It is not unusual in a property sale for sums to be left outstanding from a buyer under a sale contract following completion of a property disposal. But how can the seller be sure of receiving this deferred consideration?

The seller may be content simply to rely on the terms of the sale contract if the buyer has a strong financial covenant. But this may be risky where the buyer is of little worth, or the consideration is to be deferred for a material period.

What to do?

Where the buyer is retaining part of the price against the occurrence of a specific event (such as the transfer of SPS entitlements) then an escrow arrangement may be appropriate under which the monies are held by a third party until certain conditions are met. Otherwise, the seller may need some other security.

The obvious option is a legal charge over the property, but this may not be practical if the buyer is borrowing to finance the purchase and the borrower's lender requires a first legal charge.

If the buyer is a company then it may be able to offer the seller a parent company guarantee. However, there is a danger that the parent's worth may decrease. Guarantees are also subject to the further risk that the guarantor's liability can be discharged inadvertently (eg by a subsequent variation to the contract).

A further option is a bank bond, which imposes an obligation to pay a specified sum of money on the happening of a particular event (ie the purchaser failing to pay) regardless of the terms of, or any variation to, the underlying contract. But the buyer may well object to the expense involved in procuring a bond and the institution which gives the bond will seek to limit its liability as much as possible, to the point where the terms of the bond may be unacceptable to the seller anyway.

The best option will obviously differ, depending on the particular circumstances of the parties and the terms of their agreement. However, it is vital that the seller explores all available options fully if it is not to be faced with the prospect of incurring costs in trying to recover monies from a buyer who has no prospect of paying them.