Getting a deposit released to you early
by Jacqui Brauman
This blog is about getting the deposit released to you early if you are selling a property.
Generally, a purchaser will pay 10% of the purchase price as a deposit. This is the purchaser’s money until settlement, so there is no guarantee that you will have the deposit released to you.
Unfortunately, sometimes vendors are of the mistaken belief that they’ll have easy access to this money and they’ll use that deposit from their sale, to put that money towards a new purchase. But it’s not guaranteed that you will have access to those funds quickly, so don’t assume that you can count on using that money.
The deposit is the purchaser’s funds, so they’re not yours, and until your sale contract goes unconditional you have absolutely no right to that deposit. If the contract then becomes unconditional, which means the purchase is going to proceed, and if it doesn’t, the purchaser loses their deposit.
There is a situation where you can have the deposit released to you under section 27 of the Sale of Land Act. To do so, you are required to give a specific written statement to the purchaser to get their consent to release their money early.
Now a purchase doesn’t have to consent, but if they unreasonably withhold their consent the deposit can still be released to you on the expiry of 28 days from that statement being given to a purchaser.
This is why you can’t rely on getting a deposit released to use it for your future purchase, because it takes, potentially, six weeks to get it (maybe two weeks for your contract to become unconditional, and that’s the best-case scenario, and then potentially 28 days under the statement to expire).
Now, in that statement, if you have a mortgage or if there is a caveat on the property, you need to reveal the underlying deal behind that so the purchaser has some satisfaction that the sale is likely to proceed. If you have less than 20% equity in your property, a purchaser does not have to consent to release their deposit to you.
So you can see that it’s not your money, it’s the purchaser’s money. And the purchaser still, even though the contract becomes unconditional, wants to make sure that the contract will proceed and they will actually get this property. Your purchaser has a right to know how much debt you owe and can refuse to release the deposit if you owe too much. Please do not rely on having a deposit released early.
If you need more information, get in touch with our team at 1300 043 103 or send an email to [email protected]