Whether you’re buying or selling property, delays can disrupt plans, lead to added costs, and cause unnecessary stress. While some delays are unavoidable, understanding how to handle them can make a huge difference in how the situation unfolds.

So, why do settlement delays happen, and what can you do if things don’t go to plan?

What Causes Settlement Delays?

Settlement can be delayed for a variety of reasons. Here are some of the most common reasons for settlement to be delayed:

Financial Issues

One of the most common causes of delays is financing problems. This can include delays with securing loan approvals, organising a discharge of mortgage or issues with the transfer of funds between banks.

Financial delays may also be attributed to the bank or lender. Banks often require several business days to book in a settlement, organise funds and upload documents into the settlement system. Busy periods such as the holiday season or the end of financial year can impact banks processing times, especially when most banks close during the time that law firms still must have settlements effected and this causes the most delays.

Document Issues

Contracts, transfer documents, identity checks and financial documents must all be completed correctly and promptly. Any errors in these documents such as typographical errors, missing signatures, missing documents or outdated identity documents (or not enough identity documents), can cause settlement delays.

Property Condition Issues

If the Buyer’s final inspection of the property reveals issues with the property, such as damage to the property that has occurred after the contract date, missing inclusions or agreed works not being completed, settlement may need to be delayed allowing time for these issues to be resolved.

What are your options if settlement must be delayed?

Issues which result in settlement not being able to proceed on the scheduled date can be a stressful and frustrating experience for both the buyer and seller. Settlement delays cannot always be avoided, however there are several things that both buyers and sellers can do to navigate the situation:

Request an Extension of the Settlement Date

The most common solution is for both parties to agree to a short extension of the settlement date. This allows everyone extra time to rectify the issue that is causing the delay.

There is also a standard clause in the REIQ contract which allows either party to extend settlement without needing the other party’s consent, by nominating a new date for settlement which can be up to 5 Business Days after the scheduled settlement date.

Interest

If a buyer is unable to settle on the scheduled date, the seller may agree to extend settlement on the basis the buyer pays the seller default interest under the contract, which varies and is shown on the QLD Law Society Interest Rates page here.

This means that for each day the buyer is late, interest is charged under the contract, and it is calculated daily from the date the settlement was supposed to occur, until the date it occurs. Default interest is intended to compensate the seller for any inconvenience or extra costs caused by the delay, such as additional mortgage interest, rent, storage fees or rearranging their own moving plans. Sellers can also charge their additional legal costs to the buyer.

Even if both parties agree to extend settlement, the seller still has the right to elect to charge this interest, however some may also not charge anything and just agree to a mutual extension

Early or Partial Release of Deposit

In some rare situations, both parties may agree to release part of the deposit early to help fix a particular issue preventing settlement.

This is not common and can only occur if both the buyer and seller give written consent. If this were to occur, the contract would need to be amended so that a special condition be inserted stating that if the settlement were to not occur without any fault of the buyer, the deposit would be refunded in full to the buyer.

How to Avoid Settlement Delays

While settlement delays are sometimes unavoidable, there are steps you can take to reduce the risk of a delay:

Stay Organised

Ensure that all required documents and checks are completed accurately and submitted on time and confirm that your lender has all the necessary paperwork well before the settlement date.

Communicate Early and Often

Keep in regular contact with your lawyer, Real Estate Agent and financier to make sure everything is on track for settlement. If you are expecting to be unavailable at any time during the course of the conveyance, make sure to advise your lawyer well beforehand

Conduct a Pre-Settlement Inspection Early

If you are buying a property, schedule your final inspection well in advance of settlement to allow time to address any issues that may arise with the property, such as unforeseen damage or items from building and pest issues not being fixed.

Plan for Delays

Given that delays can sometimes occur, and are not always avoidable, it is beneficial to have a plan in place for if settlement is delayed. This can include steps such as arranging short-term accommodation in case you cannot move into the property on the expected date and confirming with your removalists as to whether your booking can be changed at short notice.

Being proactive can save significant stress on settlement day.

Get Legal Advice Early

While settlement delays can be frustrating, they don’t have to spell disaster. Whether you’re buying or selling, being prepared and informed can make all the difference in getting your property transaction completed on time.

Our team of Property Lawyers can assist you if you have any questions relating to settlement delays. Contact our team today to discuss any property questions you may have.