Understanding Property Deposits in New Zealand

Buying a property in New Zealand involves paying a deposit — a sum of money that confirms your commitment to the purchase and forms part of the overall purchase price. The deposit is one of the most important financial elements of any property transaction, yet many buyers are unclear about when it is paid, who holds it, and what happens if something goes wrong.

This guide explains how deposits work under the standard ADLS/REINZ Sale and Purchase Agreement (SPA), what KiwiSaver buyers need to know, and how to protect yourself if you are a vendor or purchaser in a situation involving an early deposit release.

What Is a Property Deposit?

A deposit in a Sale and Purchase Agreement is the first instalment you as the purchaser pay to the vendor (seller). It is a part-payment of the purchase price — not an additional fee on top of it. The deposit demonstrates your commitment to the transaction and gives the vendor some financial security during the period between signing and settlement.

The deposit is held in trust (not given directly to the vendor) until the sale is completed at settlement. If settlement does not proceed through the vendor’s fault or for a legitimate reason, the deposit may be refunded to the purchaser.

How Much Is the Deposit?

The standard deposit under the ADLS/REINZ SPA is 10% of the agreed purchase price.

For example:

Purchase price of $750,000 → deposit of $75,000
Purchase price of $1,200,000 → deposit of $120,000

If you do not have access to the full 10%, it is often possible to negotiate a reduced deposit. Many vendors will accept:

A 5% deposit, or
A specified alternative amount agreed between the parties.

However, vendors are not obliged to accept a reduced deposit. Your lawyer can assist with negotiating terms before the SPA is signed.

When Is the Deposit Paid?

The default position under the ADLS/REINZ SPA is that the deposit is payable on signing the agreement.

This default can be a problem if you are purchasing on a conditional agreement — for example, with finance or due diligence conditions. Paying a 10% deposit before your conditions are satisfied means your money is at risk if those conditions are not met.

For conditional agreements, it is strongly recommended that your lawyer negotiate the SPA so the deposit only becomes payable once all conditions are satisfied — i.e., when the agreement becomes unconditional. This is a standard amendment that vendors will often accept, and it protects you from the risk of losing a substantial deposit if your conditions are not met.

Under the standard SPA, the deposit is payable on signing — but for conditional purchases, your lawyer should always negotiate to make it payable on going unconditional instead.

Who Holds the Deposit?

The deposit is held in a trust account — it does not go directly to the vendor. The SPA specifies who holds the deposit. Common arrangements include:

Scenario	Who Holds the Deposit
Sale through a real estate agent	Agent's trust account (most common)	Vendor's lawyer's trust account (sometimes)
Private sale (no agent)	Vendor's lawyer's trust account	Purchaser's lawyer's trust account (negotiated)
KiwiSaver funds used for deposit	Vendor's lawyer's trust account (as stakeholder)	Required by the standard KiwiSaver clause

The trust account arrangement means the vendor cannot access the deposit simply because they have received it — it remains protected until the conditions of the agreement are satisfied and settlement is completed.

Using KiwiSaver as a Deposit

If you are a first home buyer using your KiwiSaver funds as part or all of your deposit, the standard SPA provisions create complications that must be addressed with a specific contractual clause.

The Problem

KiwiSaver withdrawal applications take 8–15 working days to process. The funds are released directly from your KiwiSaver provider and cannot be held speculatively while you wait for agreement conditions to be satisfied. If the funds are paid into the wrong account or the deal falls through, recovering them can be difficult.

The Solution: A KiwiSaver Deposit Clause

Your solicitor should insert a specific clause into the SPA confirming that you are using KiwiSaver funds for the deposit and setting out how those funds will be held and applied. This protects both you and the vendor.

The standard clause NZ Legal uses for purchasers relying on KiwiSaver is:

21.0 Deposit — KiwiSaver Funds

A deposit of 10% of the purchase price is payable upon this agreement becoming unconditional. The parties agree that the purchaser is using KiwiSaver funds for payment of the deposit and agree that the deposit shall be held in the Vendor’s solicitor’s trust account as stakeholder pending completion of settlement. Prior to payment of the deposit, the Vendor’s solicitor shall provide an undertaking to the Purchaser’s solicitor confirming that in the event that settlement is not completed by the due date in the Agreement or any agreed extended date (except where non-completion of the settlement date is due to the purchaser’s default) the deposit will be immediately refunded to the purchaser’s solicitor trust account.

This clause ensures:

The deposit is only payable once the agreement is unconditional,
The funds are held safely in the vendor’s lawyer’s trust account as a stakeholder (not accessible to the vendor),
The vendor’s solicitor provides a formal undertaking to refund the deposit if settlement does not proceed through no fault of the purchaser.

Impact on the Vendor

Where KiwiSaver funds are used for the deposit, the vendor cannot access the deposit until settlement. This can cause practical problems for vendors who need the deposit funds to pay a deposit on their own onward purchase.

If the vendor is in that situation, they may need to arrange bridging finance — a short-term bank lending facility used to cover the gap between purchasing a new property and receiving proceeds from their current sale.

