Section 27: getting the deposit released before settlement in Victoria

When you sell in Victoria, the buyer's deposit does not go to you. It sits with your agent, conveyancer or lawyer until settlement. That is what the law requires, and for most sales it is no problem.

It becomes one when you are buying your next home at the same time. You need a deposit for that purchase, and your money is sitting in a trust account waiting for your own settlement. Section 27 of the Sale of Land Act 1962 is the mechanism that lets the deposit come out early.

It is also on its way out. The Consumer Legislation Amendment Act 2026, which received Royal Assent on 8 September 2026, repeals section 27 and replaces it with a different rule. This post covers both.

Where the deposit sits by default

Section 24 says deposit money received by a legal practitioner, conveyancer or estate agent is held as a stakeholder until the purchaser becomes entitled to a transfer of the land. In a normal cash sale, that means settlement. Only then may it be paid to the vendor.

If the vendor receives deposit money directly, section 25 requires it to be paid within seven days to a practitioner or agent acting for the vendor, or into a special purpose account in the joint names of buyer and seller.

Consumer Affairs Victoria notes that no law sets the amount of the deposit. Ten per cent is a convention, not a rule. Where it is held, though, is the law.

How a section 27 release works today

Section 27 lets the purchaser authorise the stakeholder to release the deposit to the vendor, or as the vendor directs, before settlement. The authorisation has to be in writing, and it only works if several conditions are met.

Two preconditions

Under section 27(2), a release can only happen where:

1. the contract is not subject to any condition for the purchaser's benefit. If the contract is still subject to finance approval, or to the sale of the buyer's own home, the deposit cannot be released, and
2. the purchaser has accepted title, or may be deemed to have accepted it. The contract sets the timing for requisitions on title, and that period has to have run.

The vendor's statement

Under section 27(3), no authorisation is effective until the vendor has given the purchaser a written notice setting out:

• the particulars of any mortgage over the land, in the form in Schedule 1 to the Act: the amount secured, whether further advances are allowed, the interest rate, the repayment date, the instalments, and whether the vendor is in default, and
• particulars of any caveat recorded on the title.

The point of the statement is simple. The buyer needs to know that the price is enough to pay out every mortgage at settlement. If it is not, releasing the deposit puts the buyer's money ahead of a debt the vendor cannot clear.

The 28 day clock

This is the part buyers miss.

• If the purchaser is satisfied the particulars are accurate and the price is enough to discharge all mortgages, they give written notice of that within 28 days of receiving the statement. That notice is the authorisation (section 27(4) and (5)).
• If the purchaser is not satisfied, they must give written notice saying so, with reasons, within 28 days (section 27(6)).
• If the purchaser does neither within 28 days, section 27(7) deems them satisfied, and deems them to have authorised the release.

Silence is consent. A buyer who puts the section 27 statement in a drawer has agreed to the release four weeks later. If you receive one, send it to your conveyancer the same day.

False information

If a vendor knowingly or recklessly gives false particulars, section 27(8) makes it an offence carrying up to 50 penalty units, and it entitles the purchaser to rescind the contract and recover the deposit. At the 2026-27 penalty unit value of $209.10, 50 penalty units is $10,455.

What the agent can take

Section 27(9) lets an estate agent who releases the deposit keep out of it the commission, any auction expenses, and other money the agent is or will become entitled to. So a vendor expecting the full deposit may receive the deposit less the agent's commission.

Off-the-plan deposits are excluded

Section 27(11) says the section does not authorise the release of money held under section 9AA. That is the deposit on an off-the-plan contract, which stays on trust until the plan of subdivision is registered. Our guide to off-the-plan contracts explains why.

The risk for the buyer

Once released, the deposit is the vendor's money. If settlement then fails because the vendor cannot give clear title, becomes bankrupt or simply refuses to complete, the buyer has a claim against the vendor rather than money in a trust account. That claim may be worth very little.

A section 27 statement manages part of that risk, because it shows whether the mortgages can be paid out. It does not deal with everything:

• a judgment creditor or a caveat that appears after the statement was given
• a vendor who stops cooperating halfway through
• a vendor whose finances fall apart between the release and settlement.

None of that means a buyer should refuse every request. In a chain of sales it is often how everyone gets to settlement. It does mean reading the statement properly before the 28 days run.

What changes, and when

The Consumer Legislation Amendment Act 2026 makes three changes to the Sale of Land Act:

These three provisions commence on a day to be proclaimed, and no later than 1 July 2027. Until then, section 27 is still the law. We checked the in-force version of the Act, in force from 9 September 2026, when writing this.

In practice the change moves the decision to the start of the deal. Instead of a statement arriving after the contract is signed and a buyer who can agree by doing nothing, early release will have to be negotiated into the contract as a special condition before anyone signs. A buyer who does not want it simply does not agree to the condition.

If you are selling and need the deposit for your next purchase

Plan for it before the contract is drawn up.

• Under the current law, a section 27 release needs an unconditional contract and the title period to have run. If your buyer's contract is subject to finance for 21 days, there is no release until finance is approved.
• Once section 26A commences, the release has to be in the contract. If you are listing around mid-2027, raise it with us when we prepare your contract, so the condition is there from the start.
• A deposit bond or a bridging arrangement with your lender may suit better. That is a question for your lender or broker.

Our selling checklist covers what else needs sorting before the agent launches the campaign.

If you are buying and receive a section 27 statement

1. Note the date you received it, and diarise the 28th day.
2. Send it to your conveyancer immediately.
3. We compare the mortgage particulars against the price and order a fresh title search for caveats.
4. If it checks out, and you are comfortable, we prepare the notice of satisfaction. If it does not, we prepare a notice of dissatisfaction with reasons, within the 28 days.

You are not obliged to be satisfied simply because the vendor needs the money.

Questions we get asked

Can the vendor release the deposit without my consent?

Not legally. Release needs your written authorisation, or your deemed authorisation after 28 days of silence once a valid statement has been given. That deeming rule is why a statement should never sit unanswered.

My contract is still subject to finance. Can the deposit be released?

No. Section 27(2) only operates where the contract is not subject to any condition for the purchaser's benefit.

Does the new law apply to my contract?

The new sections commence on a date to be proclaimed and no later than 1 July 2027. Which regime applies depends on when your contract is signed and what the transitional rules say once the commencement date is known. Ask us when you have a contract in hand.

Talk to us

Deposit release looks like an admin step. It is the moment a buyer's money stops being protected by a trust account, so it deserves a proper read.

Wise Step Conveyancing is at 105A High Street, Cranbourne, and acts for buyers and sellers across Victoria. We are open Monday to Friday, and on weekends by appointment. If you are selling and need your deposit early, or buying and have just received a section 27 statement, get in touch or ask us for a quote.

This article is general information about Victorian conveyancing and is not legal advice for your particular transaction. Speak to us about your specific circumstances.