Early Release of Deposit (in VIC) - Purchaser's rights

OK, so our vendor has requested early release of the deposit, pursuant to Section 27 of Sale of Land Act. They have complied with the conditions, apparently.

Our conveyancer says we don't have the right of refusal and it will be automatically released after 28 days.

The info we've researched says variously that the purchaser CAN and SHOULD refuse because of associated risks. We have provided contrary evidence to our conveyancer but she is sticking by her guns.

So, anyone know either way??? Do we have to let them have it before settlement???

Thanks so much for your help. :confused:
 
Our conveyancer says we don't have the right of refusal and it will be automatically released after 28 days.

The info we've researched says variously that the purchaser CAN and SHOULD refuse because of associated risks. We have provided contrary evidence to our conveyancer but she is sticking by her guns.
If you don't refuse within 28 days, it will be automatically released. I think what your conveyancer is suggesting is that you don't have a valid reason for refusing.

Reading S27 of the Sale of Land Act, it would appear to be true that you do have to give a reason for rejecting an early release application.

I imagine the reason that is routinely given by solicitors is that the purchaser is not satisfied that all the particulars are accurate (see (4) (a)), and there's no defined method for the vendor to "prove" that the particulars are accurate, so really no legal reply that the vendor can make to force deposit release. They may provide bank statements, but how do you know that they're up-to-date, and that the vendor won't go and make redraws or increase their debt again prior to settlement?

I'd be finding a conveyancer who's willing to stand up for your rights; there are plenty of conveyancers and solicitors who seem to believe that you do have a right to refuse.

If your conveyancer believes that all those other practitioners are in error, ask them for their opposing legal advice, and how the vendor would prove that you were "satisfied"?
 
Hi Skuri

Welcome to the Forum!

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.

Even though a Caveat will cost you a small fee it is worth considering to protect your interests between now and settlement.

Hope this helps
Kristine
 
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.
Given that there are conveyancers and solicitors who interpret the Act differently, are you able to provide any reference, Kristine? In particular about "satisfaction" being defined and compulsory rather than at the purchasers' discretion? And about permission having to be "reasonable"?
 
Hi ozperp

Ah! And there's the rub!

Law and Regulations under Law, are open to interpretation but a basic fundamental is that people cannot be compelled to disadvantage themselves.

The early release of deposit provisions are not to create a 'right' but to create a sensibility.

The deposit monies are in limbo during the period between the contract becoming unconditional and settlement.

The Agent holds the money in their Trust Account as a Stakeholder, but no party owns the money and cannot access that money until certain future events occur ie the settlement of the property.

Requisitions on Title are, for the most part, a formality but releasing what can be a considerable amount of money is not going to be jeopardised if the vendor, for example, receives a Notice to Fence after the contracts are exchanged however if the vendor increases the debt against the property, or falls into arrears on the mortgage loan, or does anything which may lessen their entitlement to deal with the property ie settle, this may create a disadvantage to the purchaser.

Accordingly, if the purchaser has good reason to withhold permission for the release of the deposit prior to settlement then they cannot be compelled to release the deposit

But there must be a 'good reason' for withholding permission

Over the years, I have not allowed (as distinct from 'refused') the early release for some simple reasons such as a 30 day settlement which did not allow for any significant measure of time between answers to Requisitions and Settlement, and I have had customers who have not allowed (that is, refused) early release because their Conveyancer found that the mortgage was in arrears or that there would be insufficient funds to complete and settlement was in doubt from the outset

I cannot recall any purchase of mine where I have paid a 10% deposit and in some cases, have paid a very minimal deposit which was certainly less than the Agent’s commission or expenses and would have been insufficient to achieve an Account Sale and therefore there was no point in releasing the deposit earlier. The deposit, of course, is simply part of the purchase price paid at a date prior to settlement.

The Law may be an *** (this word is donkey, but the spell check censor has decided this famous quote is a bit rude!), but the law cannot and does not seek to impose hardship or disadvantage. The Law asks: What would a ‘Reasonable Person’ do?

As I understand it, the reason why Victoria has this provision is that in times past the REIV was a strong lobby group and from a commercial practice point of view, why should an Agent, who has completed their professional task, wait – in some cases, many months – to be able to do an Account Sale when the money was there and the Agent had incurred costs in achieving the sale for the Vendor.

The buying and selling of property is, by it’s very nature, a commercial transaction. The Agent is running a business and if the sale is unconditional deserves to be paid for their work.

But the desire of the Vendor to receive the balance of deposit money or the desire or need of the Agent to be paid for their work or reimbursed their expenses cannot take precedence over the rights of the Buyer to have their interests protected

However, having said all that, a Buyer may not ‘unreasonably withhold’ permission to release the deposit just because they feel uncomfortable about it. If they had not wanted to release the deposit then they had the opportunity to negotiate a smaller deposit, secure the purchase with a Deposit Bond or to impose conditions on the release of the deposit when negotiating the sale, not just dig their heels in when the sale has become unconditional and refuse to release without reason.

