Section 27 - Early Release of Deposit
What is a Section 27 Early Release of Deposit?
The deposit paid by the Purchaser in a conveyancing matter is ordinarily held in the trust account of the Real Estate Agent pending settlement. Once the property has settled, the deposit can be released to the Vendor. However, a Section 27 Early Release of Deposit allows a Vendor early access to their deposit, prior to settlement.
To initiate the process, the Vendor’s representative must serve a Deposit Release Authority Statement (‘the Section 27 Statement’) to the Purchaser’s representative, pursuant to Section 27 of the Sale of Land Act 1962.
What Information is Included in the Section 27 Statement?
The Vendor must disclose the following:
The details of any mortgage registered over the land:
—> For example, how much is owed under the mortgage and whether the Vendor is in default under their loan.
—> This must be supported by a letter from the Vendor’s Bank verifying these details.
Particulars of any caveat lodged in respect of the land.
Why Would a Vendor Issue a Section 27 Statement?
A Vendor may require early access to their deposit for several reasons, such as:
Pay a deposit for a property they are purchasing
Pay down their loan
Can a Purchaser Object to a Section 27?
The Purchaser may object within 28 days from the date that notice is served on their legal representative.
The Purchaser may object if:
The Vendor has not provided supporting evidence from the mortgagee as to the particulars of the Statement (i.e. the Bank Letter); or
The vendor owes their bank more than 80% of the sale price; or
A caveat has been lodged in respect of the land; or
There are conditions enuring for the benefit of the purchaser (e.g. subject to finance clause).
How Can this Impact the Purchaser?
The Vendor could lose legal capacity before settlement and may not be able to settle the property. If the deposit has already been accessed, it may be difficult for the Purchaser to recover their deposit monies from the Vendor. This may result in delays and the Purchaser having to seek legal action to recover the deposit via the Court System.
How Can this Impact the Vendor?
The early release of the deposit is never guaranteed and should not be relied upon.
The Purchaser could agree to release the deposit by signing the Section 27 Statement. In this case, the deposit can be released to the Vendor immediately.
Suppose the purchaser remains silent, and their legal representative provides no objection. In that case, the Vendor must wait 28 days from the date the Statement is served on the Purchaser’s legal representative before the deposit can be released to them.
If a Purchaser’s representative objects by arguing that there are other conditions in the contract which enure for the benefit of the Purchaser, the deposit cannot be released.
This argument is yet to be tested in Court and it is unlikely that a Vendor would take a Purchaser to Court about this.
Therefore, we advise you not to rely on the early release of the deposit
*The above information is general advice ONLY and not tailored to your personal circumstances. Should you require specific advice, you should contact Blueprint Legal.