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A guide to Section 27

Should I Agree to a Section 27 Deposit Release?

Here’s what you need to know about a Section 27…

One common question that comes up with our purchasers is whether to agree to a Section 27 deposit release. Section 27 of the Sale of Land Act 1962 (Vic) gives vendors the right to request early release of the deposit before settlement, and purchasers have the right to agree, object, or stay silent. This guide walks you through how it works and what to consider before you sign.

What Is a section 27 – release of deposit?
When a purchaser buys a property, they usually pay a deposit upfront of 10% of the contract price. This secures the purchase, obligating the buyer to complete the sale and the vendor to not accept an offer from another party. The deposit is usually held by a real estate agent, lawyer or conveyancer until the settlement day. At settlement, the purchaser gives the vendor the balance of the sale price owed less the deposit paid. At this point, the deposit is released to the vendor, with any applicable fees subtracted, such as the costs of a real estate agent.
In short, it allows the vendor to have early access to the deposit funds. Both the vendor and purchaser must agree by signing the Early Release Deposit Authority, giving the conveyancer, agent or lawyer permission to release the funds.
It’s important to note that while Section 27 releases are common, having your purchaser agree to one is not guaranteed. There are times when it is recommended or simply an act of good will. For example, the vendor may need the funds to put down a deposit on another property. There are other times when a Section 27 is considered risky.
  • The vendor must make a written request for early release via the Section 27.
  • The request must include details regarding money owed on the property, including mortgages and caveats.
  • The purchaser can sign the Section 27, authorising the funds to be released.
  • If the purchaser does not agree to early release, they must give a specific, written reason. The vendor will not have access to the funds until settlement.
  • If the purchaser fails to respond to the request after 28 days, the funds can be released.

What to do If you agree and something goes wrong

An experienced lawyer or conveyancer can help both parties determine if signing a Section 27 is safe. Here are two tips to help you avoid common pitfalls.

TIP 1

Get all the details. Carefully examine the vendor’s disclosure of mortgages and caveats so you can make an informed decision. How much is owed? Does the vendor need the deposit funds to satisfy all debts against the property? If the answer is yes, then letting them use the funds toward another purchase is not advisable for either party. A vendor who is in default on their mortgage should justify an immediate rejection of a Section 27 request. Vendors too need to understand the details. Are there contingencies in the sales contract that would allow the purchaser to get the deposit back if the sale does not go through? If so, how would the vendor repay the money if it is being used elsewhere?

TIP 2

Don’t be pressured. Do not allow an eager real estate agent to pressure you into signing a Section 27 at the time you sign the contract. Agents prefer for funds to be released early because this means their commission is also released early. However, neither party should be expected to make a decision without having time to review all the details and consult with their conveyancer or lawyer.

Section 27 vs Section 32: What's the difference?

Many purchasers confuse Section 27 with Section 32. Both come from the Sale of Land Act 1962 (Vic) but they do very different things.

  • Section 32 (Vendor’s Statement): Provided before you sign the Contract of Sale. Discloses title details, zoning, rates, outgoings and any notices affecting the property.
  • Section 27 (Deposit Release): Provided after you sign. Asks you to release the deposit from the trust account so the vendor can access it before settlement.

A Section 32 protects you from buying blind. A Section 27 asks you to take on risk for the vendor’s convenience. Review both carefully with your conveyancer.

Who benefits most from a Section 27 release?

The vendor benefits most. They get early access to funds, often used to pay down an existing mortgage, put a deposit on their next property, or cover moving costs. For the purchaser, there’s no direct financial upside to agreeing.

That said, agreeing to a reasonable Section 27 request can help maintain goodwill through to settlement. In practice, most Victorian conveyancers advise purchasers to agree if the vendor’s financial position (disclosed in the Section 27 statement) looks sound and the mortgage debt is well below the sale price.

Final considerations on Section 27 Release

Is it a good idea?
If it is deemed safe by your lawyer or conveyancer, it’s a good idea to be accommodating. There are often many obstacles that arise before settlement. Extending a favour to the vendor may make them more likely to be accommodating with you, if the need arises.

A good relationship may prevent the vendor from charging penalty interest. Additionally, it’s the purchaser’s legal obligation to allow the Section 27 release to proceed, unless they have valid reason to reject the request. The Supreme Court says the purchaser, “may only have regard to the accuracy of the particulars and the sufficiency of the purchase price to discharge all mortgages over the property. A purchaser may not refuse to authorise the release of the deposit on any other ground.” While a Section 27 release mainly benefits the vendor, it’s often a reasonable option for the purchaser as well.

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Section 27 Deposit Release FAQs

What is a Section 27 of the Sale of Land Act?

Section 27 of the Sale of Land Act 1962 (Vic) allows a vendor to request early release of the deposit before settlement. The purchaser must receive specific written information about the vendor’s financial position and any mortgages before being asked to agree.

No. A purchaser is not legally required to agree. You can refuse, request more information, or object within 28 days. If you don’t respond within that time, the deposit is automatically released to the vendor.

If settlement later falls through and you’re entitled to a refund, the vendor may have already spent the deposit. Recovering it can take legal action. Your conveyancer should review the vendor’s Section 27 statement carefully before you sign.

A Section 32 is the Vendor’s Statement given before you sign the Contract of Sale, disclosing title, zoning, rates and notices. A Section 27 is a separate request, made after signing, asking you to release the deposit early.

You have 28 days from receiving the Section 27 statement to object in writing. Silence counts as agreement, the deposit will be released to the vendor automatically after that period expires.

Yes, but only on specific grounds. For example, if the vendor’s statement is incomplete, inaccurate, or if the mortgage debt exceeds 80% of the sale price. Your conveyancer can help you draft a valid objection.

Once released, the vendor can use the deposit funds for things like a mortgage payout, deposit on their next property, or moving costs. The funds leave the trust account and are no longer protected.

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