At times it can feel like there is a never-ending stream of paperwork when it comes to buying or selling property. For the uninitiated, it can be overwhelming, and you may find yourself confused about what to sign and when to do it.
Property law can be complicated and is often referred to unhelpful names such as Section 27 and Section 32. But as a general guide, our glossary of conveyancing terms will help you understand the basic jargon around property law. In certain circumstances it's handy to know the ins and outs of a particular process, for example, if you live in Victoria and want to get your hands on your deposit before settlement, you'll need to fill out a Section 27 statement.
Need a conveyancing lawyer to guide you through the process of filling out and signing forms? At Conveyancing.com, we can help you reduce the time and effort involved in your property transaction. Contact us online today.
So what exactly is a Section 27?
A Section 27, otherwise known as an Early Release of Deposit Authority, takes its name from Section 27 of the Sale of Land Act 1962. It authorises the vendor of residential real estate to have their deposit released before settlement. However, the process can be cumbersome, and obtaining a letter to support a Section 27 can be challenging.
The quickest way to think of a Section 27 is as a document that authorises the early release of a deposit. When purchasing real estate, a purchaser must pay a deposit (usually 10% of the sale price) to secure the sale.
Once paid, the deposit is usually held in trust by the real estate agent, a lawyer, or a conveyancer. If the purchaser goes back on the deal after signing the contract, the vendor may be entitled to keep the entire deposit.
At the time of settlement, the purchaser pays out the balance of the sale in return for the property title, and the deposit is also released to the vendor (minus any real estate commissions).
In Victoria, a Section 27 can apply under certain circumstances where it is considered 'safe' to allow the vendor early access to the deposit. Vendors usually serve Section 27 documents because they wish to either use the money to pay their own deposit on a new home – or invest it to earn interest. Whatever the reason for the deposit to be released early, both parties must sign the document.
Sounds complicated, right? However, a Section 27 is merely enabling the purchaser to make an educated decision about whether to consent to the deposit’s release. In essence, it is a written request by the vendor to have the deposit released before settlement.
What makes for a convincing Section 27?
For a purchaser to agree that it is safe for the vendor to have early access to a deposit, they need to have sufficient evidence that the other party has disclosed details of any mortgage or caveat affecting the property. This is where the Section 27 comes in.
As a written request by the vendor (and their conveyancer) for early release of the deposit, a Section 27 will provide considerable detailed information to the purchaser.
Since the purchaser's legal representative will often object to a Section 27, a letter from the bank will usually be required to confirm Section 27 particulars and satisfy these objections. Most banks in Victoria take 1-2 weeks after receiving a discharge request to complete the required letter, and some banks will not be forthcoming with it at all, so vendors should keep in mind that early release of a deposit can never be guaranteed.
Although a vendor is never advised to rely on the success of a Section 27, early release of deposit may be possible should the following requirements be met:
The contract is not subject to any condition 'enuring' for the benefit of the purchaser
The purchaser has accepted the title or is deemed to have accepted the title
The vendor has provided the purchaser with a written notification from their lender confirming details under their mortgage (if applicable)
The purchaser is satisfied with the Section 27 statement and the details provided
The purchaser has provided written notice to the vendor consenting to release.
How long is the turnaround process?
A purchaser has 28 days from receipt of a Section 27 to either consent or object.
If a purchaser consents to the vendor having early access to the deposit, they can sign the Section 27 straight away, and whoever is holding the money in trust can release the deposit to the vendor.
If a purchaser objects to early release (and they will need to state a reason for their objection), the vendor will be unable to access the deposit until settlement. An objection immediately cancels the 28-day countdown.
If a purchaser neither consent or objects to the request within 28 days, the third party holding the deposit in trust is free to release it to the vendor, as the purchaser is deemed under Section 27(7) to have consented.
In the eyes of the law, 28 days provides ample time for the purchaser to assess and review the information supplied (or have their conveyancing lawyer do it for them).
What else do I need to know?
The Section 27 process is not for everyone and best suited for certain circumstances. Should you wish to put together a Section 27, your lawyer or conveyancer can give you advice as to whether or not it’s appropriate.
While it may seem like an easy way to redirect money into your pocket instead of a real estate agent's trust account, a deposit is unlikely to be released before settlement if the amount required to pay out an existing mortgage is 80% of the sale price or higher. In fact, there is no guarantee of early release even in the most fortuitous of circumstances.
For this reason, we strongly recommend that our vendor clients don’t rely on the early release of a deposit.
We do our best to prepare Section 27 requests as quickly as possible and provide our clients with all the information they need to understand the intricate process. Our online services help reduce the time and effort involved.
To learn more about Section 27 statements and whether you need one, contact us today to chat to real property lawyers and secure a free, no-obligation quote for conveyancing services.