Buyer’s guide  ·  Victoria

Early release of the deposit in Victoria: what every buyer needs to know

Sellers in Victoria can ask for your deposit before settlement. Learn how section 27 works, your 28-day right to object, and the law change due by 1 July 2027.

When you buy property in Victoria, you usually pay a deposit soon after you sign the contract, often 10% of the price. That money does not go straight to the seller. It is held in trust until settlement.

A seller can ask for the deposit early, using a process in section 27 of the Sale of Land Act 1962. Sellers often want it to fund the deposit on their next home. You do not have to agree, but if you ignore the request, the law treats you as agreeing.

This guide explains how section 27 works today, when you should object, and what changes when section 27 is repealed by 1 July 2027.

Who holds your deposit until settlement?

Under section 24 of the Sale of Land Act 1962, a legal practitioner, conveyancer or estate agent who receives your deposit must hold it as a stakeholder. That means they hold it for both of you, not just the seller, until you become entitled to a transfer of the property. In practice, that is settlement.

If you pay the deposit to the seller directly, section 25 says they must pass it to their lawyer, conveyancer or agent, or put it into a special account in both your names, within 7 days. Consumer Affairs Victoria has a short guide to how deposits are held.

Off-the-plan sales have extra protection. Under section 9AA, the deposit can be no more than 10% and must be held on trust until the plan of subdivision is registered. Section 27 cannot be used to release it early.

How section 27 deposit release works

Section 27 lets you authorise the stakeholder to release your deposit to the seller before settlement. The process has strict steps, and the seller cannot skip them.

When can the seller ask?

Only when both of these are true:

• No conditions remain for your benefit. If your contract is still subject to finance approval, a building and pest report or another condition in your favour, release is not available. See our guides to finance conditions in Victoria and building and pest conditions.
• You have accepted title, or are treated as having accepted it because the time to raise questions about the title has passed.

What the section 27 statement must include

Before any release, the seller must give you a written notice, often called a section 27 statement. It must set out:

• Mortgage details, if the property is mortgaged. These include the amount secured, the interest rate, whether the seller is in default, the amount needed to pay out the loan and the lender’s name and address.
• Caveat details, for any caveat lodged on the title. A caveat is a notice on the title that someone else claims an interest in the property.

This is a separate document from the section 32 vendor statement you received before you signed.

Your 28-day window

Once you receive the statement, you have 28 days to respond in writing. You can:

• Confirm you are satisfied that the details are accurate and that the price is enough to pay out every mortgage. That confirmation is your authority to release the deposit.
• Object by stating that you are not satisfied and giving your reasons.
• Do nothing. If 28 days pass without a written response, you are treated as satisfied and as having authorised the release.

That last point catches buyers out. Diarise the 28 days as soon as the statement arrives.

When should you object?

Your objection must say that you are not satisfied with the details and explain why. In GLP Batesford v 68 Bridge Road Land [2022] VSC 614, the Supreme Court of Victoria said your reasons do not need to be “reasonable”, but they should relate to the details you were given and whether the price covers the debts.

Common reasons to object include:

• The mortgage payout figure is close to, or more than, the price.
• There are several loans or caveats, or the seller is in default under a mortgage.
• The details are incomplete, out of date or don’t match the title search.
• Settlement is a long way off, which leaves more time for things to go wrong.

If you are comfortable with a release, your lawyer can sometimes ask for extra safeguards first, such as confirmation from the seller’s lender of the payout figure.

The risks of agreeing to early release

Once the deposit is released, the money is in the seller’s hands. If the sale falls over because the seller defaults, you are entitled to your deposit back under section 26. Getting it back is another matter if the seller has spent it or cannot pay their debts.

Under section 27(9), the agent can also keep its commission and auction expenses out of a released deposit before settlement. That is one reason agents often push for early release.

For most buyers, the safest approach is to let the deposit stay in trust until settlement, unless there is a clear reason to agree and the seller’s debts are comfortably covered by the price.

What if the seller does not follow the rules?

The law protects you if the seller tries to get around the process:

• Contract terms that conflict with section 27 are void. Under section 28, you may also be able to end the contract before settlement and recover what you have paid, unless a court excuses a seller who acted honestly and reasonably.
• Shortcuts don’t work. In the GLP Batesford case, a special condition requiring the buyer to sign a section 27 statement within 5 business days was held void. The Court of Appeal upheld that decision in 2023 ([2023] VSCA 325).
• False information is an offence. If a seller knowingly or recklessly gives false details in a section 27 statement, they face a penalty of up to 50 penalty units, and you can end the contract and recover your deposit.

How the law is changing in 2027

The Consumer Legislation Amendment Act 2026 received Royal Assent on 8 September 2026. It changes deposit release in three ways:

These changes start on a date to be proclaimed, and no later than 1 July 2027. As at the date of this article, section 27 is still in force. You may see 1 June 2027 quoted elsewhere. That is the fallback date for other parts of the Act, including the new section 32 timing rules. The deposit changes have their own fallback date of 1 July 2027.

The Act does not include a specific transitional rule for contracts signed before section 27 is repealed. How it will apply to those contracts is not yet clear. This is our view only: if you signed before the change and receive a release request after it, get advice before you respond.

Once the change starts, the key moment for buyers moves to before you sign. Read the special conditions for any deposit release clause, and negotiate it out or add protections before you commit.

Your deposit release checklist

Frequently asked questions

This article is general information only and is not legal advice. It reflects Victorian law at the date of publication. Please contact us for advice about your circumstances.

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