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You've paid a deposit on a place in Melbourne, you're juggling finance, building checks, and moving boxes, and then your conveyancer forwards a 'Section 27' request from the vendor. It's pitched as routine, maybe even urgent. Do you sign? Or is there a catch?
Let's slow this down and make it easy.
What Section 27 Actually Does
In Victoria, a vendor can ask for early access to the deposit that's sitting in trust. That request runs through a statutory process called 'Section 27' in the Sale of Land Act 1962. It is a legal mechanism, not a courtesy, and it only works when the conditions set by the Act are met. In short, the purchaser can authorise the stakeholder, usually the agent or lawyer, to release the deposit before settlement, but only once specific boxes are ticked.
Legal Requirements Before Release
Two things must be true before an authorisation can operate. The contract can't be subject to any condition that benefits the purchaser, and the purchaser must have accepted title. Those are the law's words, not mine, and they matter because they shut the door on early release when you still have an 'out', like finance or building and pest.
The vendor must also give you a written notice with the key particulars, including mortgage details in the form the Act expects, and any caveats on title. Only after you receive those particulars can you decide whether you're satisfied or not. If you are satisfied, you can say so in writing and that operates as the authorisation to release. If you are not satisfied, you can object and say why.
The 28 Day Rule Explained
There is a time element too. You have 28 days from receiving the particulars to either confirm you are satisfied or to object. If you do nothing within that 28 day window, the law treats you as satisfied and as having authorised release. Consumer Affairs Victoria reinforces that the deposit cannot be released until at least 28 days have passed from contract date. So silence can cost you.
Off the Plan Exemption
One more bright line. Section 27 does not authorise early release for certain transactions, including money held under section 9AA. Practically, that means residential off the plan deposits are not eligible for early release. If someone asks you to sign a Section 27 on an off the plan purchase, treat that as a red flag.
Why the 28 Day Clock Is a Bigger Deal Than It Sounds
Melbourne conveyancing has its own rhythm. You might exchange on a Saturday, wait for your broker's bank to surface during the week, and then juggle valuations and conditions. While that happens, the Section 27 clock can keep ticking away in the background. Under the Act, if you don't object in time, you are deemed to have authorised the release. That is why practitioners push to keep the process tidy and on time. Attempts to shortcut or 'contract around' the 28 days by adding special conditions have been knocked back by the courts, which have confirmed Section 27 is a statutory regime that cannot be weakened by contract terms.
So, if you are the purchaser and a contract tries to shorten the objection period to five business days, for example, that sort of term is likely to be void. Good to know when you're staring at dense special conditions on a Sunday evening.
The Real Risks for Buyers If You Sign Early
Let's get into the nitty gritty. Here are the common ways a Section 27 can bite a purchaser.
1. You Lose the Safety of the Stakeholder Holding Your Funds
While your deposit sits with an agent or lawyer as stakeholder, it is protected by the trust regime. If you agree to an early release and the deal then falls over because of a vendor issue, you are no longer asking the stakeholder to hand the money back, you are chasing the vendor directly for a refund. That can mean delay, stress and, at worst, legal action. It is why many buyers prefer to keep the deposit in trust until settlement.
2. Commission Deductions Come Out First
When a deposit is released to the vendor under Section 27, the Act allows the estate agent to retain their commission and any auction expenses out of those funds. If the sale later collapses due to the vendor's default, the agent is still entitled to that slice, and the purchaser must pursue the vendor for the balance. You can see how that quickly becomes messy.
3. You Give Away Leverage You Might Need
In Melbourne, pre settlement issues are common: a leaking shower at a Brunswick terrace, an appliance swap at a Southbank apartment, or a garden shed that was meant to stay at a Glen Waverley home. Keeping your deposit in trust gives you a little leverage while those items are sorted. Sign too early and you reduce your bargaining power to words only. That is not a legal rule, just hard won experience from plenty of transactions across the suburbs.
4. The Numbers May Not Stack Up for Discharge
The vendor's Section 27 must include mortgage particulars, and you should only be 'satisfied' when those particulars show the purchase price will be enough to discharge all mortgages over the property. If the payout looks too close for comfort, or if the numbers feel rubbery, object in writing and ask for clarity. This is literally what the law asks you to check.
5. Caveats or Second Mortgages Can Derail Timing
A caveat that still needs a withdrawal or a second mortgage that needs a payout can stretch settlement timing. If you sign off on a Section 27 while those items are unresolved, you've taken on more risk than you realise. The Act asks the vendor to disclose any caveats; treat the disclosure as your cue to slow down, not to speed up.
6. Silence Can Be Taken as Consent
Plenty of buyers think, 'I'll deal with this after finance approval.' If 28 days slip by, your silence can be treated as authorisation. Put it in your calendar and have your conveyancer shoot off an objection if anything remains outstanding for your benefit, such as finance or building and pest.
7. Off the Plan and Section 27 Do Not Mix
It bears repeating because it causes confusion. Early release is not available for the typical off the plan contract. If you are pressed to sign one anyway, take advice before you respond.
Risks Vendors Run When They Push for Early Release
It's not all one way traffic. Vendors can trip up too, and some risks come back to sour the deal.
Trying to shortcut the law with special conditions. Courts have confirmed Section 27 is a statutory regime that cannot be watered down by contract. If you try to reduce the 28 day period or otherwise massage the purchaser's rights, those terms may be void and you invite a dispute.
