If you’ve felt the need to click into this article, then the thought has probably already crossed your mind: ‘What is with lawyers and numbers? Section 27, Section 32, Section 52 – it’s never-ending!’
Yeah, we know. That’s why we’re writing this plain English guide to a Section 27, to explain in language, so you can understand what it is, how it could benefit you and when it’s appropriate.
What Does ‘Section 27’ Mean?
In actual fact, a Section 27 is called an Early Release of Deposit Authority. It is commonly referred to as a Section 27 simply because it is implemented under Section 27 of the Sale of Land Act.
What does it mean, though? In order to understand this, we first must explain the basics of the real estate transferral process.
The Real Estate Transferral Process
When purchasing real property the purchaser must pay a deposit (usually 10% of the sale price) upfront, as a sign that they are genuine about their intention to purchase. This deposit acts to secure the purchase.
Once paid, the deposit is usually held by the real estate agent, a lawyer or a conveyancer who has a trust account. If the purchaser reneges on the deal after signing the contract, the vendor may be entitled to retain the entire deposit amount.
At the time of Settlement, the purchaser gives the vendor the balance of the sale in return for the Title of the property. At this time, the deposit will also be released to the vendor - perhaps less the costs of, say, a real estate agent.
So, Where Does the Section 27 Come In?
Now we’re ready to address the Early Release of Deposit Authority.
Section 27 of the Sale of Land Act allows the Vendor to present the purchaser with an Early Release of Deposit Authority prior to Settlement. In certain circumstances, it is considered ‘safe’ to allow the vendor early access to the deposit (i.e. before Settlement).
In order for this to occur, both parties (the vendor and the purchaser) must sign the Early Release of Deposit Authority. This gives permission to the agent, lawyer or conveyancer who is holding the deposit to release that amount to the vendor.
Although a Section 27 is never necessary, there are many reasons why a vendor might want early access to the deposit money. For instance, they might need the money to pay their own deposit on a new home. Or, they may want to invest it so that it earns interest.
Whatever the reason, early release of the deposit can never be guaranteed. No matter the circumstances, it is strongly advised that the vendor does not rely on the success of an Early Release of Deposit Authority.
Should you want to apply for an Early Release of Deposit Authority, your lawyer or conveyancer will give you advice as to whether or not it’s appropriate.
Similarly, if you are a purchaser and you’ve been presented with an Early Release of Deposit Authority, you should seek advice from your lawyer or conveyancer. They will help you determine whether or not it’s safe to release the deposit to the vendor prior to Settlement.
A ‘Section 27’ is actually called an Early Release of Deposit Authority. It is commonly referred to as a Section 27 as it is implemented under Section 27 of the Sale of Land Act.
Generally, when purchasing real property the purchaser will be required to pay a deposit of around 10% of the sale price. This deposit is usually held in a trust fund until Settlement, at which time it is transferred to the vendor.
If the vendor wants the deposit money prior to Settlement, they may ask for an Early Release of Deposit Authority. In order for the deposit to be released early, both parties must sign the document. If this occurs, the lawyer, agent or conveyancer holding the deposit is given permission to release the deposit to the vendor.
There is never any guarantee that a deposit will be released early, and it is strongly advised that the purchaser does not rely on this occurring.
To determine whether or not an Early Release of Deposit is appropriate, it is best to seek advice from a lawyer or conveyancer.
If you would like to know more about a Section 27 or need professional legal advice, contact Rose Lawyers on 03 9878 5222.