What is a release of deposit clause?

Upon exchanging contracts on a property, the buyer is required to pay a deposit.  This is usually 10% of the agreed sale price.  The deposit is held in a trust account by the real estate agent until settlement takes place, usually 42 days later.  This deposit acts as a form of guarantee that the purchaser will complete the sale and the vendor is entitled to keep this deposit if the purchaser pulls out.  At settlement, the purchaser pays the balance remaining in return for the title for the property.

A release of deposit clause (or Section 27) can be inserted into the sale contract for a property, to enable the deposit paid to be released to the vendor after exchange of contracts (ie before settlement).  This is usually requested by a vendor to enable them to then purchase and place a deposit on their new property but can sometimes be sought for alternative uses.

In the past most purchasers’ solicitors advised against this and sought to delete this clause.  If a purchaser objects to early release of the deposit (and they need to state a reason for the objection), the vendor won’t be able to access the deposit until settlement.

Now days though the release of deposit clause is far more commonly accepted and with the rising property prices it in Sydney is often a necessity.  It is in most cases a perfectly acceptable practice, as long as some safeguards are put in place to reduce risk.  We recommend that you seek guidance from your solicitor or property conveyancer.


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