Bridging finance comes in two forms:

Closed bridging finance: Both the sale of the existing property and the purchase of the new property are unconditional. The bridging finance simply covers the gap between the two settlement dates.
Open bridging finance: The vendor wants to purchase a new property before their existing property is sold. The lender finances the purchase on the basis that the existing property will be sold (usually within six months). Open bridging finance is more expensive and involves greater lender scrutiny.

Bridging finance attracts floating interest rates plus a premium. It should be arranged in advance and budgeted for carefully.

The 10-Working-Day Holding Period

Deposits are regulated by the Real Estate Agents Act 2008. Section 123 of that Act requires a real estate agent who receives funds relating to a property transaction to hold those funds for 10 working days from receipt before releasing them to the vendor.

This holding period exists to allow either party to raise a requisition or dispute during that window. Common grounds for a requisition include:

An unregistered easement or covenant,
A title defect discovered after exchange,
A discrepancy in the property’s legal description.

The 10-working-day requirement can only be shortened if both the purchaser and vendor agree in writing to an earlier release.

In some transactions — particularly where settlement is imminent — the settlement date may fall within the 10-working-day holding period. If this happens, your lawyer should insert an appropriate clause in the SPA permitting early deposit release once both parties agree.

Early Release of the Deposit

In some cases, a vendor will request an early release of the deposit — before the standard 10 working days have elapsed or before settlement. This is most common when the vendor needs the deposit funds to pay a deposit on their own onward purchase.

Risks of Early Release for the Purchaser

Early deposit release carries real risks for the purchaser:

You lose leverage if a dispute arises before settlement — the vendor has your money
If the vendor defaults or cannot settle, recovering the deposit can be difficult and costly
The real estate agent typically deducts their commission before refunding the deposit, meaning the vendor may not have the full amount available to return to you
If the vendor becomes insolvent before settlement, your deposit may be at risk even if you have a legal entitlement to a refund

NZ Legal recommends that purchasers be cautious about agreeing to early deposit release. If you are asked to agree, your lawyer should negotiate appropriate protections — such as a vendor’s solicitor’s undertaking to hold the funds safely — before you consent.

What Happens If You Do Not Pay the Deposit?

Missing your deposit payment or defaulting on the SPA can lead to serious consequences. These are set out in clause 2.2 of the ADLS/REINZ SPA.

The Default Process

Step 1

Deposit not paid by the due date

The purchaser fails to pay the deposit by the contractually agreed date.
Step 2

Notice of Default issued

The vendor issues a formal Notice of Default to the purchaser, requiring payment of the outstanding deposit.
Step 3

Three working days to remedy

The purchaser has three working days from receipt of the Notice of Default to pay the deposit and remedy the breach.
Step 4

Vendor may cancel and claim damages

If the deposit is not paid within those three working days, the vendor may cancel the agreement, retain any part-deposit already paid (up to a maximum of 10% of the purchase price), and bring a claim for any losses suffered as a result of the default.

The consequences of non-payment are serious. If the vendor cancels and the property later sells for less, the vendor may pursue you for the shortfall.

Deposit Refund: When Can the Purchaser Get Their Money Back?

A purchaser is entitled to a full refund of the deposit in the following situations:

The vendor fails to or refuses to remove a title issue raised by a valid requisition,
A condition in the SPA is not satisfied (and was not satisfied within the agreed timeframe), and the agreement is cancelled on that basis,
The vendor defaults and is unable to complete the transaction,
Both parties agree to cancel the agreement.

Where the purchaser is at fault — for example, failing to satisfy a finance condition through their own inaction — the position is more complex and legal advice should be obtained immediately.

Key Takeaways

Deposits are central to property transactions in New Zealand. Before signing any SPA, make sure you understand:

Your deposit is typically 10% of the purchase price — check you have the funds available before signing
For conditional agreements, negotiate to make the deposit payable on going unconditional, not on signing
If using KiwiSaver, ensure your lawyer includes the appropriate KiwiSaver deposit clause in the SPA
Understand who holds the deposit and where — confirm the trust account details
Think carefully before agreeing to early deposit release — understand the risks
Pay the deposit on time — late payment gives the vendor the right to cancel and claim damages
If using KiwiSaver, apply for withdrawal early — providers take 8–15 working days

If you are buying or selling a property and need advice on structuring a deposit arrangement, get in touch with NZ Legal for specialised property advice.

This article provides general information about property deposits under New Zealand law as at November 2025. It is not legal advice. Speak to a lawyer about your specific situation.

Sources

Real Estate Agents Act 2008, section 123Governs how real estate agents must hold trust funds, including the 10-working-day holding requirement.
KiwiSaver Act 2006Sets out the rules for KiwiSaver withdrawals for a first home purchase.
ADLS/REINZ Agreement for Sale and Purchase of Real EstateStandard form SPA used in NZ residential transactions, including deposit and default clauses.
Property Law Act 2007Governs property transactions and vendor/purchaser obligations in New Zealand.

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Written by

Adam Siddall

Founding Director, Property Lawyer

Adam is the founding director of NZ Legal and a New Zealand property lawyer. He advises buyers, sellers, developers, lenders, and overseas investors across residential and commercial property — covering conveyancing, OIA sensitive land consents, commercial leasing, construction finance, and property development from subdivision through to off-the-plan sales.

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Understanding Property Deposits in New Zealand | NZ Legal