Industry experts critical of repeal of early access to deposit in Victoria proposal

Industry experts critical of repeal of early access to deposit in Victoria proposal
Industry experts critical of repeal of early access to deposit in Victoria proposal

A proposed move by the Victorian government to abolish a provision allowing for the early release of deposits as part of its review of the Sale of Land Act has been criticised by industry experts.

If the provision is removed, home sellers in Victoria would struggle for early access to house deposits, making it difficult for them to purchase a new home before the sale of their old one is settled.

Industry experts said the current legislation was “working well” and its repeal would only hurt buyers and sellers, said an article in news.com.au.

“Given strong price growth in recent years, many vendors will be unable to relocate without the ability to access the deposit to fund their next home,” Real Estate Institute of Victoria chief executive Gil King was quoted by News as saying.

An options paper by Consumer Affairs Victoria said the provision was contentious and and could “cause considerable stress for buyers and seller” and needed reform.

The paper suggests to either amend Section 27 of the Act to “improve and clarify the operation of these provisions” or scrap it altogether.

The paper said the provision had created a problematic expectation that sellers would be able to access deposits before settlement.

“Real estate agents support this practice. It benefits sellers who depend on the deposit money to put towards securing another property,” the paper said.

“However, most stakeholders, particularly from the legal and conveyancing sectors, expressed concern, (highlighting) the considerable administrative burden associated with this process, and the undue stress it causes for all parties.”

But the paper does mention that scrapping the provision would force sellers to make alternative financial arrangements to secure another property while waiting on the settlement of their current one.

King said the REIV strongly opposed any changes to Section 27, as the early release of deposits allowed sellers seeking a new home to avoid “the significant additional expense” of bridging finance.

The legislation also provided adequate protections for both buyers and sellers, he said, while adding that downsizers would be among the most affected, as majority of their equity was tied up in their home.

CoreLogic state director for Victoria Geoff White said buyers currently had the power to decide whether to release their deposit early or not, meaning the provision could also help them.

“If a buyer is happy, there’s no issue. (Agreeing to release a deposit early) can even make their offer look better,” the fifth-generation agent said.

“It would be stupidity to repeal this.”

Tags: 
Victoria Land Act

Comments

Be the first one to comment on this article
What would you like to say about this project?