Proposed Changes to Section 27: Why Every Victorian Real Estate Agency Should Be Preparing Now

For decades, Victorian real estate agencies have relied on the early release of deposit monies under Section 27 of the Sale of Land Act to help maintain healthy cash flow.

That may soon change.

The Victorian Government has proposed abolishing Section 27 Statements as part of broader reforms to the property transaction process. While the stated objective is greater consumer protection, the proposal has the potential to fundamentally change the way many agencies manage their cash flow.

This is not simply a legal reform. It is a business reform for agencies.

Why does Section 27 matter?

Currently, where the legal requirements are satisfied, sellers can access the purchaser’s deposit before settlement.

In many transactions, this also allows agencies to receive their commission well before settlement.

If Section 27 is abolished, those deposit monies may remain in trust until settlement.

For agencies, that could mean waiting weeks, months, or in some cases more than a year before commission is paid.

The hidden business impact

Many agency owners immediately think about commissions.

What they should also be thinking about is working capital.

Businesses continue to incur expenses regardless of when settlements occur.

Those expenses include:

• Staff wages
• Rent
• Marketing
• Technology subscriptions
• Vehicle costs
• Administration expenses
• Growth and recruitment

A delay in receiving commissions could significantly increase the amount of working capital agencies require to operate.

For growing businesses, the impact could be substantial.

Which agencies are most exposed?

In my view, the agencies most at risk are those that:

• operate on tight cash flow
• have expanded rapidly
• carry significant overheads
• rely heavily on commission income from larger developments or off-the-plan sales
• have limited cash reserves or finance facilities.

Ironically, many successful agencies may feel the greatest impact because growth often comes with higher fixed costs.

Practical steps agencies should consider now

Although these reforms are still proposed, agency owners should not wait until legislation is introduced before reviewing their businesses.

Some practical considerations include:

• reviewing cash flow forecasts using longer settlement periods
• assessing current working capital requirements
• discussing overdraft or finance facilities with lenders before they are needed
• reviewing expense structures
• considering whether commission structures remain appropriate
• strengthening debtor management across all income streams
• building larger cash reserves where possible.

Businesses that prepare early generally have far more options than those forced to react after reforms commence.

Legal documents may also need review

If these reforms proceed, agencies should also review their legal documentation.

Employment agreements, contractor agreements, shareholder agreements, business sale agreements and succession plans may all contain assumptions about when commission income is received.

Those assumptions may no longer reflect commercial reality.

Updating these documents before issues arise is generally far less expensive than resolving disputes later.

Don’t panic—but don’t ignore it

It is important to remember that these reforms have been proposed and have not yet become law.

However, history shows that businesses that monitor legislative change early are usually better positioned than those waiting until commencement.

Regardless of whether the final legislation mirrors the current proposal, agency owners should use this opportunity to review the financial resilience of their business.

The strongest agencies are rarely those that simply generate the highest revenue.

They are the ones that plan ahead, adapt early and manage risk before it becomes a problem.

If these reforms proceed, cash flow—not sales volume—may become one of the biggest competitive advantages in Victorian real estate.