Settlement delays: what happens when a property settlement is late in NSW, VIC and QLD

A settlement date is in the contract, but getting every party ready for that date is a separate task. The buyer needs funds, the seller needs their mortgage released, and the documents, duty and property must be ready. When one part is missing, the settlement can run late.

On PEXA, a settlement that cannot complete on the day is simply rescheduled. That does not answer the legal question: who bears the cost of the delay? The answer depends on the contract, who is ready to settle and the state. NSW, Victoria and Queensland have different default rules, so do not assume that a rescheduled booking also means an agreed extension.

Why a settlement runs late

The most common causes include the buyer's bank not being ready to fund and the seller's bank not being ready to release its mortgage. Either side can be waiting on a lender, even though the parties themselves want to settle.

Duty may not yet be paid where it must be paid before settlement. Documents may have been signed incorrectly, or identity verification may be incomplete. A problem found at the pre-settlement inspection can also hold up the transaction. These are different problems, but each needs to be raised with your conveyancer rather than left for the PEXA booking to resolve.

For a strata or body corporate lot, an outstanding certificate or levy can be the issue. A deceased estate may be waiting for probate or the transmission to be finalised. With an off-the-plan purchase, the plan may not yet be registered. Knowing the cause matters because it helps identify what is missing and which party needs to deal with it.

The practical task is to get ready. The separate legal task is to manage the date and any rights under the contract while that happens.

NSW: a notice to complete changes the position

Under the standard NSW contract, the parties agree the settlement date in the contract, commonly 42 days after exchange. Time is not initially of the essence, so a party who is late is not automatically in breach. A delay is not, by itself, the end of the sale.

The party that is ready can serve a notice to complete giving the other at least 14 days to settle. After that notice, time becomes of the essence. If the defaulting party still fails to settle, the other may terminate. Being ready and following the notice process matter; simply wanting the transaction finished is not the same thing.

A vendor who terminates for the purchaser's default keeps the deposit, which is 10 per cent unless the contract allows a smaller deposit, and may sue for loss. This is why a buyer should not treat a late bank as only a scheduling problem.

Many contracts add a special condition requiring the purchaser to pay interest on the price for each day of delay the purchaser causes. The rate is whatever the contract says, not a statutory figure. Extensions are usually agreed between the parties in writing before the date, rather than assumed from a change to the electronic booking.

Victoria: default interest and a default notice

The Victorian standard contract fixes a settlement date, often 30, 60 or 90 days. A party who is late is in default. Under the general conditions, they must pay interest on the money owed at the rate fixed under the Penalty Interest Rates Act 1983 plus 2 per cent per annum, and the other party's reasonable costs arising from the default.

The party not in default may serve a default notice requiring the default to be remedied within 14 days. If it is not, the contract ends. The deposit is forfeited for purchaser default, or the vendor must repay it for vendor default.

The vendor carries the risk of the property until settlement under the general conditions. The vendor's insurance should therefore stay in place through a delay. A change to the settlement date is not a reason to let that cover lapse.

Queensland: time is of the essence

Under the REIQ standard contract, time is of the essence. A party who does not settle by 4pm on the settlement date is in breach immediately; there is no notice to complete. The seller may then terminate, keep the deposit and sue, or affirm the contract and claim interest at the default rate stated in the contract's reference schedule.

There is a way to manage a short delay before that happens. Since the 2022 edition, either party may extend the settlement date by giving written notice before settlement, to a date no later than five business days after the scheduled date. A buyer whose finance is not ready or a seller whose discharge is not ready can use that provision.

That extension is the usual way a short delay is managed without a breach. It needs the written notice; do not rely on the PEXA booking moving. Transfer duty must also be paid, and the transfer stamped, before settlement can complete. That is a common cause of delay on long or off-the-plan contracts.

The costs go beyond default interest

A delay can mean removalists and storage, temporary accommodation, rent, interest on a loan where the bank has drawn down, and the other party's costs where the contract allows. The cost of being late is not confined to an interest clause.

A delay on one side often cascades through a chain of related settlements. If you are selling and buying, the late sale may affect the purchase as well. Keep the bank informed and tell your conveyancer about the related settlement, rather than considering each booking in isolation.

What to do when you see a delay coming

Tell your conveyancer as soon as you know something may be late. A short extension agreed in writing before the settlement date is cheaper than a breach. Keep insurance in place, keep the bank informed and get any new settlement date confirmed through the PEXA workspace.

Do not hand over keys or move in before settlement without a written licence agreement. The arrangements for possession need to be dealt with separately, not assumed because the parties have agreed to wait.

For the wider process, read our selling guides for NSW, Victoria and Queensland, and what happens on settlement day.