Commission goes out the door, even if the sale later fails. Once the deposit is released, the agent's commission and costs can be taken, and if things fall apart later the purchaser will understandably be unhappy, and you may still be out of pocket. That is a relationship burner in a campaign and a genuine cash flow risk.
Court action is the only path if the purchaser objects on reasonable grounds. If a purchaser objects and you still want release, your only option is to seek court orders. That takes time and costs money, which is why managing expectations beats forcing the issue.
When It's Generally Safe for a Buyer to Consider Signing
Every file is different, but as a rule of thumb in Melbourne:
- Your contract is unconditional, with finance approved and any inspections or special conditions already satisfied.
- The vendor's Section 27 notice includes complete mortgage particulars, and those figures clearly show the purchase price will fully discharge all mortgages.
- There are no caveats on title, or if there were, you've seen a signed withdrawal ready to lodge.
- You have at least a few clear weeks to settlement, so there's no practical need to rush this for anyone.
- You're comfortable that the vendor is not in default under their mortgage and has a lender issued discharge in train.
If those pieces are all lined up, signing may be low risk. Still, have your conveyancer read the figures with you. The few minutes you spend now can save a headache later.
When You Should Hold Off or Object
Here are the common, sensible reasons to say 'not yet':
- The contract is still subject to finance, building and pest, due diligence, or sale of your existing property. Those conditions 'enure for your benefit', which blocks early release.
- The mortgage particulars are missing, incomplete, or don't add up to a clean discharge from the sale price.
- There is a caveat on title, with no evidence of a withdrawal.
- It is off the plan, so Section 27 simply does not apply.
- You need more time for bank valuation or you are still waiting on the vendor to answer Section 32 questions that matter to you.
- You prefer to keep a little leverage to resolve minor issues before settlement, which is common in practice across Melbourne.
If you are unsure, object in writing within the 28 days and ask for the missing information. You are not being difficult, you are doing exactly what the law envisages.
A Simple Melbourne Ready Email You Can Copy
Subject: Section 27 – purchaser's notice
Dear [Conveyancer/Agent],
We've received the Section 27 notice. We are not satisfied with the particulars at this stage and object to early release of the deposit because [contract remains subject to finance / mortgage payout figures are unclear / caveat remains on title].
Please provide [updated payout letter from lender / copy of caveat withdrawal / confirmation the contract is now unconditional].
Kind regards,
[Your name]
[Property address, suburb VIC]
That short note preserves your position, keeps everyone honest, and takes you off the 'deemed consent' conveyor belt.
A Quick Myth Buster
You might hear an '80 per cent rule' talked about at open for inspections. The legislation's focus is not a fixed percentage. It is whether the purchase price is sufficient to discharge all mortgages when you look at the mortgage particulars the vendor provides. Ask for the lender's payout and do the maths with your conveyancer.
Local Colour: How This Plays Out Around Melbourne
In the inner north, buyers often hit tight timelines as valuations take an extra beat on quirky terraces. Out in the growth corridors, caveats pop up where a lot has been part of multiple contracts. In the CBD, the off the plan confusion is constant, and people are regularly asked to sign Section 27s that do not apply. Across the city, what works is the same: don't sign until the contract is unconditional and the paperwork stacks up.
What Happens If Someone Tells Porkies?
If a vendor knowingly or recklessly supplies false particulars in the Section 27 notice, it is an offence under the Act and the purchaser has the right to rescind the contract and recover the deposit. That is not a theoretical point, it is right there in the statute.
FAQs I'm Asked All the Time
Does Section 27 happen automatically?
Not quite. The deposit is only released early if you authorise it or you are deemed to have authorised it because you did not object within 28 days after receiving the particulars. Otherwise, it stays put until settlement.
Can the vendor force release if I object?
Not unilaterally. If you object on reasonable grounds, the vendor's only path is to apply to court. In real life that is rare, given the cost and delay.
Is off the plan different?
Yes. Those deposits are not eligible for Section 27 release. If someone is saying otherwise, push back and ask for legislative support.
What if my agent says 'everyone signs these'?
Plenty of buyers do sign when it is safe, but it is never mandatory and it is never a favour you owe. Your job is to protect your position and timeline. If the paperwork adds up, by all means sign. If not, say 'not yet'.
The Bottom Line for Melbourne Buyers and Sellers
Section 27 is useful when it is used properly. It is also unforgiving when it is rushed. For buyers, the risk isn't abstract. You are swapping the safety of funds in trust for a promise that all will be well at settlement. That promise is only worth it when the contract is unconditional, the payout math clears every mortgage, there are no caveats, and you are comfortable with the timeline.
For vendors, take care with timing, steer clear of 'shortcut' special conditions, and remember that if early release happens, the agent's commission may come out immediately. If the sale later wobbles, that can turn into an expensive headache.
If you are at all unsure, have a real person look over the papers. A five minute phone call here in Melbourne is often all it takes to either green light a Section 27 or give you a clean, courteous objection that keeps your deal on track. You do not need to be the bad guy to be the careful one.
Want a Quick, Human Read on Your Situation?
Pearson Chambers Conveyancing offers a complimentary Section 32 contract review and can talk you through your Section 27 options in plain English.