It’s easy to get ahead of yourself when buying or selling a property. However, before you can break open the bubbly, you’ll need settlement to go through without a hitch. Occasionally (not often) there can be delays with settlement – and when this happens it can be stressful, and potentially costly as well.
In this short article, we look at some of the reasons why settlement can be delayed, and whether any additional costs might fall to the buyer or seller.
Common reasons for settlement delays
With so many moving pieces coming together, and lots of fiddly paperwork, things can go wrong on the day of settlement. For example, the buyer’s lender isn’t ready to provide the funds. The seller’s bank hasn’t discharged the mortgage in time. A party hasn’t signed the required documents. There are errors in settlement documents. There are problems with the electronic settlement platform (PEXA). Or there’s an unexpected issue affecting the title, such as an unresolved caveat.
When problems like this occur, the settlement agents will tend to work together, especially if it’s likely to be a short delay of a day or so. But when the delay stretches into several days (or even weeks), it gets a little more complicated. For major delays (ie, more than a week) the party responsible will generally bear the consequences.
So let’s look at a few scenarios.
If the buyer causes the delay
The buyer will often have to pay what’s called ‘default interest’ to the seller for each day settlement is late. (The interest rate and calculation are usually set out in the contract of sale).
If the delay is significant, the seller may issue a notice requiring settlement within a specified period. Continued failure to settle can ultimately allow the seller to terminate the contract and, in some cases, claim damages or retain part or all of the deposit, depending on the circumstances and the contract.
Ok, so what if the shoe is on the other foot?
If the seller causes the delay
The buyer may be able to claim compensation for losses caused by the delay if the contract or the law allows. At the same time, the buyer can usually issue a notice requiring the seller to complete settlement within a specified time. If the seller still cannot settle, the buyer may have the right to terminate the contract and seek appropriate remedies.
If neither party is at fault
For example, there may be a temporary PEXA outage or another external issue. In cases like this, settlement will be postponed to the next available business day. (in reality, it’s not a big deal). The parties may agree that no default interest is payable, particularly if neither side caused the problem.
What happens if the delay is more than a week?
Hopefully, this scenario never happens to you. (but it doesn’t hurt to be aware). If the delay is agreed, then the parties will usually sign a variation to the contract setting a new settlement date. In this case, they can also agree that no default interest is payable, or agree on other terms.
If the delay is not agreed and one party is responsible, there are a few things that can happen: Default interest may continue to accrue each day if the contract provides for it. The non-defaulting party may issue a default notice requiring settlement within the contractual timeframe. Or if settlement still doesn’t occur, the non-defaulting party may be entitled to terminate the contract and seek the remedies available under the contract and at law. (and unfortunately this can work out to be thousands of dollars in penalties).
Of course, the best way to ensure this never happens to you is go with an experienced local settlement agent who will flag problems before they arise, and can negotiate on your behalf to achieve the best outcome.
THERE’S A TRUCKLOAD OF REASONS TO CHOOSE C & R SETTLEMENTS IN MANDURAH.
Here at C & R Settlements in Mandurah, we’re renown for our hard work, attention to detail, and going the extra mile for our clients. We’re Mandurah’s Number One independent settlement agent with over 80,000 settlements under our belt (and still going strong). As an added bonus, when you choose C & R Settlements, you can use our free courtesy truck when it’s time to make the move. All you’ll need is a standard driver’s licence (and perhaps a few strong mates to lend a hand on moving day). Just be aware that our free courtesy truck is very popular, and bookings are essential. Just another reason to make the move to C & R Settlements in Mandurah. For details, call us on 9581 2148. Or email mandurah@crsetts.com.au