Late settlement

What happens if you can’t settle on time?

Sometimes settlement doesn’t happen when it’s scheduled to. Most often, it’s because the money that you require isn’t available on time. It could be because the bank might not be ready (for any number of reasons) or because your funds are tied up in another property that you’re trying to sell.

Either way, if you can’t settle as required, there are some options available, which the vendor is in control of.

Firstly, your lawyer or conveyancer (if they’re not both things, as we are!) can ask the vendor for their consent to extend the settlement date. Sometimes the vendor will agree, simple as that. They would also be within their rights to charge interest until you settle. The interest rate will be at least 2% above the penalty interest rate and you will be charged daily.

For example, say you owe $1 million at settlement but you require an extension of seven days. At a 12% interest rate, you will incur approximately $2300 in interest and it will be payable at settlement.

Secondly, some contracts may actually include broad damages, which you may be liable for, if you cannot settle on time, such as bridging finance or interest on the Vendor’s loan.

Finally, if the vendor does not agree to give you extra time to complete settlement, and then you don’t settle on time as required, the Vendor can serve a ‘Default and Rescission Notice’. This requires you to complete settlement within fourteen days. If you still don’t complete settlement within that time, the contract can be terminated and you will lose your deposit. Please also be aware, if the Vendor then tries to re-sell the property, but can only sell it for a price below what you agreed to pay, then the Vendor can demand that you pay the difference between the two prices.

Delaying settlement can be at best expensive and at worst result in you losing your property and your deposit. So, you should ensure that you have everything in place in time for a timely settlement. That begins with being organised well ahead of time with your finance, which can take weeks, or sometimes even longer, to arrange. It also pays to have an experienced, proactive lawyer on your team (we know a few!).