A ‘Section 27’ is referring to a section of the Sale of Land Act in Victoria. In practice, it is an Early Release of Deposit Authority. What this means is that in certain circumstances, the deposit paid by a purchaser can be released to the vendor prior to settlement. Whether the deposit can be released to the vendor depends on a number of factors and is not a guaranteed thing. Therefore, a vendor should not rely on having access to these funds for making any big purchases prior to settlement, such as paying a deposit on a new property.
To obtain a s27, a Vendor must first sign and complete a Discharge Authority form for any loans they have for the property. Your conveyancer will send this to your bank and formally request a Section 27 Supporting Letter. The vast majority of banks will require the property to be sold prior to accepting this request. The letter contains information about your mortgage, which your conveyancer will use to assess whether it complies with the Section 27 Guidelines(something your Conveyancer can provide more information about). If it complies, your conveyancer will serve the Section 27 on the purchaser’s conveyancer. The purchasing party can sign off on the request, thus releasing the deposit to the vendor immediately. However, in most cases the purchasing party will exercise their legal right to wait 28 days, at which point the deposit must be released.
For the purchasing party, releasing the deposit early is considered early acceptance of title, which can come with certain risks. The purchaser’s conveyancer can object to the early release of deposit if they are not satisfied with the information provided in the section 27 request. A vendor’s agent may push for the early release of deposit monies, as under the act, agents can retain their commission when releasing the deposit funds, meaning they get paid early. However, it’s a multifaceted process with a number of factors that can cause delays and prevent the release of the deposit, so it’s not something to rely on.