Section 27 - Early Deposit Release - Vendor wants us to sign.

So, we bought a house :)

And the vendor is asking us to sign the section 27 early release of deposit form so that they can acess the deposit.

Anyone on here with advice? I know that here in VIC this is part of law etc etc.

As a purchaser though, should I be concerned? I have read the Act, but find it quite, well, legal speak and just have no idea. i have the RE agent from her end bugging me about it no end. my lawyer is advising no but he is advising no simply because it is something that is not done (and we have nothing to gain from it). but my question is: do we have anything to lose by signing it off?

Any advice would be greatly appreciated...

I don't know the law, but it sounds like the vendor wants to take your money before you buy the house, live in their house for a little while longer, but have YOUR money in their pocket while they do so.

No.

That money is YOUR money and until you have the object they are selling (ie the house) they shouldn't have your money. It's not a flipping e-bay transaction. They can take your money and then decide not to sell the house, how do you get your money back then?

I would imagine that what you have to lose is your deposit.
If the sale falls through for some reason and the vendor has spent your deposit then getting it back may be drawn out and frustrating.
Can you move settlement forward?

ditto what the other two have said. this happened to a guy dh works with and the owners wanted to stay in the house till after christmas. they found another house to buy. i would keep refusing.

Honestly depends on the reason. It might be that they have to pay more on deposit for another house, or moving or whatever. We accessed the deposit on our hose early because the banks were messing us about with getting settlement organised (was supposed to be 30 days and blew out to 75).

Get advice (legal) about what it means for you guys.

We did this recently but we were the vendors requesting it. Often vendors will request if they need access to deposit money for another purchase. We had to supply purchasers with bank documents. I would check to see that they can't draw down more on the loan and that the settlement figure (less deposit) is more than enough to cover the mortgage. Oh and if you are going to say no say it quickly I believe from memory you have 28 days and if no response then the funds can be released. I'm no lawyer so it may be best just to follow their advice but just wanted to let you know our experience.

This may sound daft, but in other places the banks can see that you're getting $X for your house, you're buying a house at $Y and you have a mortgage of $Z.

So you need a new mortgage of $Y-X+Z.

You don't take out your home loan until you have your new house, so that would be when you have sold your house... so you don't need to draw those funds earlier. It sounds like a huge con to me. By the banks, that is.

As a conveyancer I would advise any client not to sign it. Protect your interests and all that.

Jmo obviously.

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As a conveyancer I would advise any client not to sign it. Protect your interests and all that.

Jmo obviously.

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As a banker I would advise the same. If they need a deposit for a new house there are other ways.

Been on both sides. First home we were hassled to release it and when we sold, we also wanted it released. Maybe it was due to our location, but apparently it was pretty normal procedure.

The agent could be hassling you because they have told the vendor that they can have the early deposit. We were told that by our agent when we sold but once the deposit was paid, then it was a different story and nothing was handed over until settlement. I understand that people often need that money to pay off debts etc, but if I was the purchaser, I'd be wary. If you're in the position to, I'd bring forward settlement instead.

Definitely bring forward the settlement. I won't release funds until they are out of the house at least.

There is no benefit to you and you risk losing your deposit or having a very hard time getting it back.

It is not worth the hassle in my opinion.

Been on both sides and requested it and released it with no hassles either way. If you have a great conveyance should be a no issue......

I disagree tan, I think a great conveyancer would tell you not to!

As we used to say - it ain't settled - till its settled.

My parents needed the deposit released from the vendors who bought their place as they needed it for the deposit on their new place.

Slightly differently scenario though - they were downsizing on retirement so no mortgage involved. Asset rich but cash poor.

The people who purchased their place were happy to release it and everyone lived happily ever after.

Yeah I see your point but maybe we have been lucky with the 5 places we have bought and not had issues with it. We also requested ours and got it, and the only settlement we did have issues with wasn't to do with deposit.

Found this that explains the quirks of section 27's in Vic a bit better.

Once you sign the Contract, you have an 'equitable priority' established in the property and can place a Caveat on the Title.

Many Solicitors and Conveyancers suggest doing this as this prevents any further dealing with the property by the vendor between signing the contract and settlement, without your express permission.

You cannot unreasonably withhold permission for the Agent to release the Deposit once Requistions on Title are answered to your satisfaction.

You satisfaction should include that there will be sufficient funds at settlement to clear the balance of the mortgage (if any) which may be registered over the title. You should also be satisfied that the vendor is not in arrears of the mortgage loan.

There may be other issues which may cause you to withhold permission, but if you have paid a deposit - and particularly, if you have signed the S.27 then the Agent will prepare an Account Sale to the vendor and the funds will be released from their Trust Account unless you (your representative) advises in writing that permission has not been granted.

No other State in Australia has an early release of deposit clause, and is one reason why Victorians are using Deposit Bonds or negotiating smaller deposits.

It is often difficult for a purchase to say 'no' to paying over a 10% deposit when they have it, mainly because they feel 'mean' if they don't pay the full asking deposit. Purchasers with smaller deposits are often in a stronger emotional position to argue for a smaller deposit to be paid or to lodge a Bond

However, if you have paid the deposit then unless there is a real and material reason you cannot refuse the release of the deposit. After all, the vendor may require the money to pay a deposit on their next purchase and this may be why the Agent asked you to pay a deposit.

When we purchased our home 5 years ago we were asked to release the deposit early.
We told our conveyancer that we didn't want to, but he pretty much advised us what Tanstar just said (they had no mortgage on the house, and no other debts) I *think* from memory if we had refused they.could have appealed and due to their good financial history the decision would have been taken out of our hands and they could have had the funds released anyway (but I could be wrong with that part)