When your settlement is being delayed, this is a big problem. There are too many things to look after when moving home, and if the date shifts, the same work you’ve already done arranging everything around your settlement date doubles or triples.
What’s more, nobody is expecting this to happen, so when it hits – it hits people hard. If a buyer is renting a house, while he’s waiting for his settlement date, a delayed settlement (by vendor) means that he needs to extend his lease, which may not be that easy on a couple of day’s notice, re-arrange the removalist, re-arrange the disconnection and re-connection of the utilities, re-arrange the redirect of mail, take another day off at work, etc. These are just a few examples of the amount of pain a delayed settlement can put you through. And the first reaction to a situation like this is a question:
“Can they really do this to me? What are my rights here?”
A couple of days ago I received a letter from a first home buyer who was asking these questions, and decided to write a short explanation of buyer’s and vendor’s rights, because there sure are more people out there, wondering what their rights and options are in a delayed settlement.
Delayed settlement – from a buyer’s point of view
Buyers need to know that most contracts allow the vendors delay the settlement for 14 days past the settlement date without a penalty. There is a particular clause, which you can easily find – if you know what to look for.
Also, as a buyer, you’d want the contract of sale to specify what you’d like to happen if the vendor delays the settlement beyond those 14 days – in case you decide for the vendor to settle, as opposed to taking him to the court or terminating the contract and claiming back your deposit.
Make no mistake – if a buyer delays a settlement, most contracts of sale make sure vendor’s interests are covered, by charging the buyer default penalty rates. There is a specified period during which the penalty interest rates are charged, and after that it gets worse, as a vendor can cancel the contract and sell the property to someone else. To give you an estimate of costs, I have heard of buyers paying from $1000 to $5000 for a delayed settlement.
I’m sure you won’t like hearing this, but there are even more costs a buyer can incur if they are at fault for the delayed settlement – the conveyancers / solicitors can charge a client extra if the settlement doesn’t go through as planned. Some even would go to the extreme of abandoning clients when things are not going smoothly, and while I wouldn’t wish this to my worst enemy, I still feel that people need to know these things.
Have you ever experienced problems because of a delayed settlement? Share your story – leave a comment here.