One of the biggest sources of conflict in modern day Melbourne Conveyancing is accessing deposit monies prior to settlement, which is usually referred to as a ‘Section 27’.
For Melbourne Conveyancing Purchasers
Although quite a standard request some purchasers may feel uneasy about releasing their money before they’ve received what they’re paying for – the property. There are also case precedents to consider as in Pamamull v Albrizzi (Sales) Pty Ltd  VSCA 260. In this case a purchaser was attempting to assist the seller in good faith, and allowed the deposit to be released to them via this mechanism. In doing so the purchasers unwittingly signed away their rights to withdraw from the sale after it was discovered that the boundaries were not where they were supposed to be. Most Purchasers representatives will by default advise the Purchasers not to agree based on this decision.
Can a Purchaser stop the Vendor from getting the deposit released even if they meet the requirements
The short answer is probably not in most cases. This is something you will need to raise with us straight away if you are concerned. Although we will usually object by default, if there is no reason under the act for it not to be released it most likely will be.
Should a Purchaser put a Caveat on the property if the Vendor is getting the deposit released?
Yes, you should do this anyway. Please refer to our advice in relation to Purchaser Caveats.
For Melbourne Conveyancing Vendors
Most Vendors will want to have access to this money, and we find the most common reasons are;
- to use as a deposit on their purchase property
- to cover moving costs
- to offset their mortgage
- for ‘just in case’
What does a Vendor need to do to get the process started?
The first thing to do is to contact your lender as the most common time delay in having a deposit released is getting the Section 27 supporting letter from the lender. In most cases this involves sending of a ‘Discharge of Mortgage’ request and asking for a Section 27 letter to be provided to your conveyancer immediately.
What are the requirements for a Section 27 release of deposit?
Although it will always depend on personal circumstances, the requirements that are of most significance to Vendors include;
- You mustn’t owe and not have the ability to redraw more than 80% of the total Sale price
- You can not be in arrears/default on your loan
- There can not be any other conditions benefiting the Purchaser (ie subject to finance)
- There can not be any other competing claims to title, or know of any coming claims (ie you are acting a a legal personal representative that has or is about to be contested)
There are an infinite amount of other requirements and these points are intended for us as a general guide only.
What happens if I owe too much?
Typically, you won’t be able to get your deposit released prior to settlement. You shouldn’t rely on on having your deposit early in these situations.
What happens if there is a Caveat or Charge on my property?
You will need to get supporting letters from each charge or hold over the property. If for example they do not agree or this pushes you over the 80% threshold you wont be entitled for release. You should contact your conveyancer for individual advice if you think this may affect you.
How can I guarantee getting my deposit so I can pay the deposit on my purchase?
Generally speaking, you shouldn’t rely on ever getting your deposit released. This way you can never be in a sticky situation. Since Section 27 issues are so common amongst all Melbourne Conveyancing firms you have options.
You should always get individual advice from a conveyancer first.
The easiest option would be to use a deposit bond from a provider such as Deposit Power. Although common some Vendors may get caught up with this and will ask for a cash deposit instead as per the norm. In these situations if you have a conveyancer review your contract prior to signing we can allow a special condition to protect you. Generally, we would make the deposit on your purchase subject to and payable on the release of deposit on your sale property. However this is a serious and complex condition and should only be initiated by a Licensed Conveyancer such as our office, and should be tailored to your specific needs.
For all your Section 27 and Melbourne Conveyancing needs, speak to your Residential Conveyancing experts at Victorian Property Settlements on 03 9783 0111 or via email on firstname.lastname@example.org