Early access to a deposit
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