Why Section 27 Deposit Releases can be an unfriendly beast

Deposit Releases can be a paramount topic when buying and selling property. Many sellers are of the school of thought that once your house is sold and the deposit is paid by the purchaser into the real estate agent's that the deposit is automatically released to you. Unfortunately it is not that simple.

Rather, you need to complete a Section 27 Deposit Release Form (“Section 27”) and provide this to your purchaser seeking their permission for the deposit to be released from the real estate agent’s trust account to you.

If you have a mortgage over your property, in the first instance you must complete a Discharge of Mortgage form and obtain a letter from your bank or mortgagee which provides all the relevant information that must be completed on the Section 27 so that this form together with the letter received from you bank may be provided to the purchaser of the property. This letter includes information pertaining to the amount owing on the property, the interest rate, repayment amounts and frequency, whether you have the option to redraw on the loan and other relevant information.

If the borrowings are in excess of eighty percent of the value of the property then it is highly unlikely that a purchaser will consent to the release of your deposit. In instances where you do not have a mortgage over the property then you simply need to complete the Section 27 so that it may be provided to the purchaser of the property. Once the purchaser receives your Section 27 they have 28 days to object to the release of your deposit.

Sometimes purchaser’s sign the form in a timely manner consenting to the release of your deposit, however of late we are finding that many purchasers are waiting to the 28 day expiration period. If a purchaser does not object to the release of the deposit then arrangements can be made with your real estate agent and the purchaser’s legal representative to release the deposit on the 29th day after the purchaser’s received your Section 27.

You need to be mindful that your agent will take their commission and associated selling cost from this deposit and then will release the balance of the deposit into your nominated bank account. The key takeway? You can’t always rely on a speedy release of a deposit paid for the sale of your current property to be used as a deposit for your new home.

Disclaimer: The advice provided in this blog is of a general nature only and you should always seek legal advice relevant to your own circumstances.