The True Cost of a Holding Deposit: Is It Refundable in NSW?

A holding deposit in New South Wales is typically 0.25 per cent of the purchase price paid at the time of exchanging contracts when a cooling-off period applies. It forms part of the standard deposit and is forfeited if the buyer rescinds during the cooling-off period. Refundability is limited. Full deposits paid are refunded minus the 0.25 per cent penalty upon rescission.

What is a holding deposit in NSW property transactions? A holding deposit refers to the initial payment (commonly 0.25 per cent of the purchase price) made by a buyer at exchange of contracts under a cooling-off period to secure the property. In NSW, this is recognised in private treaty sales with a cooling-off period.

Paid at exchange of contracts (when cooling-off applies) Usually held in a trust account by the selling agent or stakeholder Forms part of the standard deposit (often topped up to 10 per cent after cooling-off) Governed by contract terms and statutory cooling-off rules under the Conveyancing Act 1919 (NSW) Unlike a preliminary expression of interest deposit (which is fully refundable), this payment at exchange does not finalise the transaction unconditionally but provides the buyer time during cooling-off.

How does this impact Sydney property buyers, sellers, and businesses? In Sydney’s high-value and fast-moving property market, the 0.25 per cent payment at exchange is used in private treaty sales to secure the property during the cooling-off period while checks are completed. For buyers, it provides time for due diligence. For sellers, it offers some protection via potential forfeiture.

For property-related businesses such as developers, renovation firms, and construction operators, delays or rescissions during cooling-off can affect project scheduling, financing, and subcontractor commitments.

Buyers risk forfeiting the 0.25 per cent if they rescind during cooling-off Sellers may lose time if a buyer rescinds (but retain the 0.25 per cent) Projects relying on settlement timing can face downstream delays Why is this important for NSW projects and compliance? NSW property law draws a clear distinction between preliminary payments and the exchange deposit (including the initial 0.25 per cent portion). Misunderstanding this can expose parties to financial loss or disputes.

Under the Conveyancing Act 1919 (NSW), buyers generally have a five-business-day cooling-off period after exchange unless waived. If a buyer rescinds during cooling-off, the seller is entitled to retain 0.25 per cent of the purchase price as a penalty.

This legal framework means compliance is not optional. Incorrect handling of deposits can trigger trust account breaches, contractual disputes, or professional liability issues.

What does this typically cost or affect in Sydney? Deposit Type: Initial/Holding Portion at Exchange (with cooling-off)

Typical Amount: 0.25 per cent When Paid: At exchange Refundability: Forfeited if buyer rescinds during cooling-off Deposit Type: Full Exchange Deposit

Typical Amount: Up to 10 per cent (often 0.25 per cent initial + balance later) When Paid: Initial at exchange; balance after cooling-off or at exchange if waived Refundability: Generally non-refundable after cooling-off expires On a Sydney property priced at $1.5 million, the initial holding amount at exchange is typically $3,750. This amount is forfeited if the buyer rescinds during the cooling-off period.

What are the risks or benefits of paying a holding deposit? The 0.25 per cent payment at exchange offers practical benefits but carries defined risks under NSW law.

Benefits: Secures property during cooling-off, time for due diligence, reduced risk of gazumping during period Risks: Forfeiture of 0.25 per cent if rescind, potential additional costs if issues arise post-cooling-off Operational impact: Settlement uncertainty for construction, renovation, and infrastructure planning For example, a purchaser planning immediate renovation or floor remediation works may commit contractors prematurely, only to forfeit the 0.25 per cent and face downstream planning costs if they rescind.

Why choose Elyment Property Services in NSW? Elyment Property Services operates at the intersection of property operations, legal compliance, and technology systems . Unlike single-discipline providers, Elyment understands how deposit structures, conveyancing workflows, and operational timelines intersect in real projects.

Elyment works with AI and automation to deliver business solutions that support compliance, verification, and risk management across property transactions. This includes workflow automation, document verification systems, and governance-focused process design.

Technology-enabled compliance and verification systems Operational insight across construction and renovation workflows Risk-aware process design for property and infrastructure projects This integrated approach helps clients reduce uncertainty before exchange, not after disputes arise.

Learn more about Elyment’s property and operational services and its technology and automation capability.

Speak to Elyment About Deposit Risk and Compliance

Sources & References NSW Fair Trading - Contracts and deposits: https://www.fairtrading.nsw.gov.au/housing-and-property/buying-and-selling-property/buying-a-property/contracts-and-deposits NSW Government - Contracts and deposits when buying property in NSW: https://www.nsw.gov.au/housing-and-construction/buying-and-selling-property/buying-property-nsw/contracts-and-deposits Conveyancing Act 1919 (NSW) - Section 66S (Cooling off period): https://legislation.nsw.gov.au/view/html/inforce/current/act-1919-066#sec.66S NSW Fair Trading - Making an offer (on preliminary deposits): https://www.fairtrading.nsw.gov.au/housing-and-property/buying-and-selling-property/buying-a-property/making-an-offer