The Impact of Settlement Delays on Property Transactions

Settlement represents the final stage in a property transaction, and it is crucial that all preparatory matters are resolved prior to the settlement date. However, delays in settlement can occur, creating significant uncertainty for both buyers and sellers.

The impact of a settlement delay can vary based on the cause and the responsible party, potentially leading to additional costs or even jeopardizing the sale agreement. This article explores the common causes of settlement delays and outlines steps you can take to safeguard your interests.

Causes of Settlement Delays

Lender Processing Delays

• Both buyers and sellers depend on financial institutions during settlement. Delays in processing by lenders can halt the settlement process until the issue is addressed.
• For buyers, delays often stem from the approval of a home loan. Without lender approval, the transaction cannot proceed. For sellers, delays might relate to the release of an existing mortgage. It is important to note that lenders have their own processing timelines and are not bound to meet the settlement deadline, which remains the responsibility of the buying and selling parties.

Issues with Final Inspection

• During the final inspection, buyers might identify issues with the property’s condition. If the contract of sale specifies that certain issues must be rectified before settlement, buyers may insist on these issues being rectified before proceeding with settlement.

Seller Delays

• Delays on the seller’s side can also impact settlement. Examples include the seller needing additional time to vacate the property or issues with tenant eviction that have not been resolved.

Implications of Settlement Delays

Settlement delays often disrupt and inconvenience the other party, who may be entitled to seek compensation.

Is There a Time Limit for Settlement?

In most Australian states and territories, a grace period is typically provided to allow parties to address issues before incurring additional costs.

In Queensland, the standard terms of the REIQ Contract for residential properties will allow a buyer or a seller to extend settlement for up to a maximum of five business days from the original settlement date without the consent of the other.

Where this term has been removed from the Contract or the extensions it allows for have been exhausted, both buyers and sellers have the option to reject any further request from the other for an extension to the settlement date. In these circumstances, where one party is capable of performing their obligations under the Contract on the settlement date but the other is not, the party that cannot perform their obligations is exposed to significant risk.

For example, where the party that cannot perform their obligations under the Contract is the buyer, the buyer will be exposed to the risk of losing their deposit and further legal action, such as a claim for damages or a court order for specific performance, compelling it to fulfil its settlement obligations. A seller will be exposed to similar risks.

It is essential that both parties to a conveyancing transaction seek legal advice in relation to their obligations before signing a Contract to ensure that they understand what needs to be done to achieve settlement and the specific risks that apply where they cannot comply with their obligations.

Contact Us

For more information and assistance, we recommend contacting our office to discuss your specific needs and circumstances further. Our experienced conveyancing team can provide tailored guidance and support to ensure a successful outcome. Speak to Cairns Conveyancing Solicitors today.