What happens if you miss your settlement date?

Property Jan 24, 2022

6 min read

settlement date
settlement date

Missing your settlement date may just result in the date being moving. Or it could end up with you having to pay daily penalty interest. Worse still, you could lose the property and your deposit.

Disclaimer: Every state has different legislation in place regarding settlement and what happens if you missed your settlement date. We are referencing Victorian laws in this article so be sure to check what applies in your situation if you reside outside Victoria.

When buying a property there are many steps to the process, from getting pre-approved to making a successful offer or placing the winning bid at auction. However, the property isn’t yours until it settles, which is when all of the funds and title are transferred to the relevant parties. Usually, a settlement date is booked in and the bank, conveyancers, buyer and vendor all work toward ensuring everything is ready in preparation for the big day.

As we come into a busy time of year, many lenders are experiencing longer processing times due to an influx of loan applications. Most lenders shut down over the Christmas period, if your finance is not approved by then for a settlement in January then you may be at risk of missing settlement.

What happens if you miss your settlement date?

If you know you are not going to be able to settle on the agreed upon date for whatever reason, you can seek an extension which the vendor has to agree to. The best-case scenario here is that settlement is extended at no extra cost to you. However, in some cases you may be liable for penalty interest of approx. 12 – 16% per annum, calculated daily and payable from the intended date of settlement to the actual date of settlement.

If you are unable to meet the contracted settlement date, the vendor may serve a default notice and/or rescission notice, this gives a purchaser in Victoria 14 days to ensure settlement takes place. If this still does not occur, then we head into murkier waters. The worst-case scenario for a missed settlement is that a rescission notice is issued, you still don’t settle and you lose your deposit. The vendor may also sue you for losses, especially if they are relying on this settlement to fund further purchases down the line, their losses could be substantial.

What can cause a delayed settlement?

There are a number of reasons settlement might be delayed, here are just a few:

  • Finance is not approved in time
  • Shortfall of funds
  • Documentation is incomplete
  • Difficult selling another property
  • Late pre-settlement inspections
  • Delayed release of mortgage

It’s sometimes not a big mistake like finance not being approved which causes a delay. We sometimes find it’s something small like a typo on a document or a missing insurance certificate. It pays to be organised and organised early when it comes to ensuring you’ve got everything in order for settlement to take place.

What can you do if you’re not at fault?

In some cases, it’s not going to be your fault. Issues can occur with parties across the transaction which can cause delays such as your bank, broker, conveyancer, or vendor. As the purchaser you can’t claim any penalty interest or fees from the vendor. However, if you become liable for such fees then you may be able to get the entity who caused the delay to cover these fees for you, so you are not out of pocket.

Westpac recently covered the deposit and then some for a couple who missed settlement due to the fault of the bank and subsequently lost their entire deposit. We have arranged for lenders to cover penalty fees and interest for our clients before who have had a missed settlement due to no fault of their own.

What happens if you miss the finance approval date?

The outcome can be similar to missing a settlement date. The best-case scenario is the finance date is extended. Worst case is you lose the property as the vendor withdraws due to the contract conditions not being met and they find another buyer.