Deposit release before settlement?

[Spades]

G'Morn everyone,

I was talking to my conveyancer yesterday and was mentioned that vendor wants the deposit after finance has been approved.

I never knew you could do this but doesn't purchaser have to sign a Section 27 Statement granting the release of the deposit?I've signed no sec 27.

As equity release may not come in on time,my other option was a deposit bond.Conveyancer has said they won't except this?

Any issues i should know about re:vendor accessing deposit before settlement?
Vendor is buying another prop and owns there home.If vendor is using the deposit on another property purchase,why don't they use a deposit bond?

Btw,Prop is in vic.

Cheers Spades.

 

[DaveM]

Never release deposit before settlement. Ever.

Lets say the vendor has your cash then declares bankruptcy, or spends it then gets hit by a car, or cant settle and you terminate the contract, you are then left with a difficult legal battle to get your money back

 

[Aaron_C]

In Victoria the deposit is released automatically if:
a) There is no mortgage on the property; and
b) The vendor signs a declaration to that effect.

If there is a mortgage on the property then the deposit can be released if the purchaser makes a declaration over the amount of mortgage and the purchaser accepts that declaration. See: http://www.austlii.edu.au/au/legis/vic/consol_act/sola1962100/s27.html
If no such acceptance is made within 28 days then the deposit is automatically released.

 

[Spades]

Never release deposit before settlement. Ever.

Lets say the vendor has your cash then declares bankruptcy, or spends it then gets hit by a car, or cant settle and you terminate the contract, you are then left with a difficult legal battle to get your money back

Hi Dave,
That's my thoughts as well and especially after reading on the net,some of the examples you listed plus.

In Victoria the deposit is released automatically if:
a) There is no mortgage on the property; and
b) The vendor signs a declaration to that effect.


If there is a mortgage on the property then the deposit can be released if the purchaser makes a declaration over the amount of mortgage and the purchaser accepts that declaration. See: http://www.austlii.edu.au/au/legis/vic/consol_act/sola1962100/s27.html
If no such acceptance is made within 28 days then the deposit is automatically released.

Hi Aaron,

Thanks for that..had that link btw Aaron,but thanks all the same.
I'm just not comfortable with vendor having access to deposit before settlement as the property at this stage is not mine/banks.Also vendor not willing to accept desposit bond if equity release is not due by finance date,well doesn't help me.Plan c would be to use non-deductible funds to fund the deposit,to which obviously i don't want to do but....

Cheers Spades.

 

[Aaron_C]

For my big purchase I had to release the 10% deposit to the vendor as there was no mortgage (circa 400k). It's not a big deal as unconditional contracts mean you will get the property. Just make sure there are no caveats.

 

[Spades]

Sweet,thanks Aaron.

 

[Spades]

Aaron,the thing i don't get is the vendor owns the home outright,so why won't the vendor accept a deposit bond,if equity is not released on time?
What other reasons could there be to want the deposit early?When obviously vendor has the funds to follow through on the next purchase.

Edit*There are no caveats.

 

[Aaron_C]

Because on the contract you have agreed to pay them 10% deposit, which is theirs. As a vendor I would want my 10% earlier if I could - wouldn't you?

 

[Spades]

As a vendor I would want my 10% earlier if I could - wouldn't you?

Of course,who wouldn't?

 

[TMNT]

In Victoria the deposit is released automatically if:
a) There is no mortgage on the property; and

i dont get that, why would it matter if there is a mortgage or not? they can still file for bankruptcy, or refuse to settle, or die

 

[Aaron_C]

i dont get that, why would it matter if there is a mortgage or not? they can still file for bankruptcy, or refuse to settle, or die

1) Bankruptcy - unlikely to have an impact on the sale.
2) Refuse to settle - court ordered specific performance will deal with that
3) Unlikely to impact sale, but may delay it.

 

[Aaron_C]

Of course,who wouldn't?

Deposit bonds aren't accepted because the conditions of them being released are more onerous than cash...

 

[Terry_w]

For my big purchase I had to release the 10% deposit to the vendor as there was no mortgage (circa 400k). It's not a big deal as unconditional contracts mean you will get the property. Just make sure there are no caveats.

Not necessarily. What if someone lodges a writ before settlement? See Black v Garnock.

If you do release lodge a caveat immediately.

And seek legal advice - lawyer not conveyancer.

 

[Scott No Mates]

Also consider the following:

How is this a win-win? What benefit are you getting out of releasing the deposit early? eg. can you get early access?

Who has more to lose, threaten to walk if they want you to the release of the deposit.

 

[Spades]

Not necessarily. What if someone lodges a writ before settlement? See Black v Garnock.

If you do release lodge a caveat immediately.

And seek legal advice - lawyer not conveyancer.

Hi Terry,

That's what i was thinking re:lodging a caveat after deposit release,just to cover my A$$.
Will be speaking to my conveyancer/solicitor tomorrow.

Also consider the following:

How is this a win-win? What benefit are you getting out of releasing the deposit early? eg. can you get early access?

Who has more to lose, threaten to walk if they want you to the release of the deposit.

Hi Scott,
I was thinking that yesterday that there's no benefit in it for me on a deposit release.
Re:Early access,i have written that condition into the contract to allow prospective tenants through.
As for early access if i wanted to do repairs,bit hard when the vendor is living there.

I dunno if i'd threaten to walk when i'm buying below market.

Cheers Spades.

 

[Terry_w]

Hi Terry,

That's what i was thinking re:lodging a caveat after deposit release,just to cover my A$$.
Will be speaking to my conveyancer/solicitor tomorrow.

Talk to a solicitor. A caveat will not protect your deposit. A caveat is just notice that you have an interest in the property. This may give you some priority over later legal interests (for example if someone registers a writ on title after your caveat.) But you will still be an unsecured creditor and can lose your deposit.

 

[JacM]

Can't say I am keen on the idea of early deposit release either. It is easier to choose a settlement date that ensures you never run into this problem. The longer the settlement, the more likely you will be asked for early deposit release.

As described on the page below (you have to scroll down a bit to read the relevant part):

http://www.consumer.vic.gov.au/hous...elling-property/property-deposits-for-sellers

"
Early release of property deposit

The buyer may release the deposit money to you earlier than the settlement date. For this to happen, the:
contract must be unconditional
buyer must be satisfied with your proof of debts information, usually provided as an attachment to the contract of sale. If you are requesting early release of the deposit you must provide evidence to the buyer?s satisfaction that either: there are no debts secured against the property
the total amount of debts secured against the property does not exceed 80 per cent of the property sale price.


The buyer cannot release the deposit until at least 28 days after the date the contract was signed.
"

So choose a settlement date that is not more than 28 days after the date on which you know you'll have to declare unconditional (ie that your finance is approved, you are happy with building and pest results etc).

Problem solved

 

[Aaron_C]

If it bothers you so much then don't buy it - or offer fast settlement so it isn't an issue.