Section 27 Statements – Everything You Need To Know


 

With so many things to consider when buying and selling a property, there are many requests that pop up throughout the process that can seem confusing, with even the most experienced buyers and sellers, encountering new and unfamiliar things from, time to time. Section 27 Statements fit that bill, with many confused as to what this requires and what impacts it can have in terms of the conveyancing process. 

To ensure all of our clients have a clear understanding of what a section 27 statement is, what it should include and what you need to consider if you are either a purchaser or a vendor, we have put together a comprehensive guide below! 

 

What is a Section 27 Statement? 

A Section 27 in a conveyancing matter refers to Section 27 of the Sale of Land Act, which provides that a deposit paid by the purchaser, which generally occurs on the signing of a Contract of Sale, can be released to the Vendor prior to settlement if the vendor prepares and submits a Section 27 statement. This process is often referred to as the “early release of deposit”. 

It is not uncommon for a Contract to include a special condition that refers to the purchaser agreeing to a Section 27, early release of deposit, upon the contract becoming unconditional, particularly in circumstances where the vendor is intending to make another purchase with a simultaneous settlement (selling to buy). Save for circumstances where the Contract provides for the purchaser to agree to a Section 27 release, the purchaser is under no obligation to agree to the request. 
 

What should a Section 27 Statement include? 

A Section 27 Statement is a document prepared by the vendors solicitors with information provided by the vendor, which will enable the purchaser to ascertain whether it is safe to release the deposit. The statement must be accurate, with a failure to provide accurate information grounds for the purchaser to terminate the Contract. 

The information included in a Section 27 Statement will vary due to the individual nature of each property and each transaction. However, generally speaking a section 27 statement will include; 

  • Comprehensive details of any mortgage held on the property. This includes full details related to balances outstanding. 
  • Details of any other charges, such as caveats held on the property. 

 

In terms of mortgage details a letter from the vendors bank is required to confirm the outstanding balance, with the purchaser needing this information to ascertain whether the vendor will be in a position to provide clear title to the property on settlement, without the need for the deposit funds to partially pay for a discharge of mortgage. 


I am a purchaser – what things should I consider? 

Section 27, early deposit releases come with significant risk for the purchaser. What if the transaction isn’t completed? What will happen to the funds? With these questions needing to be addressed and accurate and timely legal advice sought should a purchaser ever be faced with such a request. 

Some of the things that purchasers should take into account when considering agreeing to a Section 27 release include; 

  • Balance of the mortgage – It is critical to ascertain the vendors equity in the property. If the amount is minimal and the purchase price well and truly covers this, then it is a good indication that there will be no issues. 
  • Caveats – generally caveats refer to a third-party interest in the property. So, if a caveat is listed it is advantageous to review the section 32 Vendor Statement and find out hat it is for and what if any, funds are payable by the vendor at settlement to have removed.
  • Council rates and water charges – ensure that these are up to date, with normal outstanding balances, as opposed to years and years of unpaid charges. 

 

I am a vendor – what do I need to do? 

If you are a vendor wanting to request a section 27 early release of a deposit, you will need to work closely with your solicitor or conveyancer and your mortgagee to ensure that your provide accurate details in your section 27 statement, that will enable the purchaser to make a decision. 

Should you require the early release of a deposit in order to make a subsequent purchase or fulfil another commitment prior to entering into the contract od sale, it is always a good ides to discuss this with your solicitor or conveyancer so that provisions can be put in place to ensure this can be done in a timely manner. 
 

How long will it take to release my deposit? 

Purchasers, once they have received a Section 27 request from a vendor, with all relevant information, have a period of 28 days to make a decision to agree or to disagree with the request, so a vendor must take this into consideration. 

A purchaser should be aware that should they not respond at all to the request, the vendor will be able to receive the deposit once the 28-day period has passed. 

A purchaser who does not agree to the release, must provide reasons for denying the request and the vendor can address these issues, however if the parties cannot agree the deposit will not be released. 
 

The deposit is held by the agent – how does this affect things?  

The fact that the deposit is held by the agent, doesn’t affect the Section 27 Statement or release, save for the fact that both the vendor and purchasers solicitors will need to communicate with the agent to keep them informed as to the status of the request. The agent will not release the deposit unless instructed by the purchasers solicitors or conveyancers to do so and will need to be provided with written confirmation that the release has been agreed to. 

In terms of commission, once a Section 27 Statement has been agreed to by the purchaser and the deposit is to be released prior to settlement, the agent may deduct the commission and other changes payable to their office from the deposit, providing the vendor with the balance. 


Need assistance with a property transaction? 

If you are looking for a diligent and professional team of property law and conveyancing professionals to assist you with your next property transaction, give the team at Holcroft Lawyers a call today. Our dedicated and highly experienced team can help answer any further questions you may have in relation to Section 27 Statements and any and all other property questions.
 

© 2019 Copyright by Holcroft Lawyers. All rights reserved. Liability Limited by a scheme approved under Professional Standards Legislation.
Home  Contact