What is a Section 27 and what does it mean?
When you hear someone talk about a Section 27, they are simply referring to Section 27 of the Sale of Land Act, Early Release of Deposit Authority. Often suggested by real estate agents as part of the transferral process, a Section 27 can be extremely beneficial to Owner-Occupiers selling their home.
When a purchaser pays their deposit for a property as part of their formal offer, typically the money is usually held in trust by a real estate agent or a legal professional. This gives certainty to both parties; the vendor cannot run away with the money and take the property off the market, and the purchaser cannot renege without compensating the vendor.
At settlement, the final stage of the transferral process, the vendor receives the deposit as well as the balance due. Once the Contract of Sale becomes unconditional, it is sometimes appropriate for a Section 27 to be signed. This is an agreement between the Purchaser and the Vendor, allowing the Vendor to receive the deposit paid by the Purchaser, prior to settlement.
The most common situation where this occurs, in our experience, is when a Vendor needs to pay for their own deposit on a new home. Alternatively, they may wish to invest that money, pay down other debts, or have the security of it sitting in their bank account. Whatever the reason may be, a Vendor should always aim for financial security regardless of a Section 27 as the Purchaser is under no obligation to sign the document. Similarly, a Purchaser should consider the situation carefully if presented with an Early Release of Deposit Authority.
So, now you know a little bit of industry jargon and when it is most often utilised. Our professional sales agents have a wealth of experience in complex transferrals of properties which our valued clients continue to benefit from time and time again. If we can be of any assistance with the sale of your property, please feel welcome to contact the team.