When selling a property in Victoria, sellers sometimes ask whether they can receive the buyer’s deposit before settlement.
This is where Section 27 of the Sale of Land Act 1962 (Vic) can become relevant.
A Section 27 statement is commonly used when a seller wants to seek the early release of the deposit paid by the purchaser before settlement.
However, the deposit cannot simply be released because the seller asks for it. Specific requirements need to be satisfied before the deposit can be released.
This article explains what Section 27 means, when a deposit may be released early and what buyers and sellers should know.
What Is Section 27?
Section 27 of the Sale of Land Act 1962 (Vic) deals with the early release of a purchaser’s deposit in certain circumstances.
Normally, a deposit paid under a Contract of Sale is held in a trust account until it can be released in accordance with the relevant legal requirements.
A seller may seek to have the deposit released before settlement by providing the purchaser with the information required under Section 27.
The purchaser may then have rights to object or consent depending on the circumstances.
Why Would a Seller Want Early Release of the Deposit?
A seller may want access to the deposit before settlement for various reasons.
For example, the seller may want to:
- Use the funds towards purchasing another property
- Assist with another financial commitment
- Access funds before settlement
- Finalise another transaction
- Use the deposit for an investment or business purpose
However, the deposit is not automatically available to the seller simply because the Contract of Sale has been signed.
Is the Deposit Normally Held in Trust?
Yes.
A purchaser’s deposit is generally held in a trust account rather than being immediately paid to the seller.
This provides protection while the transaction is progressing towards settlement.
The deposit is generally dealt with at settlement unless it is released earlier in accordance with the applicable legal requirements.
How Does Section 27 Early Release Work?
The process generally involves the seller providing the purchaser with the required information concerning matters such as:
- Mortgages affecting the property
- Amounts owing to lenders
- Other relevant encumbrances
- The seller’s financial position in relation to the property
The purchaser is then given an opportunity to consider the information and determine whether they have grounds to object to the release.
The exact requirements and procedure should be handled carefully.
Does the Buyer Have to Agree to Early Release?
Not necessarily.
The buyer’s rights depend on the circumstances and the information provided under Section 27.
A buyer should not feel pressured to agree to early release without understanding the implications.
If you are a buyer and receive a Section 27 statement, you should carefully review it and obtain advice if you are unsure about your position.
What If the Buyer Does Not Object?
If the statutory requirements are satisfied and the buyer does not object within the applicable timeframe, the deposit may be able to be released in accordance with the legislation.
The conveyancers or solicitors acting for the parties will generally coordinate the process.
Can the Seller Get the Deposit Immediately?
No.
The Section 27 process involves specific requirements and timeframes.
The seller should not assume that the deposit will be available immediately after requesting early release.
The transaction needs to be assessed and the required information provided.
What Information Does the Seller Need to Provide?
The information required can include details about:
- The property
- Registered mortgages
- Amounts secured by mortgages
- Other encumbrances
- The seller’s financial position in relation to the property
The purpose is to allow the purchaser to understand whether there are sufficient funds or security arrangements relevant to the property and the proposed release.
What If There Is a Mortgage on the Property?
A mortgage is particularly important when considering early release of the deposit.
The Section 27 information may need to address the amount secured by the mortgage and other relevant details.
The purchaser may want to ensure that the information provided gives them sufficient confidence that their position is protected.
This is one reason why the Section 27 process should be handled carefully.
What If the Mortgage Is Higher Than the Sale Price?
This can be an important issue.
If the amount secured by the mortgage is significant compared with the sale price, the purchaser may have concerns about whether the sale proceeds will be sufficient to discharge the mortgage and deal with other amounts owing at settlement.
The purchaser should obtain appropriate advice before agreeing to early release.
The seller may also need to discuss the position with their lender and conveyancer.
Can a Buyer Refuse Section 27?
A buyer may have the right to object to early release if the relevant statutory requirements are not satisfied or if there are other grounds available under the legislation.
The buyer should not simply sign an agreement or consent to early release without understanding the information provided.
If you are unsure, ask your conveyancer to review the Section 27 documentation before responding.
Does Section 27 Affect Settlement?
Section 27 concerns the early release of the deposit. It does not mean that settlement happens early.
The property transaction still proceeds towards the settlement date stated in the Contract of Sale.
The buyer remains responsible for completing the purchase in accordance with the contract.
Is Early Release of the Deposit Safe for the Buyer?
Early release can be permitted by law when the relevant requirements are satisfied.
However, buyers should understand that once the deposit has been released, it may no longer be sitting in the trust account awaiting settlement.
This is why the information provided under the Section 27 process is important.
A buyer should carefully consider their position before consenting to early release.
What If the Sale Does Not Settle After the Deposit Is Released?
