A Section 27 Statement lets a vendor request early release of the deposit before settlement in a Victorian property sale, and while it typically benefits the vendor, it directly affects the purchaser too. Understanding what it means and what to check protects both sides of the transaction.
When buying or selling property in Victoria, the deposit plays an important role in securing the transaction. In most cases, the deposit is held in a real estate agency's trust account until settlement.
However, under certain circumstances, a vendor may request early release of the deposit by serving a Section 27 Statement. While this request typically benefits the vendor, it directly affects the purchaser as well. This article will help you understand the essential terms of how Section 27 works and how it affects both vendors and purchasers.
What is a Section 27 Statement?
A Section 27 Statement is a notice given under section 27 of the Sale of Land Act 1962 (Vic). It allows a vendor to request early release of the deposit before settlement occurs.
Ordinarily, the deposit is held in a real estate agency's or law firm's trust to protect the purchaser. Section 27 creates a legal mechanism for early release, but only if strict conditions are satisfied.
Why Do Vendors Request Early Release of the Deposit?
For vendors, early access to the deposit can allow them to:
- Fund the deposit on another property
- Reduce short-term financial pressure
- Access funds needed to discharge an existing mortgage
- Improve cash flow before settlement
What Are the Legal Requirements for Early Release?
To lawfully release the deposit early, several requirements must be met:
- The purchaser must have paid the full deposit.
- If there is a mortgage, the notice must include mortgage particulars.
- The notice must also include particulars of any caveat lodged over the land.
- The contract must not be subject to outstanding conditions that increase risk to the purchaser.
If the mortgage debt exceeds 80% of the sale price, the purchaser is entitled to object. Incorrect or incomplete information can invalidate the section 27 early deposit release request.
How Does Section 27 Affect Purchasers?
While Section 27 benefits the vendor, it significantly impacts the purchaser. The deposit provides protection to the buyer if:
- The vendor defaults before settlement
- The property is damaged prior to settlement
- The contract is terminated due to vendor breach
When a Section 27 Statement is served, the purchaser has 28 days to give written notice if they are not satisfied with the particulars, stating their reasons. If no such notice is given within that period, the purchaser is deemed to be satisfied and to have authorised release of the deposit.
The Act does not set out a fixed or exhaustive list of valid grounds for objection. The test is whether the purchaser is genuinely not satisfied with the particulars and gives reasons in writing, not whether a reasonable purchaser would object on those grounds. Common reasons purchasers rely on include:
- Insufficient equity
- Incorrect mortgage information
- The contract not being unconditional
- Other inaccuracies in the statement
- Not providing evidence in support of the Section 27 Statement
Because releasing the deposit removes a layer of financial security, at Phan Campbell & Associates Lawyers, we provide legal advice to purchasers before consenting to the early release of the deposit.
The Process Step-by-Step
- The vendor's solicitor prepares the Section 27 Statement.
- The statement is served on the purchaser or their solicitor.
- The purchaser has 28 days to review and object.
- If no valid objection is made, the deposit is released.
If an objection is raised, the deposit remains in trust until settlement.
Why Does Legal Advice Matter?
- For vendors, we properly prepare the section 27 statement to ensure that it is compliant with legislative requirements and reduces the likelihood of objection.
- For purchasers, we will review the section 27 statement and advise you on your legal rights before consenting to release.
- Because property transactions involve substantial sums of money, careful legal oversight provides peace of mind.
Frequently Asked Questions
1. What is a Section 27 Statement?
A Section 27 Statement is a notice given under section 27 of the Sale of Land Act 1962 (Vic) that allows a vendor to request early release of the deposit before settlement, provided strict conditions are satisfied.
2. Why do vendors request early release of the deposit?
Early access to the deposit can let a vendor fund the deposit on another property, reduce short-term financial pressure, access funds to discharge an existing mortgage, or improve cash flow before settlement.
3. How long does a purchaser have to object to a Section 27 Statement?
The purchaser has 28 days from receiving the statement to give written notice if they are not satisfied with the particulars, stating their reasons. If no such notice is given, the purchaser is deemed satisfied and to have authorised release of the deposit.
4. What are valid grounds for objecting to a Section 27 Statement?
There is no fixed statutory checklist. The test is whether the purchaser is genuinely not satisfied with the particulars and gives reasons in writing, not whether a reasonable purchaser would object. Common reasons include insufficient equity, incorrect mortgage information, the contract not yet being unconditional, other inaccuracies in the statement, or a lack of evidence supporting it, but a vendor who disputes the objection may need to apply to the court.