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Early release of deposit monies explained.

What is a Section 27 Statement and how does an early deposit release work?

A Section 27, or early release of deposit, is a part of the conveyancing process and is unique to conveyancing in Melbourne and Victorian properties. It gets its name from the Section of the Sale of Land Act Victoria 1962 – Section 27.

It is also formally referred to as Early Release of Deposit Authority. Usually you will hear the term Section 27 used by real estate agents and conveyancers.

It allows for the vendor, in certain circumstances, to get early access to the deposit monies before settlement. Vendors in other states across Australia only get paid the monies after or at settlement.

It is important to understand how the process works when buying a property.

It is fairly simple, but also has some tricky bits. We explain how the process works and when a vendor can’t get deposit monies early.

What’s in a Section 27 Deposit Release Form? 

The Section 27 form is simple and usually contains:

  • Details of the vendor’s mortgage
  • Confirmation that there is no caveat over the property 

We often hear concerned vendors worried about giving the purchaser the details of their mortgage. This is a key legal requirement and it is not compulsory to get your deposit released early. So, if privacy is a concern vendors may opt to wait until settlement.

The form needs to be signed and dated by the Vendor. It also has a section for the purchaser to sign to say they have acknowledged receipt of the form. There is another section for the purchaser to also authorise the release of the deposit monies.

The process of getting a deposit released early. 

How the dates for getting the deposit released causes a bit of confusion. We outline the process here.

The vendor must complete the form, complete with details about any charges or mortgages over the property. You will also need a letter from your lender confirming the mortgage amount confirming this information.

Once the purchaser’s conveyancing lawyer has received the section 27 the clock starts ticking. 28 days becomes the outside date the vendor can get their deposit monies released if there are no legal grounds for objection. Note this is 28 days from the date the purchaser’s conveyancer is served with the Section 27 NOT the sale date in the contract.

One of Three things can happen from here…..

Section 27 - How they work infographic

Section 27 - How they work infographic

Section 27 How its approved or rejected

 

The purchaser must have a legal reason to object, read more below. No one can make the purchaser return the Section 27 quickly, so some patience and tact is required. If they don’t sign and return the Section 27 by 28 DAYS AND no objection has been lodged then the deposit monies can be released early.

The vendor’s conveyancer will keep track of this and once the 28 days has passed can request the Real Estate Agent release the deposit monies.

Does the deposit get released all the time?

In short no. Certain conditions must be met for the deposit monies to be released prior to settlement. The purchaser can object to the release of deposit monies.

Here are some of the main reasons the purchaser can object:

  • The property is an off the plan purchase 
  • The contract is unconditional – purchaser should have accepted title 
  • The mortgage amount secured against the property is more than 80 percent of the sale price in the contract 
  • There is a caveat on the property 

I’m a purchaser do I have to agree to the release of the Deposit monies?

Where there are no legal objections the deposit can be released to the vendor even if the purchaser does not consent. It just means that it takes the maximum amount of time – 28 days.

It is normal to be concerned about the deposit being released to the vendor as it is usually 10% of the purchase price ie a lot of money!

The law protects purchasers by already having detailed the reasons the purchaser can object. The reasons for objecting cover most cases where a vendor wouldn’t be able to settle. Ultimately, it’s up to your conveyancer to check and provide the right advice to protect you as the purchaser.

Mostly vendors use the deposit monies to help fund the deposit on their next property purchase. Often in longer settlements the deposit is released.

Getting a skilled and thorough conveyancer to act for you is key to mitigating risks when buying a house.

Real estate agents can also apply a lot of pressure to purchasers to get monies released early as they can get paid their commission. It can help keep good relations between the purchaser and vendor if this process is not unnecessarily frustrated.

How the deposit monies get released?

Once the 28 days have elapsed or the purchaser’s conveyancer returns the signed Section 27 to your conveyancer, they can authorise the deposit release.

The deposit monies are usually held by the real estate agent in their trust account. The agent is entitled, by law, to take any expenses and commission they are owed and the vendor receives the balance.

If you’re a vendor and have an issue with the real estate agent’s fees you should sort this out before the deposit monies are released.

Getting quality conveyancing legal advice.

It is important to have the right conveyancer taking care of you when buying a house. Issues can be overlooked and inexperienced conveyancers are prone to making mistakes. Getting quality advice and representation is recommended as there is a lot at stake for purchasers when buying a property.

At Conveyancing Depot, our conveyancers care about their clients and the level of service that is provided. We want to the best by our clients and have high standards for service we provide.

To speak to a lawyer or conveyancer about Section 27s or conveyancing in Melbourne/Victoria call us on 1300 900 440. You can also submit a form online and we’ll call you.

Disclaimer: This article has been prepared for general information purposes and may not apply to your situation. This information should not be relied upon for legal, tax or accounting advice. Your individual circumstances will alter any legal advice given. The views expressed may not reflect the opinions, views or values of Conveyancing Depot and belong solely to the author of the content. © Conveyancing Depot Pty Ltd.

If you require legal advice specific to your situation please speak to one of our team members today.