KEY TAKE OUTS:
- It is important to be aware of the ramifications of a release and how release differs between states.
- If you are a Vendor who wishes for the deposit to be released prior to settlement, it is important that you make your conveyancer or solicitor aware.
As a Vendor of residential property, you can request for the deposit to be released prior to settlement. This is the case for both NSW and Victoria, however the process in which the release occurs, and the legal ramifications differ.
NEW SOUTH WALES:
There are many reasons why a release of deposit may be needed for a Vendor; some of these reasons include:
- Assisting the Vendor to pay a deposit on a property purchase
- Paying stamp duty on a property they’re purchasing
- Paying the deposit to their mortgage to clear debt for settlement
- Relocation or rental fees
However, the most commonly used and known reasons for a release of deposit in NSW is for the Vendor to use the deposit towards another purchase, whether it may be for stamp duty or deposit to secure the purchase.
If you are a Vendor who wishes for the deposit to be released prior to settlement, it is important that you make your conveyancer or solicitor aware. In preparing the Contract for Sale, a conveyancer or solicitor will be able to provide for this scenario in the special conditions of the contract. Once the contract is agreed upon by both parties, the Vendor will be able to request the release of the deposit from the agent.
It is not uncommon in practice for the release of deposit clause to provide that the deposit be released for a specific purpose or in specific circumstances. A clause like this at times, may be more readily accepted by the Purchaser.
In Victoria, the primary purpose of the deposit release is to bind the Purchaser to the Contract for Sale. Unlike NSW, in Victoria, the agent will draft and prepare the Contract for Sale, resulting in a standard contract with often little variance. As a result, Section 27 of the Sale of Land Act 1962 allows for a Vendor to request the release of a deposit through a Deposit Release Statement.
The Deposit Release Statement allows for the deposit to be released, only if the following 5 factors are in existence:
- The Contract for Sale is unconditional- i.e. the Contract for Sale is not subject to any conditions such as cooling off periods, pest and building dates and finance dates;
- The Purchaser accepts title or may be deemed to do so;
- The Vendor has given notice in writing in accordance with Section 27(3) – the notice must set out particulars of the property including if there is a mortgage or any caveats on the property;
- The Purchaser is satisfied with the particulars of the notice and that the purchase price is sufficient to discharge any mortgage on the property i.e. the deposit monies are not needed by the Vendor to provide a ‘good title’ without a mortgage at settlement;
- The Purchasers gives notice that they’re satisfied with the Particulars in writing within 28 days of the Vendor’s notice.
As a Purchaser, if you do not wish for the release to occur, you must provide the Vendor in writing with the below:
- That you are not satisfied with the particulars of the title expressed to you in the Section 27 Statement;
- The reasons for which you are not satisfied.
It is important to note that a response to the Section 27 Statement must be provided. If not provided within 28 days, the Purchaser is deemed to have agreed with the terms of the Statement including the title particulars and thus the deposit will automatically be released.
To a Vendor, a release of deposit can be seen to be a practical and necessary request; whereas, to a Purchaser the release of deposit is a problematic request, because if they have a right to recover their deposit, it can be difficult and they would prefer it to remain in the agent trust account.
Either way, it can be seen that whether you are a Vendor or a Purchaser, releasing a deposit it is not without risk. It is important to be aware of the ramifications of a release and how release differs between states. Therefore, it is important you consult your conveyancer or solicitor for specialised advice.
For further information please don’t hesitate to contact:
This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.