WARNING: Thinking of Buying a Property? Settlement Delays Caused by Vendor - Beware!

Daniel Plainview on 24/03/2016 - 16:22

Hi,

I'll keep this as succinct as can be (as I have to get dinner cooking) BUT I just wanted to take the time to post some information up as in undertaking the conveyancing for our recent property purchase myself I became aware of the VERY dodgy area of property sales/transfers that pertains to the vendor delaying (referred to in the industry as 'crashing') settlement.

Settlement is the final stage of the conveyancing process and generally in simple terms involves the buyer paying the agreed balance of funds to the vendor's conveyancer/solicitor. Authority to release the 10% deposit is given by the Buyer to the vendors real estate agent and then the vendors solicitor authorises the agent to release the keys to the buyer and gives the vendor signed 01T transfer form and original of the certificate of title to the buyer (or their mortgagee).

Now most folks know that it's dangerous to arrange to move in to their newly bought home on the same day as settlement - so generally allow a day or so between that and planning on vacating their old rental etc. Removalists, power connection/disconnection etc all need to be arranged around this.

Now it's standard practice that if the Buyer delays settlement - there is real monetary penalties that apply to them immediately - and failing to settle within 14 days of settlement CAN see the Buyer forfeit their 10% deposit to the seller AND lose the right to purchase the property at the previously agreed contract. Big penalty on the buyer for delaying settlement right? MASSIVE.

So what about if the Vendor/Seller delays settlement?????

Basically nothing……thats right under the standard REI contract, thats used in NSW and basically very similar around Australia there is no penalty for the Vendor who delays settlement for up to two weeks!!!!!!!

So they might have had sellers remorse, had a change in the details of their next address, removalists cancel on them etc - they can stay in their home and delay settlement for atleast 2 weeks before the Buyer has any possible remedy against them!!!! And even then the buyer is at best looking at having to undertake a civil suit to be reimbursed for any expenses incurred and maybe…and thats a BIG maybe they can get the sale upheld….but it's far from a sure thing.

Please feel free to read this over it's absolutely terrifying how much the standard REI contract is supportive & protective of sellers but not for buyers.
https://www.lawyersconveyancing.com.au/faq/settlement/

FWIW you'd think that any professional solicitor or conveyancer would be heads up to this and ensure that special conditions are ALWAYS entered into the sales contract on the buyers behalf ensuring that EQUAL penalties apply to the vendor as to the buyer IF they delay settlement BUT as their arrangements generally DO NOT cover for 'crashed' settlements they have no real interest in doing this - as this will mean extra fees/client charges in handling what could be a very messy delay.

So my advice would be to ensure that you always include a special condition that states that the penalties for delay of settlement are 'vis a vis' (apparently latin for like for like) for the vendor as they are for the buyer.

Honestly…its a REALLY largely overlooked area of conveyancing law - I am sure that 99% of sales go through without issue BUT if you're in that 1% who gets a dodgy seller you could be up for thousands of dollars in extra costs plus SOOOOOOO much stress and only able to get it back by putting thousands of more dollars up in legal proceedings. Its very unfair.

FWIW didn't happen to me - buy in doing DIY conveyancing I became aware of it and friends who have bought dozens of homes when told were horrified so I thought I'd share. Caveat emptor folks.

Cheers, Nick

Financial

Comments

  • tonyjzx on 24/03/2016 - 16:54

    Man that's a lot words. Your agent is a dipshit. The rule is that if the vendor is the one backing out and causing delays then the buyer walks with no penalty.

    You have to look at it from the agent's perspective. He wants the sale to happen, in fact I've seen the agent get very upset if the vendor pulls out as all the work the agent has done leading up to the sale requires is $0 commission to the agent… this is after agent has spent money promoting property.

    I honestly have not seen a situation where the agent sits back like a fool and puts this on the buyer as he loses his commission. I'm saying this as someone who involved in multiple property purchases every year, not including non personal conveyancing/agent work.

    Unfortunately every purchase includes about a $1,000 in conveyancing fees. I hope your fees goes towards some legal backing. I know I have the services of two dedicated conveyancers on every sale.

  • whooah1979 on 24/03/2016 - 17:05

    Caveat emptor folks.

    you could have started your post with that. please add a tldr.

  • poppit88 on 24/03/2016 - 19:57

    Sorry to hear that you seem to have incurred a financial loss.

    However, this is basic law 101. I would never,ever have a contract prepared for the sale of a property without a penalty being involved for delayed settlement by a purchaser. Nor would I sign a contract without having protection for myself as a purchaser if the vendor delays settlement.

    If the delay suits me either way, I'm not going to invoke the penalty clauses, however if I was being genuinely inconvenienced and incurring financial penalties I'd invoke them in a heart beat.

    I'm cheap with somethings. When it comes to business, I spend the money employing the services with a good solicitor.

    There are times to be a cheap skate and times to just pay up.

  • Daniel Plainview on 25/03/2016 - 07:58

    Thanks for the replies - FWIW I've not incurred ANY financial loss nor been delayed - like I said I've simply become aware of this POTENTIAL issue for buyers through undertaking the conveyancing myself.

    Firstly, it's not necessarily a case of where the vendor wants to back out entirely - they might just have had circumstances change and want to stay in what they feel is still 'their' home for another week or so. So when you say my agent is a dipshit I think you've not understood whats been put across as in any situation like this the vendors real estate agent has ZERO say on things….so essentially the vendor can just say, piss off and continue to do what they want - which their solicitor would have advised is legal. The buyer is the one who ends up wearing it and has no real viable remedy until 2 weeks pass and even then it's likely still a crapshoot.

    As for it being basic law 101 - well based on what I've seen this is simply not the case - as the buyers I've spoken to never had 'vis a vis' type additions made to the penalties for delay of settlement. Heck even IF you did request them the seller could just say Nah, and you'd either have to proceed without or walk away…and most folks and conveyancers know they'll be objected to and hence wanting a smooth sale don't insert them.

    Plus like I said any conveyancer or solicitor will NOT include the potential of a 'crashed' settlement in their quotation to you on conducting the transfer - as such in the thankfully highly unlikely event you get a vendor caused delay they will want additional fees to sort it out - so no real downside for them.

    ANyway like i said this is just a 'FYI' type post - the alarming thing to me is how unbelievably pro-vendor and anti-buyer the standard REI sales contract is …..there's a whole range of areas where it's grossly duplicitious in its handling of similar if not IDENTICAL issues and others where it can seemingly go against common sense and fairness. So the next property I buy I'll definitely be inserting a bunch of special conditions to bring it back closer to vague parity.

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