We have clients who signed a contract in June 2007 to purchase a flat in a large new development, off-plan. At exchange of contracts, they had a mortgage offer based on the flat having a value of £470,000 and they paid a deposit of £47,000.

Unfortunately, the value of the flat has decreased significantly since exchange. Our clients have received a valuation of £350,000 from one mortgage lender and £320,000 from another. They are therefore unable to obtain the mortgage that will enable them to pay the contract price.

The developer has refused to permit our clients to purchase instead another flat that still has a value of £470,000 for which they would still be able to obtain a mortgage or to reduce the purchase price of the flat they agreed to buy. The developer is likely to serve notice of practical completion in the next couple of weeks and, since our clients will be unable to complete, they are at risk of losing their deposit and perhaps also having to pay damages to the developer.

Under Section 49(2) of the Law of Property Act 1925, it is possible for a court to order the return of a deposit if it thinks fit, but according to case law an action will only be successful in exceptional circumstances. We consider the current recession to be an exceptional circumstance.

We would be grateful to know whether other solicitors have clients in similar positions and, if so, whether they would be prepared to contact us to discuss the matter.

Calvert Solicitors, London Bridge, London