Don't jump the gun! Early release of deposits in Victorian real estate transactions

Under the procedure set out in the Sale of Land Act, a vendor seeking the release of a deposit must provide specified information to a purchaser in a section 27 statement (Notice). The purchaser then has 28 days to indicate whether they are satisfied with the information in the Notice, and only then may a deposit be released before settlement.

In a joint judgment late last year in a case involving our litigation and real estate teams, the Court of Appeal affirmed a decision of Justice Riordan that a contractual term that altered the method and timing for a purchaser to provide a response to a Notice was void (GLP Batesford Pty Ltd v 68 Bridge Road Land Pty Ltd [2023] VSCA 325). Consequently, the purchaser was not in default of the contract and a rescission notice issued by the vendor for failing to release the deposit was invalid.

The Court of Appeal held that the contractual provision which truncated the time provided by sections 27(4) and (6) of the Sale of Land Act from 28 days to five business days was in contravention of the legislation and therefore void and of no effect. The Court held that the "reduction of that time frame is inimical to the protection the statute affords purchasers and to the balance it provides between the interests of purchasers and those of vendors". The Court highlighted this was even more so where settlement of the contract may not take place for several years.

Based on those findings, the Court held that a rescission notice issued by the vendor was invalid.

This decision is a salient reminder of the importance of the requirements in the Sale of Land Act generally, and in respect of early release of deposits. Drafters must ensure that the requirements of section 27 are unaltered, otherwise they risk those provisions being struck down.