When Can You Object To a Section 27 Deposit Release Request?

A purchaser can object to a request for early release of the deposit from trust on three different grounds:

1. If there is a mortgage over the property, subsection 27(3) of the Sale of Land Act 1962 (“the Act”) requires the vendor to set out the particulars of the mortgage in accordance with Schedule 1 of the Act.

1. • In accordance with subsection 27(4)(a) of the Act, you need to be satisfied that the particulars of the mortgage set out are accurate.  Failure by the vendor to provide a certificate from their mortgagee confirming these particulars would be grounds for an objection.
   • In accordance with subsection 27(4)(b) of the Act, you need to be satisfied that the purchase price is sufficient to discharge all mortgages over the property.  In accordance with subsection 27(10) of the Act, this includes any charge or lien on the land, and so in addition to any mortgage loan it includes any amounts payable by the vendor for rates or land tax owing, or for foreign resident capital gains or GST withholding.
2. Subsection 27(2) of the Act prevents release of the deposit where the contract is subject to any condition inuring for the benefit of the purchaser.  Such a condition must be an essential term of the contract, i.e. one that if it is not met, the purchaser can end the contract.  Examples would be a purchaser buying subject to:
   • finance or a building and pest inspection
   • unconditional sale of the purchaser’s own property
   • vacant possession being provided at settlement and the property is still being occupied by either the vendor or a tenant.
3. Subsection 27(11) of the Act prohibits early release of the deposit for off-the-plan contracts.

As a purchaser, it’s not unusual to receive a request from the vendor to release the deposit from trust to them before settlement. For more information about early deposit release, please contact Glenferrie Conveyancing in Northcote at 03 9815 2351.