Release of Deposit

Release of Deposit

In the sale of residential and commercial land in New South Wales, it is common for vendors to insert a special condition into the contract which allows for the deposit to be accessed earlier by the vendor. This is known as a Release of Deposit clause. Although it is common, a Release of Deposit clause carries a number of risks to any potential purchaser.

A Typical Contract

Usually, when a purchaser enters into a contract with a vendor to purchase residential or commercial real estate in New South Wales, they are required to provide a deposit to the agent or to the vendor’s solicitor (if there is no agent), to hold on trust until the contract has settled. The deposit is not touched by the vendor or purchaser and is protected in that trust account until settlement occurs.

What is a Release of Deposit Clause?

A Release of Deposit clause allows the vendor to access this deposit before the completion of the purchase. There are many reasons why a vendor might wish to access the deposit before the settlement, such as:

  • The vendor is simultaneously purchasing a property and needs the deposit to pay the deposit on that property
  • They need to pay stamp duty on the property they are purchasing

Risks with Release of Deposit Clauses

The risk that results from a Release of Deposit clause is that if the contract falls over and the deposit is required to be returned to the purchaser, after it has been released to the vendor, the purchaser may have to sue the vendor to retrieve the deposit.

If the vendors have purchased another property and that deposit is now sitting in another agents’ trust account, or it is being used for the payment of stamp duty, then the recovery of the deposit increases in difficulty. Alternatively, if the vendor has become bankrupt, the likelihood of receiving any amount of the deposit back will also be impacted.

Minimizing Risk

Therefore, it is important for a purchaser to seek guidance from solicitors who can identify and request the removal of these clauses from a contract, as well as to look for other clauses which may be detrimental to a purchaser’s interests.

If the above sounds familiar and you wish to have a contract reviewed, or you require any other advice relating to the purchase and sale of commercial or residential real estate, please contact Etheringtons Solicitors.

Buying a Property At Auction – Things you need to know BEFORE auction day

Buying a Property At Auction – Things you need to know BEFORE auction day

Buying a property can often be an intimidating process, especially at auction where you are competing with other buyers and there is no cooling off period.

Many properties are sold at auction, particularly in a rising market, so it is important for buyers to understand the processes involved so they can bid confidently on the auction day.

There are many things that need to be done before the auction to ensure that your interests are protected and that you are fully informed about the property you are intending to buy; these things are outlined below.

Contract Review

The most important thing to do is to take the contract of sale to your lawyer well before the auction date.

Your lawyer will review the contract, advise you of any risks and help to protect your interests by identifying any terms that might need to be negotiated on your behalf such as longer settlement periods, reduced deposits and/or additional terms and conditions.

Your lawyer will also make sure you are buying exactly what you intend to and that the property is in the condition you expect. This will likely involve arranging pre-auction inspections, such as building and pest inspections.

If you are the successful bidder at the auction the reviewed contract can be signed with confidence.

Inspect the Property

You should thoroughly inspect the property before the auction day and satisfy yourself that all inclusions are in proper working order and that the gas, water and electricity are functioning properly.


Thoroughly research the area and surrounding suburbs before the auction day, so that you are comfortable about the amount you are prepared to pay for the property.


Make sure that you have your finances in order before making an offer. If you are obtaining mortgage finance, you should have this unconditionally approved not just pre-approved. Confirm with your lender the maximum amount you can borrow.

Pre-approval is not confirmation of how much the lender is willing to provide you, it is an indication of what you might be able to borrow depending on the value of the property, which is determined by a formal valuation after the auction.

It is important to ensure that you have adequate funds available to complete the purchase within the timeframe stipulated in the contract.


If you are the successful bidder, you will be required to pay a deposit cheque or deposit bond (usually 10% of the purchase price) immediately following signing of the contract.

Register to Bid 

To participate or bid at an auction, buyers must register with the selling agent and be given a bidder’s number. You can register with the selling agent at any time prior to the auction, such as when you inspect the property, or on the day itself.

To register you must provide ID – this must be a card or document issued by a government or financial institution showing your name and address. For example:

  • Driver’s license or learner’s permit
  • Vehicle registration paper
  • Council rates notice

If you do not have this kind of proof of identity you can use two documents that together show your name and address.


Make sure you have a strategy going into the auction and that you set yourself a maximum purchase price. Stick to that maximum price. If you feel as though you may be too emotionally attached to bid at the auction yourself, then organise with the Agent to have someone bid on your behalf. If you elect to do so, you must provide a written signed authority to the Agent authorising the person to bid on your behalf.