This is one of the important considerations for buyers.
If the deposit has already been released and the transaction later encounters difficulties, recovering funds may become more complicated depending on the circumstances.
Buyers should therefore understand the risks before consenting to early release.
If there is a concern about the seller’s ability to settle, seek advice before agreeing to the release.
Section 27 vs Section 32: What Is the Difference?
These two sections are often confused because both are commonly mentioned in Victorian property transactions.
They serve very different purposes.
Section 32
A Section 32 Vendor Statement provides important information about the property to a prospective purchaser before the Contract of Sale is signed.
It can contain information relating to matters such as:
- Title
- Mortgages
- Covenants
- Easements
- Planning
- Outgoings
- Other relevant property information
Section 27
Section 27 relates to the potential early release of the purchaser’s deposit after the Contract of Sale has been entered into.
In simple terms:
Section 32 → information about the property before signing
Section 27 → potential early release of the deposit after signing
They are completely different documents and processes.
When Should a Seller Request Section 27?
A seller who wants the deposit released early should raise the issue with their conveyancer as early as possible.
The earlier the process begins, the more time there is to prepare the required information and deal with any questions raised by the purchaser.
Waiting until shortly before settlement may reduce the practical benefit of early release.
Common Mistakes Sellers Should Avoid
Assuming the Deposit Is Automatically Available
Signing the contract does not mean the seller can immediately access the deposit.
Requesting Section 27 Too Late
Early preparation can make the process smoother.
Providing Incomplete Information
The Section 27 process relies on the required information being provided accurately.
Assuming the Buyer Must Agree
The purchaser may have rights in relation to the proposed release.
Ignoring Mortgage Details
Existing mortgages and the amounts secured are important considerations.
Common Mistakes Buyers Should Avoid
Signing Without Reading the Information
Make sure you understand the Section 27 documentation before consenting.
Assuming Early Release Has No Consequences
The deposit may no longer be held in trust once released.
Ignoring the Seller’s Mortgage Position
The mortgage information can be particularly important.
Feeling Pressured to Agree
If you are unsure about early release, ask your conveyancer to explain your position.
Frequently Asked Questions
What is a Section 27 statement?
A Section 27 statement is used in connection with the potential early release of a purchaser’s deposit before settlement under the Sale of Land Act 1962 (Vic).
Can a seller get the deposit before settlement?
In certain circumstances, yes. The requirements for early release must be satisfied.
Does the buyer have to agree?
Not necessarily. The buyer’s rights depend on the circumstances and the statutory requirements.
Is Section 27 the same as a Section 32?
No. A Section 32 Vendor Statement provides information about the property before the contract is signed, while Section 27 concerns potential early release of the deposit after the contract has been entered into.
Is it safe for a buyer to agree to Section 27?
It can be lawful for the deposit to be released early when the requirements are satisfied, but buyers should understand the information and potential risks before consenting.
What if there is a mortgage on the property?
Mortgage details are relevant to the Section 27 process. Buyers should carefully consider the information provided about the mortgage and amounts secured.
Can the seller use the deposit to buy another property?
Once lawfully released, the seller may generally use the funds as permitted, but the seller remains responsible for completing their sale contract.
Should I ask my conveyancer to review a Section 27 statement?
Yes. If you are unsure about the information or your rights, your conveyancer can explain the conveyancing aspects and help you understand the implications.
How Prox Conveyancing Can Help
At Prox Conveyancing, we assist Victorian buyers and sellers with the conveyancing aspects of property transactions, including Section 27 matters.
If you are a seller considering early release of the deposit, we can assist with the conveyancing process and help coordinate the required documentation.
If you are a buyer who has received a Section 27 statement, we can explain the conveyancing aspects and help you understand what the documentation means for your transaction.
If you are unsure about your position, it is always better to ask questions before agreeing to early release.
About the Author
Meet Sally
Sally Kwok is a Licensed Conveyancer and the Director of Prox Conveyancing. With more than 16 years of experience in the conveyancing industry, she is committed to helping buyers and sellers navigate Victorian property transactions with confidence. Sally is passionate about providing clear communication, practical guidance and personalised service throughout every stage of the conveyancing process.
👉 Learn more about Sally on our About page.
About Prox Conveyancing
Prox Conveyancing is a Victorian conveyancing practice providing professional conveyancing services for residential property transactions across Victoria. We assist buyers, sellers, investors and families with a wide range of conveyancing matters, delivering personalised service, transparent communication and professional support from contract through to settlement.
👉 Learn more about Prox Conveyancing on our About page.
This article provides general information only and is not legal advice. Every property transaction is unique, and the information above may not apply to your particular circumstances. If you require advice about your specific situation, please contact a qualified legal professional or licensed conveyancer.