The Contract for sale stipulates a completion date (settlement date), being the date on which both buyer and seller must settle.
If a buyer does not settle on or before the stipulated completion date, then a buyer may be liable for penalty interest under the contract. A buyer needs to make sure that they are aware of what the penalties are for failure to complete on time. The special conditions of the contract normally provide the penalties for late completion, and on most occasions this can range in penalty interest rates from 5% to 20% per annum (calculated daily) depending on the drafting of the special condition of the contract.
For example, if you still owe the seller $300,000 under the contract and there is a penalty interest rate in the contract for 10% per annum calculated daily, and you delay for 5 days, then the penalty interest would be approx $410.96.
In addition to the possibility of penalty interest, the seller may have the right under the contract to terminate or rescind the contract for the failure of the buyer to settle. There are strict time frames in the contract if the seller wishes to take this course.
Failure to settle by the purchaser, through no fault of the seller, will normally also allow the seller to keep the deposit already paid.
There are also further avenues available to the parties including specific performance, termination and rescisssion. Every contract is unique, and all parties should get proper legal advice during the process.
(Note - these are general comments and parties should always get independent legal advice on their particular situation)
Comments by Dean Carver
Property Lawyer
Australia
Ph: (02) 9773 4550
