Delayed Settlement? Here’s What To Do

With all the best intentions and planning in the world, things can still go wrong. This is especially true when it comes to a property settlement. Just when you think you’ve finally dotted all the Is and crossed all the Ts, something else that is out of your hands pops up to cause a delayed settlement.

While you may not be able to avoid settlement delays, you can be better prepared for them. Here’s what to know so you can take whatever remedial action is necessary to get the settlement back on track.

Reasons for delayed settlements

A delayed settlement could be the fault of the bank, lender, seller or buyer, and many reasons for each. Here are some of the main culprits of settlement delays and what you can do to keep things moving.

Lender problems

A successful settlement requires the lender’s approval to release funds. The seller may also need to pay out the remainder of their mortgage on the property. If either party cannot secure this clearance by the agreed settlement date, the settlement cannot proceed.

While this situation is relatively uncommon, it can happen. If it does, a mortgage broker, settlement agent or conveyancer can be vital in coordinating between parties to help meet the necessary deadlines.

» MORE: 10 questions to ask your mortgage lender

Late filing of documents

One common cause of delays is missing or improperly filed documents. Banks and lenders are unwilling to proceed to settlement without all the required paperwork, which can hold up the process.

This issue could arise if the buyer cannot provide appropriate proof of income or assets by the date. Or, delays can come if the seller falls behind in providing the necessary documentation to pay out their mortgage.

Issues with the pre-settlement inspection

As a buyer, you have the right to conduct a final pre-settlement inspection to ensure the property is in the same condition as when it was purchased. However, sometimes, issues arise in the weeks between the exchange of contracts and the inspection.

Problems could include anything from electrical issues or broken fixtures and fittings to water or fire damage. Additionally, there could be incomplete repairs that the seller had agreed to undertake before settlement. Depending on the severity, these issues may be considered a breach of the contract of sale and could delay settlement.

In cases of minor damage, the seller may offer monetary compensation to resolve the issue. However, these problems are sometimes so insurmountable that settlement must be delayed until resolved.

» MORE: Smart ways to cut settlement costs

Issues with the settlement statement

The settlement statement, or ‘closing statement,’ contains a comprehensive list of all payments and receipts related to the settlement and any monies owed to the seller or buyer. If there are outstanding amounts due from either side, a statement of adjustment will be included in the settlement statement that outlines who owes who what on settlement day.

Delays can arise when there are discrepancies on the settlement statement, or both parties disagree on certain points — such as who is responsible for paying council or strata rates, or other outstanding debts. While these issues can usually be resolved, they may still cause settlement delays.

Subject-to-completion-of-sale issues

Many buyers are buying a new property while simultaneously selling their current one. This means the purchase of the new property is contingent on the successful sale of the old one, a term referred to as ‘subject-to-completion-of-sale’ in the contract.

However, if the sale of the previous property is delayed, it can cause a knock-on effect, making settling on the new one impossible. This is one reason simultaneous settlements can be particularly stressful — you need to finalise the sale of your existing property and move into your new one on the same day.

» MORE: What to expect on settlement day

What can you do to avoid settlement delays?

The best way to avoid delays is simple: be organised. That means understanding every document you need to provide so that there are no issues with the loan from your end.

Additionally, you should double-check with your lender that they have everything they require in the lead-up to settlement. If you’re the seller, you should check with your real estate agent.

As the buyer, you should also take notes, photos, or even a video of the property’s condition when contracts are exchanged so the final inspection goes smoothly.

If you’re selling, you are responsible for the upkeep of the property until settlement day. You may also need to ensure documents are in order if you’re paying out your mortgage through the sale.

Remember, lenders, mortgage brokers, buyer’s agents, real estate agents, conveyancers and settlement agents are there to help you with any issues. Don’t hesitate to reach out if something troubles you.

What are your rights if a delay occurs?

Understanding your rights before a delay can help you navigate potential setbacks more confidently.

Each State and Territory has its own legislation regarding the rights of buyers and sellers in residential property sales. Most have a few-day grace period for settlements without either side incurring penalties.

For example, some States also have a Notice to Complete arrangement where the party struggling to settle gets an extra 14 days to complete the settlement. In comparison, the Northern Territory offers a written default notice that gives the other side ten working days to fix and settle their issues.

Once the grace period has expired, you are generally entitled to charge the other party penalty interest. This may amount to hundreds of dollars a day, depending on the property’s price and the interest rate levied. If all else fails, the other party could terminate the contract. That scenario can be particularly dire for buyers, who risk losing their deposit. However, it’s uncommon for settlements to reach this point — most issues are resolved before becoming a problem.

Either way, it’s still important to know your rights and understand your options. As always, consult with your mortgage broker, conveyancer, buyer’s agent, or other professionals to fully protect your interests.