a delayed settlement can result in fines and penalties, but it doesn't have to

Buying a home or property is rarely easy – it requires an extraordinary amount of time, effort, and energy on behalf of both the buyer and the seller – and by the time settlement rolls around it's very tempting to assume that the process is finally, thankfully over. The property will change hands, both sides will come away happy, and everything will come up roses.

Unfortunately, there are situations where the settlement date – when both parties (or their representatives) get together in order to officially transfer ownership – happens a bit too quickly for everything to be in order. In that case, the settlement will be delayed.

What can cause a delayed settlement?

Settlement can be delayed by all sorts of things: one of the checks could have had a misspelling or similar error, there might have been issues that arose during the final inspection, or perhaps the buyer was counting on selling another property to finance the new one and that deal fell through.

It doesn't always have to be the buyer, either: say the seller hadn't finished moving all of their belongings out of the home, or couldn't find the certificate of title for the property.

Any of these things could cause a settlement to be delayed. Depending on which state you live in, and which party is at fault, you could find yourself fined for the delay or even see the sale go up in smoke.

Can a settlement date be delayed without a penalty?

Yes, but there's a little more too it than that. If you are selling a home and the buyer wants to delay the settlement date, you don't have to agree to it. Remember, the settlement date is agreed to in the contract drawn up when you agreed on principle to sell them the property: you're under no obligation to agree to a new settlement date if you don't want to.

The same goes for the buyer, by the way. If the seller comes to you and asks you to delay settlement, you are well within your rights to say no.

That said, there's no reason both parties can't agree to delay the settlement date – it's just that neither has to. If there's an amicable agreement, then the settlement date can be moved without delay. If you find yourself having to delay the settlement date, remember to be on your best behaviour when you ask the other party.

What can happen to the buyer if they delay the settlement date?

Let's assume that the settlement date had to be delayed because of some error on behalf of the buyer. Maybe they couldn't make it to the bank on time to get the check because they forgot about a public holiday. What happens?

While the details change slightly depending on the state where the sale is taking place, typically the seller can do a number of things if the settlement date is delayed by the buyer.

  • They can charge penalty interest – the interest amount will have been detailed in the contract.
  • They can keep the deposit and cancel the sale all together.
  • They can issue a Notice to Complete. A Notice to Complete is a legal order that makes a timely completion of settlement the most important thing for the buyer. If the settlement does not happen on the new completion date, the seller may be able to terminate the contract, keep the deposit, and possibly sue the buyer for additional damages.

What can happen to the seller if they delay the settlement date?

If the seller delays the settlement date, the recourse available to the buyer is fairly similar to the options detailed above. Just as the seller can charge the buyer penalty interest, the buyer can do the same to the seller in some states, like Queensland for example.

The other options are fairly similar, too – the buyer can retrieve their deposit, or even sue the seller to either continue to sell the home as agreed or for other damages. And, of course, both sides can potentially terminate the contract if there is a settlement date delay they find particularly objectionable.

What can you do to avoid a settlement a delay?

There's a reason the settlement period typically lasts anywhere between 30 and 90 days, and that's to ensure that both the buyer and the seller have ample time to get everything in order for the sale to proceed smoothly.

So, what are the best steps to take in order to make sure you arrive at settlement day ready to seal the deal?

First, you want to communicate. Keep everyone in the loop -- the other party, your broker, the real estate agent. If something comes up, you don't want to be breaking the ice with a problem or an issue. Make sure that you're asking questions about anything that might be unclear: it doesn't do you any good to turn around at the eleventh hour to quibble over details that could have been ironed out at the initial contract meeting.

Secondly, you want to make sure you're organized. This means being prompt in all communications, making sure you're on top of all the details contained in the documents you're responsible for, and always knowing where everything is, physically. Knowing your contract inside and out won't do you any good if you can't produce a physical copy to sign when the time comes.

Finally, you want to make sure that you're being reasonable and polite throughout the process. As long as you're open at every step of the way, you should be able to trade in some of that good will for an amicable agreement if you have to delay your settlement date after you've already agreed to it.

Life happens to the best of us, and the best intentions can still be stymied by something that is beyond your control. If you've been a pleasure to deal with up to that point, you're going to have a lot more leeway if something truly comes up than if you've been rude or unpleasant.