It is possible for the deposit to be released to you prior to settlement
So your property has sold, the buyer has paid a deposit - how do you access the deposit funds?
Purchasers usually pay a 10% deposit at the time the contract is signed, or once their finance has been approved, and these funds must be held by a stakeholder, agent or solicitor, until settlement.
It is possible for the deposit to be released to you prior to settlement, but before this occurs, in accordance with section 27 of the Sale of Land Act:
The purchaser must have paid a cash deposit (i.e. not a bank guarantee or deposit bond).
The contract must be unconditional - this means all conditions in the contract relating to things such as finance approval or building and pest inspections have been satisfied.
The purchaser is entitled to receive full details of any outstanding debts on the property (for example your mortgage). This means that your legal representative must first obtain this information in the form of a letter from your lender as evidence that the proceeds of the sale will be sufficient to pay out any mortgage or other debt over the property and give that letter to the purchaser attached to what is commonly called a 's27 notice'.
The purchaser must sign and return the s27 notice to approve the release of the deposit - if they don't sign the release and if they raise no objection to the release, the deposit can be released 28 days after service of the s27 notice (the agent will deduct the commission and marketing costs from the deposit once released).
Barriers to release of the deposit
Although this process seems straight forward, there are a number of factors that can delay or hinder the release of the deposit prior to settlement including:
Your lender may take a very long time to provide the letter required to be served with the s27 notice - sometimes so long the settlement date has arrived by the time we receive their letter.
The amount owing on the property exceeds 80% of the sale price - in which case it cannot be released.
The purchaser objects to the release of the deposit - even if their objection is invalid, many agents will not release the deposit unless that objection is withdrawn.
This means there is no guarantee the deposit will be released prior to settlement so it is important to understand the deposit release process, particularly if you intend to rely on the deposit funds in order to purchase another property.
All information provided is general in nature and does not constitute legal advice, nor is it intended to be taken as legal advice. While all care is taken to ensure information on this website is accurate and current, we make no warranties as to the accuracy or reliability of any information provided. Users of this website must make their own inquiries and must seek their own legal advice specific to their own circumstances and not act or rely on any of the information on this website.