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A property settlement is the finalization of the process of transferring a property from a seller to a buyer when the conditions of the standard residential sales contract for the sale are fully met. 

 

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 legally-binding conditions that apply to the O & A. When entering into an O & A to buy or sell a property, it is normal to choose a mutually-agreeable date for settlement. It is essential when agreeing upon this date that you are confident everything that needs to be dealt with beforehand can be achieved in the timeframe.

You need at least 21 – 28 days from the date of your contract for your finance to be approved, and 21 – 28 days thereafter, for your settlement date to occur. You may be able to vary these dates, however, you need to speak with your settlement agent to ascertain what dates are realistic for your specific circumstances. Relying on the real estate agent to choose a date may not necessarily be in your best interest, if they are not fully aware of your position. 

 

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 legal title to 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 settlement agent, conveyancer, or solicitor.   

 

Buyer-Delayed Settlements

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

We will discuss 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. 

In Western Australia, there is a 3 business day period of ’leniency’ to allow the buyer to rectify any issues and provide the required documents and finances to reach an agreement. After that period, the seller is entitled to terminate the contract if settlement is not reached and in this case, 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 the 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 set down in the General Conditions and may be deducted by the buyer from the money they owe. Again, there is a 3 business day leniency 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 terminate and sue for damages is also on the table in this scenario.

Clearly, neither of these are ideal situations and can cause a great deal of unwanted stress and frustration, not to mention the financial loss to one side or the other.

 

Why Might A Settlement Be Delayed?

Some potential delays include valuation discrepancies, bank mistakes or processing hold-ups, which are all hard to account for beforehand and must be dealt with as they happen. Delays can also occur when the final inspection raises issues that need to be addressed and those too need to be dealt with in real-time. While it is true that there are always events that cannot be anticipated or accounted for, from the buyer having difficulty selling their previous property to the seller not having moved out of the new one, 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

Keep all the relevant paperwork neatly and logically stored and always sign and return any documents you receive asap. You can return them by hand for peace of mind, or use a registered delivery service so you know they have arrived safely. Do your best to avoid submitting late or incorrect documentation, because if the clock is ticking, you don’t want to be the link in the chain that holds the process up.

 

Make sure you have the required funds in your bank account. 

This one speaks for itself. If you don’t have the means to pay then there can be no settlement. If your financing bank is paying the loan amount, and you need to contribute the balance, then you need to make sure that you have given your bank, an “Authority to Debit” your bank account for the balance of funds required. 

 

Communicate Effectively. 

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

 

Be Polite. 

Being flexible in the face of reasonable requests from the other party can only ever help to smooth things along and it is essential to always be courteous and professional.

 

Choose Reliable & Competent Professionals. 

When it comes to conveyancing services, you could make no better choice in Perth than to engage the services of Kidman Conveyancing. We have an impressive record of property settlements, are highly respected, fully licensed and are 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.

Perth: The Capital City Of Western Australia
Call (08) 9204 1868