribute the proportion due up to the date of sale. Consequently the seller’s proportion can be taken from the retention, and any balance returned to the seller.
When such retentions are held, there should be clear agreement between the parties and their lawyers as to:
- the terms on which the money is held, and,
- the circumstances in which it is to be paid out to either the seller or the buyer
Clients should also check whether their Conveyancing Solicitors will charge any additional costs for administering any such retention.
Sometimes mortgage lenders retain part of the mortgage advance, usually until some work has been carried out to the property. This is often the case where the survey found that remedial work was required, such as woodworm treatment, which cannot be carried out until after completion of the purchase.