EARLY RELEASE OF DEPOSIT IN VICTORIA: WHAT PURCHASERS NEED TO KNOW BEFORE AGREEING

When buying property in Victoria, the deposit (which typically can be up to 10% of the purchase price) is paid on signing the contract and held securely in trust until settlement. At settlement, you pay the balance, and the deposit is released to the vendor.

However, vendors sometimes request early release of the deposit before settlement. This is common when the vendor needs funds for their own next purchase. While it can help the transaction proceed smoothly, it introduces risks for purchasers.

What we cover in this article:

How a vendor requests early release of the deposit
When can a purchaser object?
Why this matters for purchasers
How to protect your position as a buyer

How Does a Vendor Request Early Release of the Deposit in Victoria?

In Victoria, vendors can request early release under section 27 of the Sale of Land Act 1962 (Vic). They must provide a formal section 27 statement along with supporting documents that disclose:

Details of any mortgages or caveats on the property.
Confirmation of amounts owing (often via a letter from their lender).

Once you receive the section 27 statement, you have 28 days to respond in writing. If you do not object within this timeframe, consent may be deemed given, and the deposit could be released to the vendor.

When Can a Purchaser Object to Early Release?

You have valid grounds to object in several situations, including:

The section 27 material is incomplete or inaccurate regarding mortgages or caveats.
The mortgage amount(s) exceed what is permitted under section 27 (typically where they exceed the sale price).
The contract remains subject to a condition for your benefit (e.g., an unsatisfied finance approval).

Practical tip: Even if the mortgage does not exceed the sale price, review for other risks such as accruing interest, unpaid rates, land tax, GST, or foreign resident capital gains withholding tax. These may not always provide a standalone objection but should form part of your overall risk assessment.

Why Does Early Release of the Deposit Matter for Purchasers?

Releasing the deposit early reduces your security. While funds are held in trust, they provide protection if the vendor defaults. Once released:

Recovering the deposit (if settlement fails due to the vendor’s default) may require costly and time-consuming legal action.
You lose leverage in negotiations or disputes.

This is particularly relevant in a competitive market where vendors may push for early access to funds.

Protecting Your Position as a Purchaser

Review promptly: Have the section 27 statement and supporting documents checked carefully against statutory requirements.
Consider a caveat: In some cases, lodging a caveat on the title can further protect your equitable interest in the property.
Seek expert advice: Don’t assume everything is in order — professional review can identify hidden risks.

MAP Lawyers can assist by reviewing section 27 materials, assessing objection grounds, advising on risks, and taking steps to safeguard your interests before any deposit is released. Early intervention is key to avoiding unnecessary exposure.

Contact our experienced Victoria conveyancing team today to discuss your property purchase and ensure your position is fully protected.

Call us on 1300 680 584 or contact@maplawyers.com.au

Please note: This article provides general information only and is not formal legal advice. Laws and individual circumstances vary — always seek tailored professional advice for your transaction.