Section 27: what is an early deposit release?

When you buy a property in Victoria, you typically pay a deposit at the time of signing the contract. That deposit, usually 10% of the purchase price, sits in a trust account and is held until settlement. That's the default position under Victorian property law.

It's part of our complete Section 32 (Vendor's Statement) guide, if you want the bigger picture.

But there's a mechanism that allows the vendor to access those funds before settlement. It's called a Section 27 statement, named after section 27 of the Sale of Land Act 1962. Understanding how it works, and what you're agreeing to when you sign one, is part of being an informed buyer.

What is a Section 27 statement?

A Section 27 statement is a formal document the vendor provides to the buyer, requesting the early release of the deposit from the trust account. Normally, the deposit is held until settlement, at which point it's applied toward the purchase price. A Section 27 request asks the buyer to allow access to those funds earlier.

The vendor might want early access to the deposit for a number of reasons: they need the funds to cover the deposit on their next property purchase, they have debts to clear, or they simply want access to the money while waiting for settlement to complete.

From the buyer's perspective, agreeing to release the deposit early is a decision that carries some risk, and it's worth understanding that risk before you agree.

Why the deposit sits in trust in the first place

The trust arrangement exists to protect the buyer. If the vendor dies, becomes bankrupt, or is otherwise unable to complete the sale before settlement, the deposit held in trust is safer than money that's already been paid out to the vendor.

If the deposit has already been released to the vendor and something goes wrong before settlement, recovering those funds can be far more difficult. The trust arrangement keeps the money in a neutral holding position until both sides have fulfilled their obligations and settlement can proceed.

What a Section 27 statement must contain

For a Section 27 statement to be valid, the vendor must provide specific information. The key requirement is that the vendor must disclose the amount outstanding on any mortgage over the property.

The purpose of this disclosure is straightforward: the buyer needs to know that the amount being released isn't greater than the vendor's available equity. If the vendor owes $800,000 on their mortgage and the deposit being released is $100,000, the vendor technically has enough equity to absorb it. If the mortgage balance is close to or exceeds the purchase price, the situation is different.

The vendor must also confirm that the property is not encumbered by any mortgage that would prevent the early release, or that the lender has consented.

Your right to object

As a buyer, you don't have to agree to a Section 27 deposit release. You have 28 days from the date you receive a valid Section 27 statement to object. If you don't object within that time, your silence is treated as consent and the deposit can be released.

If you do object, the deposit remains in trust until settlement. You don't need to give a detailed reason for objecting.

Given that the default position (deposit held in trust until settlement) is the safer one for you as a buyer, there's a reasonable argument that unless you have a specific reason to agree, the default is to protect yourself by not agreeing.

What your conveyancer will check

Your conveyancer should review the Section 27 statement before you agree or object. Specifically, they'll look at:

• Whether the statement has been properly completed and includes all required disclosures
• The amount of any mortgage outstanding on the property
• Whether the early release amount appears to leave the vendor with sufficient equity
• Whether there are any factors that would make early release risky in this case

This is one of the situations where your conveyancer's review is particularly valuable. The mechanics are technical and the consequences of getting it wrong sit with you.

When vendors typically request it

Section 27 requests are most common when the vendor has already signed a contract to buy another property and needs their deposit from this sale to fund that purchase. It's a common domino effect in property chains, where one transaction depends on another. This is one of the contract red flags worth reviewing carefully.

It's not unusual or inherently suspicious for a vendor to make a Section 27 request. It's a legitimate mechanism under Victorian law. But it transfers some risk from the vendor to you, and that's worth knowing.

What happens if you agree and something goes wrong

If you agree to the early release of the deposit and the sale does not complete (for example, because the vendor becomes bankrupt or the contract is rescinded for some reason), recovering the deposit can be significantly harder than if it were still held in trust.

You would become an unsecured creditor of the vendor for that amount, which means you'd be competing with other creditors in any insolvency process. The money may not be recoverable in full.

This is the risk you're accepting when you agree to a Section 27 release. For most transactions, the risk is low because settlement completes without issue. But for high-value purchases or where there are any flags about the vendor's financial position, it's a risk worth thinking about carefully.

Does the vendor need to offer you anything in return?

No. The vendor is not required to offer anything in exchange for your agreement. It's simply a request. Whether you agree is up to you.

Some buyers use it as a negotiating point, for example asking for a small reduction in price in exchange for agreeing, but there's no obligation on either side to do this.

Practical tips

If you receive a Section 27 statement:

1. Don't ignore it. The 28-day window runs regardless.
2. Send it to your conveyancer promptly so they can review it properly.
3. Ask your conveyancer to explain the vendor's disclosed mortgage position.
4. Make a conscious decision to agree or object. Don't let it lapse into silent consent without understanding what you're agreeing to.

For most straightforward transactions, a valid Section 27 statement with a vendor who clearly has sufficient equity presents low risk. But the default position of holding the deposit in trust exists for good reasons, and it's worth taking those reasons seriously.

Summary

A Section 27 statement is a request from the vendor for early access to your deposit before settlement. It's a legitimate part of Victorian property law but transfers some risk to you as a buyer. You have 28 days to object. Always have your conveyancer review it before you respond, and make sure you understand what you're agreeing to before you give up the protection that the trust arrangement provides.

Sources

• Sale of Land Act 1962 (Vic), section 27: the provision allowing early deposit release, the disclosure the vendor must give, and the purchaser's 28-day right to object.

Sources verified 25 July 2026.