Early Release of Deposit

OPINION
by Peter Mericka B.A., LL.B Real Estate Lawyer and Qualified Practising Conveyancer Victoria Lawyers Real Estate

Enzo Raimondo, CEO of the Real Estate Institute of Victoria (R.E.I.V.) regularly provides consumers with his understanding of the law affecting the sale of real estate. Unfortunately, Enzo's explanation of these laws is often quite limited, and his offering in the Domain section of The Age Saturday 28 April 2007, is a case in point.

In his article Enzo suggests that a person who sells one property can use the deposit paid by the purchaser of that property to pay the deposit on the purchase of another, by arranging for early deposit release. Enzo presents this as something of a helpful hint for vendors, but doesn't go into detail.

As a practitioner in property law, I find Enzo's article both mischievous and misleading.

As Enzo acknowledges in his article,

"...if an early release is agreed to, the selling agent may deduct commission and expenses from the deposit when the release occurs."

This is a very important point, because in my experience estate agents will always put their own interests ahead of those of the vendor when the deposit is needed for the purchase of another property.

I would like to ask all estate agents the following open question:

"If the vendor needs the entire deposit to use in the purchase of another property will you deliver the full deposit, or will you deduct your commission from it first?

I do not believe that there is a single estate agent in Melbourne who would agree to deliver the full deposit to the vendor and wait until settlement for the payment of their commission under any circumstances.

Consumers who read Enzo's article should not believe for one moment that having the deposit released is a simple procedure, or that they will have the full deposit available to them even if it is released. I invite readers to read our section on Deposits and Section 27 Deposit Release.

So what does a vendor do if she can't have her deposit released and she wants to purchase another property?

We have assisted clients to purchase properties where their deposit is unavailable, and we have assisted vendors to sell their properties to purchasers who are unable to pay a deposit because the deposit on their own sale has not yet been released.

All it takes is an appropriate condition in the contract. It may be a matter of having a few thousand dollars paid shortly after the sale, with the balance payable upon release of the deposit paid on the sale of the purchaser's property. The vendor need not miss out on a sale simply because the purchaser can not pay the deposit immediately. Similarly a purchaser should not be disqualified from buying just because the deposit funds aren't readily available.

Estate agents usually tell purchasers that they can not receive an offer where the payment of the deposit is subject to the release of the deposit paid on the purchaser's property. This is quite false. In any case, this is not a matter that the estate agent should be advising on, and the vendor should seek advice from her legal representative.

To post your comment on this item, please return to

Legal Notice
All visitors to this website are advised to visit our
Disclaimer regarding the limited use of information provided on this website, and our Conveyancing Section for conveyancing consumer information.