Don’t forget about the further deposit release requirements for Unit Title properties...

An agent was selling a unit titled property and the vendor was keen to have the deposit released to them.  Equally, the agent was keen to have their commission paid as soon as they could, as it had been a difficult sale to get across the line.

The agent sent a request for early release of the deposit to the lawyers for both parties.  The purchaser’s lawyer advised that they had not yet received a Pre-Settlement Disclosure Statement (PSDS) from the Body Corporate, so the deposit could not be released.

The agent didn’t understand why this would be an issue, so questioned the lawyer further.  The lawyer explained that the purchaser had the right to cancel the agreement if the PSDS was not provided.  The agent certainly didn’t want to be responsible for trying to get the deposit back from the vendor if it was incorrectly paid out to them!

Releasing a deposit

When an agent (as stakeholder) holds a deposit as part payment of the purchase price for a property, the requirements for the release of the funds are prescribed in the Real Estate Agents Act 2008 (“the Act”), and under the ADLS Agreement for Sale and Purchase.

Section 123 of the Act provides that agents must hold any deposit paid to them for ten working days after the date that they received it, before paying the deposit to any other person (usually the vendor). 

The Agreement for Sale and Purchase provides that the agent (or the stakeholder) shall hold the deposit:

1. Until such time as the agreement is unconditional, and the title requisition clause (general term 6.2 of the standard agreement) procedure has been completed (whichever is the later), or until such time as the purchaser’s rights under the clause are waived; and
2. When the deposit is paid towards the sale and purchase of a unit title property, the deposit cannot be released until the Pre-Settlement Disclosure Statement, and any Additional Disclosure Statement, have been provided to the purchaser. 

The reason for having this requirement is that a purchaser can cancel an Agreement for Sale and Purchase if the PSDS is not provided.  If settlement is not going ahead, you do not want the vendor to have received the deposit, and have to ask them to pay it back! 

Equally, the purchaser can delay settlement until the PSDS is provided.

The parties can agree to an early release of deposit, but in the case of unit titles, this is less likely to be agreed for the above reason.

How long might the PSDS take?

The Pre-Settlement Disclosure Statement must be provided at least five (5) working days prior to settlement.  Accordingly, the deposit is often required to be held by the agent or stakeholder for a longer timeframe for a unit title property than any other type of property. 

It is essential that you are aware of your obligations, so you don’t get caught out.