Property Settlement Delay: Here are your rights.

When you buy or sell property, in an ideal situation, everything goes to plan, and settlement happens on the agreed date. Unfortunately, the process can sometimes cause obstacles to arise and a delay to occur, despite both parties having already signed off on the Contract and the due diligence checks have been completed. Here are your rights during a Property Settlement Delay.

Settlement delays can occur from a range of different factors.

For the Sellers, factors such as:

  • Late requests to change cheque or funds disbursement directions.
  • The seller’s discharging bank may not be ready to release the mortgage in time for settlement.
  • Sellers not having enough funds to pay out their remaining loan.
  • Not all documents necessary for settlement to occur are provided to the bank or their solicitors in time.
  • The tenant has not moved out of the house – the property may not be ready for vacant possession.

For the Buyers, factors such as:

  • Delays in obtaining financial approval.
  • Not enough funds at settlement to purchase the property.
  • Not all documents necessary for settlement to occur are provided to the bank or their solicitors in time.
  • Late pre-settlement inspection – issues found during the property inspection must be negotiated with the Sellers, thus causing the delay.
  • Difficulty selling another property where the purchase contract is dependent on the funds obtained from the sale.

In Queensland, the Settlement Date is an essential term of the contract, and time is of the essence. The Buyer or the Seller can request an extension to the settlement, but there is no obligation for the other party to agree. If one party is unable to settle on the Settlement Date and no extension is agreed, the other party (amongst other things) will gain the right to terminate the contract.

If one party is unable to complete settlement on the Settlement Date, the other party may:

  1. Refuse to grant an extension.

The first party can wait until the close of business on the Settlement Date and inform the other party that they are ‘ready, willing and able to settle. If the other party does not settle by that required time, the first party is entitled to terminate the contract, retain the deposit, and sue for damages, or possibly obtain specific performance where a court would force the other party to have to settle; or

  • Grant an extension of time.

The Seller may grant an extension of time and impose penalty interest for the extra days delayed. This is the amount that is payable per annum, as noted on the contract. If this section is left blank, a penalty interest rate at the contract’s date will apply. The Seller may also negotiate other penalties to cover any additional costs they will incur, such as legal fees, storage costs etc.

The Buyer may grant an extension of time and negotiate penalty charges to cover any additional costs they will incur, such as accommodation, storage costs, legal fees, etc. The Buyer may also request to seek early possession of the property.

How to avoid settlement delays?

Whether you are a buyer or a seller, you must be organised early and well prepared for the settlement to proceed smoothly.

If you are a buyer, make sure you have sufficient funds ready and that all documentation as required by your solicitor or your bank are delivered on time. Nominate an account with your financier to draw funds from in the event of a shortfall of funds.

If you a Seller, please ensure your mortgage discharge form is submitted as early as possible. Some Sellers do not give the bank the release authority until the property goes unconditionally, which may leave only a short time before settlement. Some banks can turn it around with such short notice; however, we certainly do not recommend this approach.

At Cornerstone Law Offices, all the important due dates are set out in our first letters to our clients, so you will have information regarding deadlines and documents that we need to be returned to us from the outset of the transaction.

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