Why You Might Not Get an Early Release of the Deposit in Victoria — And Why Planning Ahead Is So Important
/Many sellers in Victoria expect that once they’ve signed a contract of sale, they’ll soon have access to the purchaser’s deposit to help pay for their next move.
It’s understandable — selling and buying often go hand in hand, and there’s frequently overlap in the timing that puts pressure on cash flow. Whether it’s paying removalists, putting down a rental bond, securing short-term accommodation or just bridging the gap until the next purchase, these are real costs that most people face.
But under Victorian law, the deposit is generally locked up in trust until settlement. Early release is only available under very specific conditions, which often catch sellers by surprise.
That’s why planning ahead, and talking with us early about your options, is the best way to make sure you’re not left scrambling.
The default position under Victorian law
When a property is sold in Victoria, the purchaser usually pays a 10% deposit. This money is held by the stakeholder (commonly the estate agent or sometimes the vendor’s conveyancer) in a trust account.
This trust requirement is set by law and reinforced by standard REIV / Law Institute contracts. It protects both parties:
It ensures the deposit is secure if something goes wrong before settlement.
It proves the purchaser is serious and has financial commitment to the deal.
Unless early release is validly triggered, the deposit stays right where it is — in the trust account — until the day of settlement. At that point, it’s released to the vendor (after deducting the agent’s commission and any agreed adjustments).
The only real path to early access: Section 27 of the Sale of Land Act
In Victoria, the only lawful mechanism for a vendor to get early access to the deposit is through what’s known as a Section 27 release, under the Sale of Land Act 1962 (Vic).
Here’s exactly how it works:
The vendor completes a Section 27 statement that discloses the amount still owing on their mortgage, details of the lender, interest payable, and any arrears or defaults. They also confirm there are no caveats or other issues affecting title.
This statement is given to the purchaser.
The purchaser then has 28 days to either:
Consent in writing to early release; or
Object in writing.
If 28 days pass without objection, early release can generally occur.
But crucially, if the purchaser objects — and has reasonable grounds under the Act — early release simply doesn’t happen.
For a detailed explanation of the Section 27 process, you can also see our main article:
“Section 27 Statements & Early Deposit Release in Victoria: What Buyers and Sellers Must Know”
https://www.victorianpropertysettlements.com.au/news/2025/5/23/section-27-statements-and-early-deposit-release-in-victoria
Why early release often fails
Most purchasers are rightly cautious. Their conveyancers will usually advise them not to agree to early release if:
The vendor owes more than 80% of the purchase price to their bank (which is a statutory threshold under Section 27).
There are unpaid council rates, water rates or owners corporation fees.
There are concerns the vendor might default on their mortgage before settlement.
Even if the vendor is well under the 80% mark, purchasers sometimes object just to keep their position secure. This is all perfectly lawful.
What happens if your Section 27 fails?
If the purchaser objects, or simply doesn’t consent, the trust holder (agent or conveyancer) is not allowed to release the deposit. It must stay in trust until the settlement date.
This often causes practical headaches, especially if:
You were planning to use that money for removalists, paying a rental bond, or covering short-term accommodation between properties.
You were going to use it as a deposit on another purchase.
You need it to pay down other debts or tidy up finances.
That’s why it’s so important to plan early.
How we can help you plan
At Victorian Property Settlements, we encourage all our vendor clients to talk through these issues right from the start.
We’ll help you work out if a Section 27 release is realistically going to be possible by looking at your mortgage balance and any other factors that might give the purchaser reason to object.
If it looks unlikely, we can help you explore alternatives, so your plans aren’t thrown into chaos.
Other options: bridging finance, deposit bonds and bank guarantees
Bridging loans
This is the most common solution. A short-term bridging loan lets you buy your next property (or pay for movers, rental bonds or storage) even while your sale is still completing.
Most banks will offer these loans where there’s a signed contract showing your current home is under contract. Interest is generally a bit higher, and you’ll want to be sure about timing.
Deposit bonds
A deposit bond is an insurance-backed guarantee that the purchaser gives to the vendor instead of paying a cash deposit.
At settlement, the purchaser pays the full price — if they fail to do so, the bond provider pays the deposit amount to the vendor.
Where a deposit bond is used, there is no cash sitting in a trust account, so you don’t have to worry about early release.
Bank guarantees
Similar to a deposit bond, but issued by a bank. Instead of paying a 10% cash deposit, the purchaser’s bank provides a written guarantee.
Again, there’s no deposit tied up in trust, so early release doesn’t come into play.
However, these options need to be negotiated upfront and written into the contract. They can’t be introduced midway.
Why talking early makes all the difference
Too many sellers only discover the realities of Section 27 once they’ve already signed contracts and booked removalists.
By having a chat with us early, we can help you:
Understand whether a Section 27 release is genuinely possible.
Look at your financial position and obligations to the bank.
Explore bridging loans if needed.
Make sure the contract allows for alternatives like deposit bonds or bank guarantees if they’re appropriate.
It’s all about avoiding surprises. Moving house is stressful enough — we like to make sure there’s no sudden scramble for cash at exactly the wrong time.
Conclusion
Victorian law is strict about protecting both buyers and sellers. The rules under the Sale of Land Act 1962 (Vic) and standard conveyancing practices mean deposits usually stay in trust until settlement — and early release only happens under specific, carefully controlled conditions.
If you’re planning to rely on that money to fund your next step, it’s absolutely vital to talk it through with us early. Whether it’s paying for moving costs, covering a rental bond or lining up the next purchase, we can work with your broker and help you understand all the options.
We’ve been trusted by Victorian sellers and buyers for over 25 years, and we’re always here to make sure you’re not caught out.