A delay in settlement occurs when either the purchaser or vendor is not ready to settle on the day of settlement. This is not only stressful but can be also cause you to incur expensive penalty interest if you are responsible for the delay.
These delays can be made less stressful with effective communication between everyone and your conveyancer can be invaluable at this time.
HOW AND WHY DOES A DELAY IN SETTLEMENT OCCUR?
The most common causes of a delayed settlement are due to late documentation and either the purchasers or sellers bank not being ready on time.
HOW CAN THIS BE AVOIDED?
Usually the purchaser needs to take out a mortgage to buy the property and the vendor needs to discharge their previous mortgage. Settlement cannot take place until both banks are ready and they usually are the most common cause of a delayed settlement.
There are a few reasons the bank may not be ready in time for settlement date and often it is because vital documents have not been returned to them in time, sometimes administration errors are made by the banks themselves and sometimes there is simply not enough time for the banks to complete their part of the process.
To greatly reduce the risk of bank complications delaying your settlement you need to ensure you return all documentation as soon as possible and allow plenty of time in the contract for finance approval and settlement. In South Australia property settlements are often set for only 30 days after the contract has been signed and this sometimes is not long enough for banks to be prepared. Having a loan pre-approved will help but the bank will need to complete your application and have a valuation done on the property you are purchasing. If you are a vendor then a discharge of mortgage request has to be sent to your bank within a certain time frame. This is usually at least 10 business days prior to settlement if it is a full discharge and 15 business days if a partial discharge, Some banks need more time than this so ensure you talk to your conveyancer as soon as a contract has been signed so this can be assessed and dealt with promptly.
WHAT HAPPENS IF SETTLEMENT IS DELAYED?
This question is a common one asked by both purchasers and vendors as even with all the best endeavours of everyone involved sometimes delays in settlement just cannot be avoided.
SAME DAY DELAYS
Your conveyancer should always keep you informed of any issues that arise in getting ready for settlement day. Sometimes if a problem arises on the day of settlement the situation can be sorted and settlement can take place a little later in the day especially if settlement is to take place electronically. The effect of this is more of a nuisance however it will still affect moving in or out of your property. The removalist may be able to take a break and wait to see what time settlement is going to take place before unloading the van at your new property.
If things get really out of hand and settlement is unable to take place until the next day then you may need to have your furniture stored overnight at the removalists depo. If they are not busy then the furniture could stay in the truck overnight otherwise it may need to unloaded at the depot and reloaded the next day.
WHAT IF SETTLEMENT IS DELAYED FOR A FEW DAYS?
Usually your conveyancer will know prior to settlement if there is going to be a delay and they will advise you earlier enough so your removalist can be cancelled and rebooked for the day that settlement does take place. The worst case scenario is where settlement is delayed at the last minute and you have the removalist all packed and ready to go. This is where negotiations with the other party is imperative to work out the best way to deal with the situation. In some cases a license to occupy may be granted so at least you can move into your new home and sort out the settlement after. All these items are best dealt with your conveyancer who can advise and liaise with all parties to get to an outcome that suits best.
WHAT ELSE WILL I NEED TO ARRANGE OR CANCEL?
You may need to remember to inform the service provider for your gas and electricity and any other service industries that you may have arranged for the day such as a locksmith or painter.
Having a great conveyancer that keeps you up to date at all times will really make all the difference if things go pear shaped. They will also know if you have any rights and remedies under the contract for any defaults that you may either incur if you are at fault or may be entitled to if you are not.
Call us on 8333 3525 if you have questions about this topic as we would be more than happy to assist.