Why has the developer requested proof of funds from me, and is it necessary to provide them?

Why did the developer ask for proof of funds?

There are two main reasons a developer might request proof of funds:

Firstly, developers need assurance that you can afford the property they are selling. To verify this, they may ask for proof of funds such as a bank statement or documentation showing the value of investments like ISAs, bonds or shares. If you cannot demonstrate financial capability, the developer might consider other potential buyers, depending on the current market conditions. It’s important to understand that this isn’t about prying into your finances; it’s simply part of their responsibility.

Secondly, there’s a regulatory aspect involved. Since the implementation of the EU’s Fifth Money Laundering Directive on January 10, 2020, developers are obligated to verify your funds when you submit a property offer. This step ensures not only that you have the necessary funds but also that they weren’t obtained illegally. Therefore, if a developer asks for proof of funds at this stage, you must comply.

How can you present proof of funds to the developer?

You can provide proof of funds through:

– An agreement or mortgage in principle
– Bank statements showing your deposit (for those obtaining a mortgage)
– Bank statements reflecting your available cash (for cash buyers)
– Documentation of a property sale if you’re using those proceeds
– Proof if the funds were gifted

Developers might request additional details about the origin of your funds. This is standard procedure to comply with Money Laundering Regulations, ensuring thorough checks.

In some cases, more evidence may be required. Depending on your deposit’s source or if you’re a cash buyer, the developer might ask for further validation of your claimed funds.

What additional proof might the developer request?

– A letter from the individual who gifted the money (for example parents contributing to a deposit, lottery winnings or inheritance)
– Additional bank statements from previous months or years to display how funds were accumulated
– Documentation or receipts for gambling wins, share sales, or other substantial deposits

It’s wise to maintain a record of all funds related to your property purchase so you’re ready if further proof is requested.

Remember, this won’t be the only instance you’ll need to show proof of funds when purchasing a property. Your lender, broker and solicitor will also require similar documentation. It’s best to prepare ahead and understand these requests are part of their due diligence.

If you are looking for a first rate conveyancing service why not give one of Alexander JLO’s specialist property lawyers a call on 020 7537 7000, click on the get a quote button or email quote@london-law.co.uk for a free, no-obligation quotation? Come and see what we can do for you.

This blog was prepared by Alexander JLO’s property partner Matt Johnson on 20th January 2025 and is correct at the date of publication. Matt has many years of experience of dealing with property work and specialises in new build and shared ownership properties.  His profile on the independent Review Solicitor website and be found here