What is a section 27?January 14th, 2020
A section 27 notice also commonly referred to as a request for early release of a deposit is as the name suggests a request made by the vendor to have the deposit that has already been paid by the purchasers for their property released to them prior to settlement.
Step 1: The vendor completes, signs and dates a section 27 statement, where you will need to provide various information about your existing loan which includes the amount secured by the mortgage over the property, the amount of the installments, the remaining amount required to discharge the mortgage. A vendor is also required to declare that they are not in default of the mortgage and that there are no caveats affecting the property. The information to complete the section 27 statement these days can be found on a vendor’s internet banking page for the homeloan or by looking at your most recent statement. However, if you are unsure of the specifics of your loan you will need to speak to a bank representative to obtain the relevant information to complete the form as lawyers/ conveyancer’s are unable to access this information from your bank on your behalf due to strict privacy laws.
Step 2: When speaking to the mortgagee about discharging the loan on a property for settlement, most lenders within the discharge request form will ask whether you will need a confirming s27 statement. Once your financial institution has received a completed discharge form with a request for a section 27 statement, they begin preparing the necessary documents. The banks can take anywhere from 1-2 weeks to provide section 27 confirming statement as their response times when discharging a mortgage are vastly different to their time frames when creating a new mortgage.
Step 3: Once the confirming s27 statement has been received from the bank, it is annexed to the section s27 document that has been signed by the vendor and is provided to the purchasers for their execution. Whilst many conveyancers serve the section s27 as soon as the statement is signed by the vendor, it is technically incomplete and the 28 days for the release does not begin until the bank letter confirming the details of the section 27 has also been provided to the purchaser.
Where there is a clear title which means there is no mortgage secured over the property, it is sufficient to provide a section 27 statement that has been signed and dated by the vendor to the purchaser for execution. The 28 days begins from the date section 27 statement is emailed to the purchaser.
Step 4: The purchaser’s representative has 28 days to respond to the early deposit release request. Whilst agents often push vendors to request an early release from their legal representative because it means they are paid prior to settlement; the purchaser is under no obligation to consent to the request.
Purchaser or their representative will commonly object to the early release of the deposit for the following reasons;
- A letter from the bank confirming the details of a section s27 where there is a mortgage over the property has not been annexed to the early deposit release request.
- If the amount required by the vendor to pay out the existing mortgage on a property is 80% or more of the sale price.
If there has been no objection raised by the purchaser to the section27 notice within 28 days of it being served, the deposit is released upon the expiry of the 28 days.