HELD LAWYERS

Est.1991

Property & Commercial Law

Law Matters

September 2012 Newsletter

Welcome
In this months bulletin, we look at issues relating to sale of property - deposit releases; and
who carries the risk of loss or damage before settlement and associated insurance issues.
If there are topics you would like us to look into, please let us know.
Adam Held
Principal

Real estate transactions deposit releases

Any deposit received by a vendor or vendors agents
must be held under stakeholder provisions of the Sale of
Land Act 1962 (Vic) until released under the provisions
of that Act. A Section 27 Statement of Release of
Deposit Monies Notice (Notice) allows the deposit to
be released after any condition enuring for the benefit of
the purchaser has been fulfilled and the purchaser has
accepted title.
A purchaser is to give the notice of satisfaction with the
particulars, or give the reasons for dissatisfaction, within
twenty-eight (28) days of receiving them. If the purchaser
fails to give a notice of satisfaction or dissatisfaction, the
purchaser is deemed to:
have authorised the release of the deposit, and
be satisfied with the particulars provided by
the vendor.
Under sub-Section 27(5), the notice of satisfaction with
the particulars is deemed to be the authority for the
release of the funds. By sub-Section 27(9), the estate
agent who has held the deposit moneys may retain the
agents commission and auction expenses and any other
moneys to which the agent is entitled.
However, the agent continues to hold the deposit moneys
as a stakeholder until the purchaser becomes entitled
to a transfer or conveyance of the land or, in the case

of a terms contract, the purchaser becomes entitled to

possession or to the receipt of rents and profits.
For obvious reasons, vendors prefer deposits released
as soon as possible after sale and before settlement.
Following recent case law it is unclear whether a vendor
can deem that a purchaser has accepted title by the
signing of the Notice (when it has not accepted title in
fact), and that the deposit is automatically released.
Further, as purchasers can no longer serve requisitions
(i.e. questions) on a vendor, they are no longer able
to ascertain whether there are latent (i.e. not obvious)
defects with the title giving rise to substantial risk that
would otherwise give rise to a purchasers right to rescind.
Notwithstanding that there might not appear to be
any significant problems with either the Notice or the
substantiating documentation, it is up to purchasers
to determine whether or not they wish to release
the deposit.
There is no obligation whatsoever upon purchasers to
complete and return the Notice, as to do so will mean
the release of those deposit monies. If those monies are
released, and if the settlement does not take place on
time or at all, the purchaser is normally entitled pursuant
to Statute to a lien over the subject property.

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Carlton Office

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Contact Details

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Glenferrie Rd
MalvernVIC3144
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Melway59C8

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CarltonVIC3053
Melway2BF10

P.O. Box 467

Malvern VIC 3144
W: www.heldlawyers.com

T: 03 9509 0710
M: 0407 548 632
F: 03 9500 0805
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Real estate transactions loss or damage

before settlement - insurance
General Condition 24 of the Contract of Sale of Real
Estate deals with the risk of loss or damage to a property
before settlement.
GC 24.1 provides that the vendor carries that risk until
settlement. GC24.2 requires the vendor to deliver the
property to the purchaser at settlement in the same
condition it was in on the day of sale, except for fair wear
and tear.
The Contract of Sale of Real Estate does not contain
a general condition requiring the vendor to insure
the property.
We always recommend that a vendor should be/remains
insured in respect of loss or damage to property, for the
following reasons:
Obligations to the purchaser: as legal owner, the vendor retains an insurable
interest in the property after contract and pending
completion.
a purchaser has the right to the application of
the proceeds of insurance policies effected by
the vendor. Furthermore, a purchaser has a right
of rescission where a building is destroyed or
rendered uninhabitable by damage occurring
after the execution of the contract.
Obligations to mortgagee: it is usual for a mortgagee to require the
mortgagor to take out insurance for the
property sufficient to cover the mortgagees
interest. Failure to have insurance may be a
breach of the facility.
a mortgagee retains an insurable equitable
interest in the property pending completion.
Notwithstanding the above, we always recommend
that a purchaser should arrange insurance cover
immediately after loan approval and the Contract
becomes unconditional, either directly with a reputable
insurance company or through a reputable insurance
broker in respect of loss or damage to property, for
the following reasons:
Vendors insurance (for non-Owners Corporation
situations) may: lapse before settlement.
be inadequate amount of cover.
not insure for the event (e.g. flood).
Obligations to proposed mortgagee: prior to settlement, the mortgagee will normally
require an insurance policy for not less than the

amount of the loan in the name of the mortgagor,

with the interest of the proposed mortgagee as
mortgagee noted. Failure to have insurance may
be a breach of the facility.
a mortgagee will have an insurable equitable
interest in the property after completion.
Please note that where there is an Owners Corporation:
Section 11(1) of the Sale of Land Act 1962 (Vic.)
states that
A person cannot sell a lot affected by an owners
corporation unless the Vendor or the owners corporation
has a current insurance policy in accordance with the
Owners Corporations Act 2006 (Vic.) for any insurance
required by that Act to be effected by the owners
corporation.
Section 11(2) states that
If a lot is sold in contravention of subsection (1) the
Purchaser may avoid the sale at any time before the
contract is completed..
usually, the Owners Corporation or service company
insures the buildings (but not the contents) and this
insurance can be relied upon.
rather than taking out separate insurance, a
purchaser is entitled to request the Owners
Corporation insurer to issue such a certificate
of insurance for the unit being purchased.
Please contact us if you require our assistance with any
of these matters.
Referrals
Should you require non-legal assistance with various
matters, we are happy to provide you with contact details
for a range of service providers, including financial
institutions, accountants, real estate agents, etc.
Areas of practice
Property Law including conveyancing and leasing
Commercial and Business Law
Banking and Finance Law including mortgages
and guarantees
Wills and Estates Law
Intellectual and Industrial Property Law
Litigation
If you would like further details or assistance or to
discuss information contained in this publication or
generally, please do not hesitate to contact us. For
copies of this and other publications, visit our website
at www.heldlawyers.com.

Disclaimer
This publication is intended to provide a general outline. It is not intended to be a complete or definitive statement of the law on the subject matter covered.
Further professional advice should be sought before any action is taken in relation to the matters described in this publication.
Liability limited by a scheme approved under Professional Standards Legislation

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