What is a Release of Deposit Clause?
In New South Wales, a release of deposit clause is a condition that allows the deposit you’ve paid on a property (typically 10%) to be released to the vendor before settlement, rather than being held in trust until the sale is complete.
This clause is not standard and must be explicitly agreed upon by both parties and clearly stated in the contract of sale.
Why Do Vendors Request Early Release?
Vendors may ask for early access to the deposit in order to:
- Pay a deposit on another property purchase
- Cover short-term financial needs
- Reduce bridging finance costs
Is it Common to Agree to a Release of Deposit?
In NSW, agreeing to a release of deposit before settlement is relatively uncommon, but may be requested in situations where the vendor needs access to funds urgently—particularly in a fast-moving or competitive market.
Buyers should be extremely cautious, as once the deposit is released, it may be difficult to recover if the vendor defaults or settlement does not go ahead for any reason.
Key Considerations Before Agreeing
- Before agreeing to release your deposit early, it’s essential to:
- Seek legal advice from your solicitor or conveyancer
- Ensure the vendor has met all contract conditions
- Confirm there are no encumbrances or undisclosed mortgages that could affect the property title
- Understand what would happen if settlement is delayed or does not occur
- Only agree if your solicitor is satisfied that your interests are fully protected
Our Advice
In NSW, early release of the deposit is generally discouraged unless there is a compelling reason and robust safeguards are in place.
Always get legal advice before agreeing to a release clause. Your solicitor will review the contract, assess any risks specific to the transaction, and guide you on whether it’s safe to proceed.
