Selling property in Victoria can be a long game. From the day of sale to the settlement date, months can pass, and for many vendors, the deposit sitting in a trust account can feel tantalisingly close yet frustratingly out of reach. It’s no surprise that the question often arises: can we get that deposit released early?
In Victoria, the answer is governed by a specific piece of legislation – Section 27 of the Sale of Land Act 1962. This provision offers a pathway for vendors to access the deposit before settlement, but it’s a path paved with strict rules designed to protect the purchaser. Some vendors, eager to get their hands on the funds, try to create a shortcut by inserting special conditions into the contract of sale. However, a recent Supreme Court of Victoria decision, GLP Batesford Holdings Pty Ltd v 68 Bridge Road Land Pty Ltd [2022] VSC 614, has fired a clear warning shot across the bow of this practice, highlighting the significant risks involved.
This article will break down how Section 27 works, explore the lessons from the GLP Batesford Holdings case, and explain why trying to sidestep these statutory requirements is a gamble not worth taking for vendors in Victoria.
The Rules of the Game: How Section 27 Early Release Works
The deposit paid by a purchaser isn’t just a sign of good faith; it’s a form of security. Under Victorian law, this money is held by a stakeholder (usually the vendor’s real estate agent or solicitor) and can’t be released until settlement, unless the specific requirements of Section 27 are met.
The process for an early release is a structured dialogue between the vendor and the purchaser:
- The Vendor’s Notice: The vendor must provide the purchaser with a written notice (a Section 27 Statement) that gives details of any mortgage or loan over the property. This includes the amount owing and confirmation that the sale price is enough to discharge all debts. If there’s no debt, the notice must state that.
- The Purchaser’s Response: Once the purchaser receives this notice, they have 28 days to respond.
- If the purchaser is satisfied with the information and agrees to the release, they can provide written authorisation.
- If the purchaser is not satisfied (for example, they have doubts about the accuracy of the information or whether the sale price will cover the debts), they can give a notice stating their objection.
- If the purchaser does nothing for 28 days, they are deemed to be satisfied, and the deposit can be released.
Crucially, the Act also states that the deposit cannot be released if the contract is subject to any condition that benefits the purchaser (like a ‘subject to finance’ clause) that has not yet been satisfied.
The entire process is designed to ensure the purchaser isn’t put at risk. If the vendor were to take the deposit and then be unable to settle because they couldn’t pay off their mortgage, the purchaser could lose their money. The 28-day period gives the purchaser and their legal representatives adequate time to assess this risk.
When Shortcuts Lead to a Dead End: The GLP Batesford Holdings Case
The temptation to speed up the 28-day waiting period can be strong, as illustrated in the GLP Batesford Holdings case. In this high-stakes, $176 million property transaction, the vendor inserted a special condition into the contract that required the purchaser to sign and return the Section 27 statement within five business days, a significant reduction from the statutory 28 days.
When the purchaser received the vendor’s deposit release statement, they responded within the 28-day statutory timeframe (but after the five business days stipulated in the special condition), stating they were not satisfied with the particulars provided and therefore did not authorise the release.
The vendor claimed the purchaser was in breach of the special condition and issued a notice to rescind the contract. The matter ended up in the Supreme Court of Victoria.
The Court’s decision was unequivocal. It found that the special condition was an attempt to ‘contract out’ of the consumer protections provided by the Sale of Land Act. The legislation gives a purchaser 28 days to consider their position, and this right cannot be stripped away or watered down by a special condition in the contract.
The judge ruled that the special condition was in contravention of the Act and was therefore void and of no effect. Consequently, the vendor’s rescission notice was invalid, and the purchaser was not in default. The vendor’s attempt to create a shortcut had not only failed but had also put the entire contract at risk.
What This Means for Victorian Vendors and Practitioners
The GLP Batesford Holdings decision reinforces a fundamental principle: statutory rights are not negotiable. The early release of a deposit is a privilege granted by legislation, not a contractual right. For vendors, conveyancers, and legal practitioners in Victoria, the key takeaways are crystal clear:
- Stick to the Script: The Section 27 process must be followed to the letter. Any attempt to alter the timeframes or obligations through special conditions is likely to be deemed void.
- Patience is a Virtue: Vendors must be advised that the 28-day period is a non-negotiable part of the process. Managing a vendor’s expectations about when they can access the deposit is a crucial part of a practitioner’s role.
- The Risks Outweigh the Reward: A non-compliant special condition doesn’t just fail; it can have severe consequences. Under Section 28 of the Act, a contract containing a provision that contravenes the deposit requirements is voidable by the purchaser at any time before completion. A vendor who tries to take a shortcut could find themselves with no contract at all, and may have to return all monies paid.
For property sellers, the message is simple. While the desire for early access to your deposit is understandable, the legal framework is there for a reason. Taking a shortcut might seem appealing, but as the GLP Batesford Holdings case shows, it can lead you down a legal dead end, jeopardising the very sale you’re trying to expedite. The safest and most effective approach is always to play by the rules.