Early ac­cess to a de­posit

Herald Sun - Property - - NEWS - ADAM ZU­CHOWSKI

IF YOU’RE sell­ing prop­erty in Vic­to­ria, there is an in­ter­est­ing op­por­tu­nity avail­able to you. In cer­tain cir­cum­stances, you can ac­cess your buyer’s de­posit be­fore set­tle­ment, so long as the per­son who is buy­ing the prop­erty agrees to it.

Or­di­nar­ily the de­posit paid by a buyer when they pur­chase a prop­erty is held by the real es­tate agent in their trust ac­count and is only re­leased to the seller when the trans­ac­tion is com­plete.

This gives the seller the op­por­tu­nity to use those funds for such things as re­duc­ing debt or as part of a de­posit when buy­ing a re­place­ment prop­erty.

In Vic­to­ria, sec­tion 27 of the Sale of Land Act uniquely pro­vides — in cer­tain cir­cum­stances — that a seller is able to ac­cess the de­posit funds prior to the set­tle­ment.

In or­der to ob­tain an early re­lease of the de­posit, the fol­low­ing con­di­tions must be sat­is­fied first:

The buyer has ac­cepted ti­tle or deemed to have ac­cepted ti­tle.

There are no fur­ther con­di­tions ac­cru­ing for the ben­e­fit of the pur­chaser.

The seller pro­vides the buyer no­tice in writ­ing, ad­vis­ing de­tails of any mort­gage or ex­is­tence of caveats (if ap­pli­ca­ble). Such a no­tice is known as a Sec­tion 27 state­ment.

The buyer is sat­is­fied with the in­for­ma­tion pro­vided by the seller and gives writ­ten no­tice to the seller con­sent­ing the re­lease of the de­posit within 28 days.

Should the buyer fail to re­spond within that 28-day pe­riod, ei­ther ex­pressly pro­vid­ing con­sent or an ob­jec­tion to the re­lease, the Act makes the as­sump­tion that the buyer is deemed to have au­tho­rised its re­lease.

For this rea­son, it is vi­tally im­por­tant that a buyer re­sponds in a timely man­ner.

In the event that a buyer does con­sent to the early re­lease, the real es­tate agent is then au­tho­rised by the Act to deduct from the de­posit any com­mis­sion or sell­ing ex­penses payable by the seller and re­mit to the seller the bal­ance of de­posit funds.

How­ever, a buyer is legally en­ti­tled to — and of­ten does — ob­ject to an early re­lease.

If there are still con­di­tions in the con­tract of sale that are of ben­e­fit to the buyer, or if there is ex­ces­sively high debts se­cured against the prop­erty, for ex­am­ple in ex­cess of 80 per cent of the sale price, the buyer is not ob­li­gated to and in all like­li­hood will not con­sent to the early re­lease of the de­posit.

As the Act specif­i­cally makes ref­er­ence to the phrase ‘‘any con­di­tions’’ it is worth not­ing that a con­tract of sale has many con­di­tions, the most ba­sic be­ing the obli­ga­tion to de­liver the prop­erty at set­tle­ment in the con­di­tion it was when bought.

Viewed in this con­text, there will al­ways be con­di­tions en­sur­ing for a buyer’s ben­e­fit right up un­til set­tle­ment is com­pleted. As a mat­ter of prac­ti­cal­ity it is im­pos­si­ble to sat­isfy this con­di­tion.

Should a buyer be so in­clined, they pos­sess the right to refuse an early re­lease.

Clearly the drafters of the leg­is­la­tion did not in­tend for the above cir­cum­stances to arise, how­ever un­til such time as the leg­is­la­tion is changed, a seller should not be re­liant on the use of de­posit funds.

As al­ways this ar­ti­cle con­tains gen­eral in­for­ma­tion only and should not be re­lied on for de­tailed ad­vice re­lated to your par­tic­u­lar cir­cum­stances. Should you re­quire such ad­vice, please con­tact your lawyer. Adam Zu­chowski is a se­nior as­so­ciate and prop­erty spe­cial­ist with Slater & Gor­don Con­veyanc­ing

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