Buyers are not lambs to the slaughter. A Buyer, by definition, is an Adult entering into a Contract. Due Diligence includes negotiating fair and reasonable terms and conditions of the Contract acceptable to both parties and the payment and release of a deposit form part of the terms and conditions negotiated by the Buyer.

The Agent is there to ensure that the Vendor’s interests are protected and the Buyer must protect themselves and to seek advice, if necessary, before entering into the Contract.

Caveat Emptor includes all things but once signed and exchanged the Contract stands and the Contract embodies the law. In Victoria that includes provision for the early release of any monies paid as part of a deposit. The time to opt out of that provision of the Sale of Land Act is when negotiating the Contract unless matters later come to light which the Buyer would have good reason to believe may disadvantage them.

So where is this written in law? Everywhere and nowhere. In all things we must endeavour to act in a reasonable manner and the Buyer must be Aware that they, as well as the Vendor, will be required to act reasonably and in accordance with the law throughout the execution of the contract.


Cheers
Kristine
 
Impressive but......

Hi ozperp


However, having said all that, a Buyer may not ‘unreasonably withhold’ permission to release the deposit just because they feel uncomfortable about it. If they had not wanted to release the deposit then they had the opportunity to negotiate a smaller deposit, secure the purchase with a Deposit Bond or to impose conditions on the release of the deposit when negotiating the sale, not just dig their heels in when the sale has become unconditional and refuse to release without reason.

Buyers are not lambs to the slaughter. A Buyer, by definition, is an Adult entering into a Contract. Due Diligence includes negotiating fair and reasonable terms and conditions of the Contract acceptable to both parties

I see what you're saying, but you see Vendor's are currently "digging their heels in" in Victoria with the ridiculously high proportion of auctions with, of course, unconditional sales. There IS NO OPPORTUNITY to negotiate anything at all and with 90% clearance rates, please tell me where you think the balance lies in this equation? What can a buyer do if they wish to get into property but to just suck it up and do what they can, where they can to indeed protect their interests.

In this case, we aren't being unreasonable, I think, we just don't believe it should be all the vendor's way. Given that since 2003 they have paid off a grand sum of $1000 on their mortgage - do we have reason to be concerned? YES!

What exactly is the point of holding deposit in trust - suppossedly originally designed a s abuffer to protect each party - if the vendor can ask for and simply get it? It's a ridiculous notion that a purchaser simply has to acquiesce. That is unreasonable demands on a purchaser who at this point powerless, to expect them to give up their only bit of security!

Anyhow, I am very appreciative of the time you have both taken to respond. I'll try to fight it out further and insist on our rights.....
 
if the vendor increases the debt against the property, or falls into arrears on the mortgage loan, or does anything which may lessen their entitlement to deal with the property ie settle, this may create a disadvantage to the purchaser.

Accordingly, if the purchaser has good reason to withhold permission for the release of the deposit prior to settlement then they cannot be compelled to release the deposit
The fact that the vendor might increase the debt or fall into arrears sounds like a very good reason to me! Let alone the risk of the vendor dying... I don't think any reasonable purchaser would approve the early release of deposit when there's potential harm to their position, and no benefit.

The fact that it's "customary" to authorise release doesn't mean that it's good practise, nor obligatory. If it is obligatory, there's been no evidence provided to support this position thus far, only opinion (valuable as your opinion is ;)). In fact, I've found reference on several legal sites saying that early release is usually only authorised when there is no mortgage over the property, eg http://www.lawyersconveyancing.com.au/section_27.asp, so I'm still not buying that you're required to approve.
 
There IS NO OPPORTUNITY to negotiate anything at all and with 90% clearance rates, please tell me where you think the balance lies in this equation?
The pendulum swings both ways. Now it is a seller's market. 12 months ago it was a buyer's market.

What can a buyer do if they wish to get into property but to just suck it up and do what they can, where they can to indeed protect their interests.
Suck it up. Do what you can. On a % basis, very few deals go badly.

Given that since 2003 they have paid off a grand sum of $1000 on their mortgage - do we have reason to be concerned? YES!
Not necessarily. They might have decided to pay IO. I know I do. Haven't paid down 1c in principal for many years. But nett assets are up :)

What exactly is the point of holding deposit in trust - suppossedly originally designed a s abuffer to protect each party - if the vendor can ask for and simply get it? It's a ridiculous notion that a purchaser simply has to acquiesce. That is unreasonable demands on a purchaser who at this point powerless, to expect them to give up their only bit of security!
Take it up with your solicitor. The law is what it is.

Anyhow, I am very appreciative of the time you have both taken to respond. I'll try to fight it out further and insist on our rights.....
Rights? :confused: You have the right to comply with the aspects of the law that affect your present dealings :rolleyes:

Don't sweat it - it will probably work out fine. ;)
 
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