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How do I extend the date for Settlement under my Contract?

In Queensland property conveyancing, dates are crucial and essential terms of the contract. In the real world, it is very common for dates to be varied by agreement between the parties. However, there are traps for the unwary!

Sajen Legal are experts in smoothly handling extensions and taking the worry out of it. We take a commercial approach to a common situation.

This article covers the extension of settlement dates, however it is also common for other contract dates, such as finance approval, to be extended.

Generally, both buyers and sellers are strongly advised to do all that they can to settle on the date originally listed in the Contract. It is more common for buyers, rather than sellers, to be asking for an extension of the settlement date. However, be wary that sellers are usually under no obligation to agree!

When is settlement supposed to take place?

The date of settlement is noted under the contract and is usually a certain number of days (30 days is common) from the contract date, or a particular date, eg. 1 May 2017..

If the calculated settlement date falls on a public holiday or weekend then the next business day is the date of settlement.

What time does settlement need to take place?

Settlement must take place between the times noted under the standard conditions of the contract. This is normally between 9am and 4pm. The actual time that settlement will occur is usually agreed between the party’s solicitors. Factors such as the bank’s availability will generally dictate this.

What if I am unable to settle by the settlement date?

If a party cannot settle on the contracted settlement date, settlement cannot usually be unilaterally extended by one party. This is because in Queensland property law, time is “of the essence” of the contract, which means that it is critical that parties perform their obligations on time.

However, if you really can’t settle in time, then you may instruct your solicitor to request that the other party agree to extend the settlement date. If the other party agrees, then the contract will be varied and you will not be in breach of your obligations.

However, as I have said, a buyer or seller is not obligated to grant an extension of settlement. In a typically amicable conveyance, they usually will agree, as it is usually in their interests to see a contract proceed through to settlement. However, it is possible that a party will not agree because they want to get out of the contract due to external factors (for example, a seller might want out if they have another buyer that has come along willing to pay a lot more for the property).

Are there any penalties if the settlement date is extended?

There are usually no automatic penalties on a party, as the contract is technically varied to change the settlement date.

If you are a buyer and have requested an extension to the date of settlement, it is in the seller’s hands. A seller may agree to the extension without anything else changing. A seller may instead agree to an extension, but only with one of more conditions such as :

  • Requiring the buyer to pay default interest on the balance purchase price from the original settlement date up to the new settlement date. A default interest rate is included in most standard contracts, and is usually the interest rate regularly published by the Queensland Law Society (currently 9.35% per annum).
  • Leaving settlement adjustments as at the original settlement date, meaning that the buyer pays adjustments for the extensionperiod when the seller still owns the property. To find out more on settlement adjustments see here.
  • Requiring the buyer to pay the seller’s additional legal fees caused by the extension – however, in a friendly conveyance this usually wouldn’t happen until a number of extensions have been requested.

If a seller requesting an extension to the date of settlement, a buyer may impose similar conditions such as :

  • Settlement adjustments being calculated from the newly proposed settlement date – this is fair
  • Pay additional legal fees.

What happens if settlement is not extended and I can’t settle?

The majority of extensions are agreed and the contract ends up settling. However, where there is a problem with this, things can go south very quickly. Over the years we have helped clients in some truly bad situations.

For buyers

If you are a buyer and an extension request to settlement is not granted the seller can either affirm or terminate the contract.

If the seller affirms the contract, they may sue the buyer for:

  • Damages;
  • Specific Performance (to require you to comply with the contract and settle); or
  • Damages and specific performance.

If the seller terminates the contract, they may do any or all of the following:

  • Take back possession of the property;
  • Claim the deposit paid and any interest earned;
  • Sue the buyer for damages;
  • Resell the property. If the property is resold at a lesser value, then the seller may sue the buyer for the difference in resale price. They may also sue the buyer for any expenses relating to any repossession, any failed attempt to resell, and the resale of the property. However, this is on the basis that the resale of property settles within 2 years of the termination of the original contract.

For Sellers

If you are a seller and an extension request to settlement is not granted, the buyer can either affirm or terminate the contract.

If the buyer affirms the contract, they may sue the seller for:

  • Damages;
  • