Should I Sign a Section 27 Deposit Release Statement?

You should only sign a Section 27 Deposit Release Statement after your conveyancer reviews the vendor’s mortgage and debt details. Signing too early carries risks, such as losing access to the deposit if settlement fails. Safe signing conditions include a clear title, low mortgage, and an imminent settlement date.

What is a Section 27 Deposit Release?

Under Section 27 of the Sale of Land Act 1962 (Vic), a vendor can request early release of the deposit held in trust before settlement. This typically happens when:

• The contract is unconditional, and
• The vendor has provided a written statement about their mortgage and other encumbrances on the property.

If the buyer signs the statement, or if they do not object within 28 days (provided the legal requirements are met), the deposit can be released to the vendor before settlement.

Why Vendors Want Early Release

For sellers, early release of the deposit can help:

• Pay off an existing mortgage.
• Fund the deposit on their next property purchase.
• Cover moving or renovation costs before settlement.

Risks for Purchasers

From a buyer’s perspective, there are important risks to consider before signing:

1. Outstanding debts on the property – If the vendor has a large mortgage or other debts secured against the property, early release could leave you exposed if something goes wrong before settlement.
2. Settlement failure – If the vendor cannot settle and the deposit has already been released, recovering it can be complicated and costly.
3. Incomplete information – The vendor’s statement may not always give you the full picture about the property’s financial position.

When You Might Agree to Sign

A buyer may be comfortable signing a Section 27 if:

• Your conveyancer has reviewed the vendor’s statement and confirmed the mortgage and debt details.
• The property title is clear of significant encumbrances.
• The vendor’s mortgage balance is comfortably less than the purchase price.
• The settlement date is close and all conditions have been met.

When You Should Be Cautious

Be cautious about signing if:

• The vendor’s mortgage or other debts are high.
• There are unresolved conditions in the contract.
• Settlement is a long time away.
• Your conveyancer advises against it based on the vendor’s financial position.

At Red Door Conveyancing, we recommend that you never sign a Section 27 Deposit Release Statement without first obtaining independent legal advice. Every property transaction is different, and a quick review by your conveyancer can protect you from costly mistakes.

Should you have more questions and concerns about conveyancing, please do not hesitate to contact us on 03 8456 6797 or send us an email via this page.