Signing the contract of sale isn’t the last stage of a home purchase. Rather, it’s the beginning of a process that only ends on settlement day. This is the day when the agreed purchase price is paid to the seller and the buyer takes legal possession of the property.
Unfortunately, settlement day can be delayed for many reasons. And while many of these can be avoided, it’s important to know your legal rights if this happens to your transaction – especially if the delay isn’t your fault.
What are your legal rights?
In Victoria, your legal rights depend on whether you are the vendor or buyer:
- A vendor can charge penalty interest if the buyer wants to delay settlement. The exact amount will be specified in the contract of sale and is typically calculated on a day-to-day basis.
- A buyer can’t claim penalty interest if it’s the vendor causing the hold-up.
- Both parties can terminate the contract if the delay drags on for more than 10 business days.
Why do settlement delays occur?
Some common reasons for settlement delays include:
- Finance complications
Settlement can’t occur until a lender does their bit, whether that’s assessing the buyer’s finances or discharging the vendor’s mortgage on the property. So if you don’t submit paperwork to the lender in a timely manner, there’s likely to be a hold-up. But even if you hand in everything on time, delays can still occur. For example, the lender may be dealing with a high volume of home loan applications.
- Final inspection problems
Buyers typically use the final inspection to check the property is still in the same condition as when they agreed to the purchase. If it isn’t, they might want to delay the purchase so the issue can be fixed.
- Document delays
During the conveyancing process, key documents such as the ‘transfer of land’ need to be submitted to the relevant government bodies. However, if either party doesn’t sign and return paperwork on time, settlement can be pushed back. Small errors can also cause delays. For example, if your legal names are misspelled or a first name and surname mixed up, the lender will need to reissue your mortgage documents.
How can you avoid settlement delays?
There’s no such thing as being too organised when it comes to settlement. So keep track of all deadlines and return and sign documents as soon as you are asked to by your conveyancer or broker.
Communication is critical too. So keep your broker, conveyancer and agent up to date on any developments or if you encounter any issues.
Finally, working with the right team of professionals can make all the difference to your chances of a smooth, stress-free settlement. An expert conveyancer can guide you through the legal transfer process, minimising the possibility of delays.
Rhiannon Leonard is a property lawyer at Sutton Laurence King Lawyers.
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