Successful Bidder 

If you are the highest bidder, immediately following the auction, you will be asked to:

  • Provide your contact details to the Agent;
  • Sign the contract of sale; and
  • Pay the deposit.

You will be entering into an unconditional and legally binding contract. There is no cooling-off period.

The signed contract will then be delivered to your solicitor’s office and they will contact you to discuss the next steps.


Getting the right advice, being fully informed and prepared before the auction day is a critical part of ensuring that the purchase of property runs smoothly.

The purchase of a property, at auction or otherwise, should not be unduly stressful and our expert team can help guide you through the process and make sure your interests are protected.

If you or someone you know is looking to purchase a property at auction and needs help or advice, please contact us via our form or on (02) 9963 9800.

5 Costs to Factor in When Buying a Home

5 Costs to Factor in When Buying a Home

Etheringtons Solicitors Note: In June 2022, the NSW Government announced legislation to reform transfer duty within NSW, moving to an ‘annual property tax’ system. These changes will take place over a number of years. For more information, click here.

If you are currently in the process of buying, looking or saving for a house, there are extra costs beyond the property’s price tag that you need to know about.

1.  Transfer duty (previously known as stamp duty)

When you purchase a property in NSW, you are required to pay transfer duty. This is a tax on property which varies depending on the value of the property. Generally, the more expensive the property you are purchasing, the more transfer duty you will pay. Transfer duty must typically be paid with 30 days of settlement, and may be a big upfront cost. It is important to factor your transfer duty costs into the other upfront costs you will need to make.

Some websites will help you calculate an estimate for what your transfer duty will be, to help you plan.

2.  Pest and building inspections 

Before purchasing property, it is recommended that you have pest and building inspections to determine the property’s condition. These inspections are especially important for older properties which might have long term problems that are not evident in a general inspection. Make sure you appoint a qualified person such as a licensed builder, surveyor or architect.

3.  Mortgage registration

You are required to pay a fee to formally register your mortgage in NSW. This mortgage registration payment is required by the state government to register the security for a home loan. This is important as it allows any potential buyers to check claims against the title of your property.

4.  Loan application or establishment fee

When you take out a home loan, you may be required to pay an establishment fee. However, some lenders will waive this fee, so it is worthwhile to around and see what your options are.

5.  Mortgage insurance

If you are borrowing more than 80% of the property value, you may be required to pay ‘Lenders Mortgage Insurance’ (LMI). The lender’s valuation of the property determines this fee.

Further Information 

It is important that buyers are aware of any additional costs which may be required when purchasing a property. If you have any questions or concerns, we can provide additional information and advice to you regarding your situation. If you would like to discuss your concerns with a legal professional please contact us on (02) 9963 9800 or via our contact form.

Natural Disasters: My home insurer refused to renew my policy

Natural Disasters: My home insurer refused to renew my policy

The 2020 bushfires across Australia had devastating effects on the lives of so many Australians. Many lost homes, treasured possessions or most terribly, a family member or friend.

In the aftermath of this natural disaster, we had clients call us to seek advice on their rights in respect of their home insurance. Some overlooked paying their insurance premium. When they were told to evacuate their homes, they rang their insurer to check that their policy was current and were told that they had not paid the premium and therefore the policy had expired. They asked to pay the premium immediately to renew the policy. However, their insurer refused to renew the policy due to the high risk of bushfires in the area.

Notice Provided by Your Insurer

The Insurance Contracts Act 1984 provides that an insurer must notify an insured customer in writing no later than 14 days before the expiration of their policy stating that their policy will expire if not renewed or negotiated in that time.

It is important to note that if the insurer did not provide this notice, even though you did not renew your policy, the policy is taken to continue as if you had renewed for the period of the original policy. So it is important to check first whether you have received this notice.

Special Circumstances

You might be able to show that there were special circumstances that made it impossible for you to renew your policy. These may include that you were overseas, or severely ill and in hospital.

Seeking Legal Advice

It is important to be fully aware of your insurance renewal date and ensure your insurer is keeping you accurately informed about the status of your policy.

If you would like further information regarding building insurance or general litigation or insurance advice, please do not hesitate to contact one of our experienced litigation solicitors on (02) 9963 9800 or via our contact form.

The team at Etheringtons would also like to extend our heartfelt sympathies to all those affected by the recent bushfires and commend the hard work and sacrifice by the fire fighters.

Security for Leases – 3 Most Common Forms

Security for Leases – 3 Most Common Forms

What is a Security?

