Settlement Date

A property settlement is the final stage of transferring a property from a seller to a buyer when all conditions of the standard residential sales contract are met. It involves transferring the funds from the buyer to the seller and the legal title of the property from the seller to the buyer. This process is facilitated by a settlement agent.

Residential Sales Contracts in Western Australia

In Western Australia, the standard residential sales contract has two sections:

• Contract for Sale of Land or strata title by Offer and Acceptance (O & A).
• Joint form of general conditions for the sale of land (General Conditions).

Effectively the O & A indicates that both parties agree to the conditions of the contract, including, but not limited to, the purchase price. The General Conditions are the enforceable and binding terms that apply to the O & A. When entering an O & A to buy or sell a property, it’s normal to choose a mutually agreeable date for settlement. It’s essential when agreeing on this date, you’re confident everything that needs to be dealt with beforehand can be achieved in the timeframe.

Now, let’s get specific – you need at least 21 – 28 days from the date of your contract for your finance to be approved, and 21 – 28 days after that for your settlement date to occur. You may be able to vary these dates, however, you need to speak with your settlement agent to work out what dates are realistic for your specific circumstances.

It’s worth remembering that relying on the real estate agent to choose a date may not be in your best interest because they’re not fully aware of your position. It’s a good idea to speak to your settlement agent and, if purchasing, also your broker before committing to a specific date.

The Settlement Process

When settlement occurs, the balance of the purchase price for the property is transferred from the buyer to the seller and the official ownership of the property is transferred from the seller to the buyer. This stage involves a lot of complex paperwork and requires excellent attention to detail and understanding of the process. To ensure a smooth and efficient transfer takes place, each party needs to use either a licensed settlement agent or conveyancer.

Buyer-Delayed Settlements

So, what happens if a settlement is delayed by the buyer?

We’ll talk about some potential reasons for buyer delays and how to mitigate them later, but the basic premise is this: if the buyer cannot settle on or within three business days of the agreed settlement date then they are liable to pay penalty interest to the seller.

The amount of interest is calculated on a daily basis and is based on the balance of the purchase price and of any other money due to be paid on settlement. The penalty payments begin to accrue from the original settlement date and the rate of interest will have previously been set down in the General Conditions. (9% per annum)

In Western Australia, there is a three-business day period of ’leniency’ (commonly known as a 3 day grace period) to allow the buyer to rectify any issues and provide the required documents and finances to reach an agreement. After that period, the seller will issue a default notice. If the buyer does not remedy the default in the appropriate time frame, the seller would be entitled to keep the deposit and sue the buyer for damages. This option might come into play if there were multiple interested parties prior to the acceptance of an offer and the seller can immediately offer the property to one of those parties who were unsuccessful first time around.

Seller-Delayed Settlements

If the situation is reversed and the buyer is ready to settle but the seller causes settlement to be delayed for longer than three business days, then the seller must pay penalty interest as compensation on the balance of the purchase price from the original settlement date. The amount is calculated daily at the interest rate (9% per annum) set down in the General Conditions and may be deducted by the buyer from the money they owe. Again, there is a three-business day grace period in WA and if you’re in the process of buying a house and the seller asks to delay settlement beyond that point, you don’t have to agree. The option to issue a default notice is also on the table at this stage.

Clearly, neither of these are desirable situations because of the added stress and frustration, not to mention the financial loss to one side or the other.

Why Might a Settlement Be Delayed?

Settlements can be delayed for various reasons such as valuation discrepancies, banking errors or processing hold-ups – all of which are all hard to account for beforehand so they must be dealt with as they happen.

Delays can also occur when the final inspection raises issues that need to be addressed before completion, so these also need to be dealt with in real-time. Life happens and we can’t always account for every possibility – from the buyer who’s unable to sell their previous property to the seller who hasn’t moved out yet.
However, there are certain steps that both buyers and sellers can take to minimise the chances of a failure to reach a settlement.

Be Highly Organised & Efficient

Organise and store all the relevant paperwork in a neat and logical way and always sign and return any documents you receive asap. You can return them using DocuSign or by hand for peace of mind. Alternatively, you can use a registered delivery service so you know they have arrived safely.   Do your best to avoid submitting late or incorrect documentation because when the clock is ticking, you don’t want to be the link in the chain that holds up the process.
It’s good practice to complete your verification of identity early and use a secure portal, such as the Scantek App on your phone.

Make sure you have the required funds in your bank account

This step is crucial because without the means to pay, the settlement can’t move forward. If your financing bank is covering the loan amount, and you need to contribute the balance, make sure you’ve given your bank an “Authority to Debit” your account for the required funds.

Communicate Effectively

Ask questions early if there is anything you’re unsure of and keep all involved parties in the loop about developments on your end. Raise any discrepancies you come across in the documentation by informing the relevant people asap so the issues can be fixed in plenty of time. And always email your conveyancer with any questions you may have.

Be Polite

Being flexible in the face of reasonable requests from the other party can really help to smooth things along. While buying and selling property can be stressful, it’s important to remain courteous and professional as all parties work towards a successful outcome.

Choose Reliable & Competent Professionals

When it comes to conveyancing services in Perth, Kidman Conveyancing are a great choice. With an impressive record of property settlements, we’re highly respected in the industry and we take time to understand each client’s circumstances.

As fully licensed, PEXA Authorised Specialists, our focus is to ensure your settlement is as efficient as possible and to mitigate the risk of having to deal with the consequences of a settlement being delayed by the buyer or vice versa.