Understanding the Section 27 Statement

The Spirit and Purpose of Section 27

Russell Cocks, a highly regarded expert in Victorian property law, has provided insightful commentary on the intention behind Section 27. In his article “Deposit Release – Why Take the Risk?”, he explains that the section was designed as a limited-use mechanism—not a routine part of property sales. Cocks points out that the spirit of the Act allows early deposit release only under controlled conditions, generally to help a vendor fund the purchase of another property. However, when used indiscriminately or without proper safeguards, it can expose purchasers to significant risks. He warns that professional advisers must ensure purchasers fully understand these risks, or they may be exposed to claims of negligence.

My Property Sold—When Can I Access the Deposit?

A Section 27 Statement can be served once the contract becomes unconditional. This means any conditions benefiting the purchaser (such as finance approval or building and pest inspections) must be satisfied.

If the property is sold at auction, the contract becomes unconditional immediately, allowing the vendor to issue the Section 27 Statement straight away.

Why Seek Early Release?

Vendors commonly request early release of the deposit to:

• Fund the purchase of a new property
• Cover moving or bridging finance costs
• Offset other settlement-related expenses

Additionally, should the purchaser default under the contract, having the deposit already released to the vendor can simplify recovery and save on further legal work.

What Needs to Be Disclosed?

Vendors must provide specific disclosures in the Section 27 Statement, typically

including:

• A bank letter confirming the Particulars of the mortgage, such as interest rates, default interest, whether repayments are up to date, and the frequency of payments.
• Disclosure of any registered caveats on the title.

Importantly, the purpose of the request does not need to be disclosed. However, supplying false or misleading information is an offence under the Act and can lead to significant penalties.

Can a Purchaser Object?

Yes, and the purchaser has 28 days from the day the Section 27 Statement is served to raise a valid objection. Grounds for objection include:

• A caveat is registered on the property title.
• The mortgage balance exceeds 80% of the property’s sale price.
• The vendor fails to provide supporting evidence of the mortgage details (e.g., a bank letter).

If no valid objection is lodged within 28 days, the purchaser is deemed to have consented to the release of the deposit.

What Are the Risks for Purchasers?

If a vendor is unable to provide clear title at settlement and the deposit has already been released, the purchaser may face significant hurdles in recovering their funds.

For this reason, legal advice should always be sought before agreeing to early release.

How Can Purchasers Protect Themselves?

If no grounds exist for objection, a purchaser can still lodge a caveat on the property title to protect their interest until settlement. This is a key safeguard if early release of the deposit has occurred.

How Is the Deposit Actually Released?

If the purchaser signs the Section 27 Statement, or if 28 days pass without valid objection, the vendor’s solicitor can instruct the agent to release the deposit. The agent may deduct their commission or fees before disbursing the balance, so it's important for the vendor to review the agent’s final sales account.

Need assistance with a Section 27 Statement?

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