Landlords typically ask for payment of ‘security’ when you first enter your lease. The security is an amount – usually 4 or more weeks’ rent – to cover any extra expenses should you break the terms of the lease agreement. For example, if the property is unreasonably dirty when you leave, cleaning may be paid for with the security. If you haven’t breached the lease agreement, your landlord will return the security amount to you at the end of the lease.

There are a few options that you can consider to provide security. Your landlord might only accept certain types of security based on the type of lease and the amount – it is prudent to check this when making your decision.

The three most common forms of security for leases are:

1.  Security Deposit

A security deposit, or cash bond, is an amount that is paid directly. It is paid to your landlord or managing agent when you enter into a lease.

If your lease is a commercial lease, you can pay the security directly to your landlord or managing agent. They will hold it for the term of the lease. The exception is if your lease is a retail lease (a type of commercial lease used if you have a shop front). If your lease is a retail lease, your security must be provided to the NSW Retail Bond Scheme. They will hold it during the term of the lease. Your landlord will require your signature to claim the security from this scheme should you break the terms of the lease.

2.  Bank Guarantee

A Bank Guarantee is an unconditional undertaking provided by a bank to your landlord to guarantee payment of an amount. In effect, the bank will pay the security amount to the landlord on your behalf if you either break the terms of the lease or have outstanding rent due.

The bank will usually secure this amount by:

  • Cash deposit by yourself (if you are an existing customer); or
  • Drawing on an existing security (such as the equity in a mortgage).

This can make it attractive to some tenants, as it doesn’t tie up cash in a security deposit.

3. Third Party Guarantee

A third party can guarantee payment under a lease. Your landlord would be able to recover money due to a breach of the lease from the third party. If the tenant is your company, the landlord may require the directors to guarantee the lease. If you are an individual tenant, a third party guarantee might not be accepted by your landlord as a form of security, as it can be costly to enforce payment if required.

Seek Legal Advice

It is important to seek legal advice before entering into a lease to determine which type of security is in your best interests. Therefore please get in touch if you have any questions about security for leases, or other property law matters.

5 Things You Need to Check Before Signing a Business Lease

5 Things You Need to Check Before Signing a Business Lease

Below are five things you should do before signing a business lease.

1.  Factor in rent payments

As a tenant, you are required to pay an amount – often referred to as your rent – for occupying the premises. This amount is usually paid to your landlord or managing agent each month. Calculate how this will affect your business so that you will be able to operate effectively whilst paying the rental amount. Look out for clauses in your lease that set out the yearly increase in the amount of rent payable, as well as the utilities you are required to pay for.

2.  Obtain council approval

It is important to check if you require council approval to operate your business before entering into a lease. All properties in Sydney are zoned by the local council. The type of activities and zones will vary from council to council, and determine what sort of activities the property can be used for. Examples include:

  • Residential zones;
  • Commercial zones;
  • and Industrial zones.

If you are entering into a lease, you need to ensure that your business is allowed to operate at that location. If you operate without council approval the council can stop your business from trading and order you to close your business.

3.  Organise security

When entering into a lease, the landlord will usually require you to provide security for the lease. The amount of security is usually the equivalent to four or more weeks’ rent.

Types of security you could provide include:

  • Bank guarantees;
  • Bank cheques;
  • Deposit bonds; or
  • A guarantee by a third party.

It is important to ensure that you seek legal advice on the type and amount of security you provide, as you will be required to forfeit this amount if you break the terms of the lease. Read our article about the Three Most Common Forms of Security for Leases for a detailed explanation of security options.

4.  Note the condition of the property 

Most leases have a ‘make good’ clause, which requires you to return the premises to their original condition when the lease ends. You therefore need to ensure that you keep evidence of the condition of the property when you entered into a lease. If this is not done, the landlord can use the security provided you provided to ‘make good’.

This is a common area of dispute between landlords and tenants. It is therefore important to know your make good obligations.

5.  Seek a legal opinion on the terms of the lease

The lease is prepared by your landlord and will likely be drafted in their favour. It is therefore crucial that you seek a solicitor’s advice on the terms of the lease. They can also assist with negotiations. This can bring a balance of power to the relationship between you and your landlord, and will ensure that you know what you are signing.

Leases can have three or five year terms and are difficult to terminate before their expiry, so it is important to know your obligations and if there are any unfavourable terms.


These are some of the issues that may arise when signing a business lease. Therefore it is important to seek legal advice if you are considering entering into a business lease. Please get in touch to discuss your lease.