Early release of a deposit under Section 27 is a statutory right—not a contractual one—and must be strictly followed.
Section 27 of the Sale of Land Act 1962 (Vic) (Act) permits the early release of the deposit prior to settlement to a vendor under a contract of sale of land in certain prescribed circumstances. However, it is not uncommon for vendors to attempt to vary the section 27 statutory requirements by special conditions in the contract of sale of land.
This was the situation that the court considered in GLP Batesford Holdings Pty Ltd v 68 Bridge Road Land Pty Ltd [2022] VSC 614 (Batesford Case) and, on appeal, in 68 Bridge Road Land Pty Ltd v GLP Batesford Holdings Pty Ltd [2023] VSCA 325 (Appeal Case).
In that matter, the vendor had included a special condition in the contract of sale of land that reduced the notice period for the purchaser to object to the deposit release notice from 28 days (as required under section 27 of the Act) to 5 business days (Special Condition).
Dismissing the appeal, the Court of Appeal held that the Special Condition was in breach of section 27 of the Act and void. As a consequence, the vendor’s rescission notice that relied on the Special Condition was invalid.
Key considerations for practitioners
Special conditions in a contract of sale of land that limit or reduce a purchaser’s statutory right under section 27 of the Act, may:
- breach section 27 of the Act,
- be void and of no effect under section 28 of the Act, and
- permit a purchaser to terminate a contract of sale of land any time prior to settlement and receive a full refund of all monies paid to date from the vendor.
To minimise the risk of the potential for a voidable contract of sale of land, disputes, and potential claims, practitioners should:
- not insert any special conditions into contracts of sale of land that reduce the statutory rights of a purchaser under section 27 of the Act,
- give clear advice and manage a vendor’s expectations about access to deposit funds prior to settlement, and
- review their precedents to ensure compliance with section 27 of the Act.
Key reflections
Ultimately, practitioners need to be aware that an early release of the deposit prior to settlement of a contract of sale of land is not a contractual right of the vendor, but a statutory mechanism that must be strictly followed. Accordingly, practitioners should not insert special conditions into contracts of sale of land that reduce a purchaser’s rights under section 27 of the Act.
