Early Release of the Deposit when selling your property - an outline to section 27 statements
In certain circumstances, once you have sold your property you may request the deposit be released to you before settlement. This is known as the early release of the deposit under Section 27 of the Sale of Land Act (1962) (the Act).
Once a Purchaser has signed a Contract of Sale, they are required to make payment of the deposit in accordance with the terms set out in the Contract of Sale. The Purchaser can make payment of the deposit to any one of the following:
1. Vendor’s real estate agent; or
2. Vendor’s legal representative; or
3. Into a special purpose account in an authorised deposit-taking institution in Victoria specified by the Vendor in the joint names of the Purchaser and the Vendor.
Whomever the deposit is paid to is called the ‘stakeholder’ under Section 24 of the Act. The stakeholder must retain the deposit and only pay the deposit to the party entitled when:
4. The deposit is released under Section 27 of the Sale of Land Act (1962 Act); or
5. The Contract of Sale is settled; or
6. The Contract of Sale is ended.
In order for the stakeholder to pay the deposit to the Vendor before settlement, the Vendor must fulfil certain obligations as outlined in Section 27 of the Act. The Vendor must give to the Purchaser a notice in writing otherwise known as a ‘Section 27 Statement’ setting out:
7. Whether or not there is a mortgage over the land; and
8. If there is a mortgage over the land, you must give the Purchaser written evidence from your mortgagee which states the particulars of the mortgage such as interest rate, amount owing, frequency of instalments etc.
9. Particulars of any caveat lodged under the Transfer of Land Act 1962; and
10. If there is a caveat lodged, you must give the Purchaser written evidence from the caveator stating the amount owing and that the caveat will either be removed prior to or at settlement.
This is because the Purchaser must be satisfied that the information provided in the Section 27 Statement is accurate and that if the Purchaser pays the balance of the purchase price, they will be able to get the Certificate of Title to the property free of all mortgages and caveats.
It is important to consider whether the purchase price is sufficient to discharge all mortgages over the property. Any debts owed to the mortgagee or caveator and anything else owing against the property such as foreign resident capital gains withholding tax or GST Withholding, must generally not exceed 80% of the sale price.
Once the Section 27 Statement has been served on the Purchaser, the Purchaser has 28 days from the date of service to raise a valid objection to the release of the deposit. If such an objection is raised the deposit will not be released until the objection is satisfied. The Purchaser must give reasons why they are not satisfied, not simply just say they object.
If the Purchaser fails to give notice within the 28 days, then the Purchaser will be deemed to be satisfied with the particulars provided and be deemed to have given the authorisation required and the deposit can be released.
The Purchaser may also agree to the early release of the deposit by signing and returning the Section 27 Statement, which the deposit can be released at that point.
If the stakeholder is a real estate agent, they may retain out of the deposit their commission, any auction expenses and any other moneys that they are or will be entitled. If the stakeholder is a solicitor/conveyancer they may also retain out of the deposit their legal fees provided that it is in accordance with their cost agreement and disclosure statement.
If you require assistance or advice on early release of the deposit, please contact our office on (03) 9707 1155 or via email at admin@wslegal.com.au.