The use of a retention is often to allow exchange of contracts or even the completion of a sale (so the buyer can move in) when there are still matters outstanding. The retention funds are usually held by a solicitor.
Example One: The property is a flat and the seller owes some service charge payments but it is not clear how much as the managing agents books are out of date. The seller agrees that £5,000 should be held in retention to clear these debts when they are clarified. The balance - any amount left from the £5,000 - is then given to the seller.
Example Two: In a survey it is suggested that the roof of a house must be replaced but due to the unusual nature of the structure quotes from builders vary and none of the builders are prepared to guarantee their quotes. £50,000 is held in retention until the work is carried out by the buyer (after they move in). Any funds left over are then forwarded to the seller.
I'm Tim Hill, Author of How to Really Buy a Property. I'm a property buyer, seller, landlord, tenant and I've been an agent in hundreds of transactions. I own a property portfolio across Europe but that doesn't mean I think you should to!
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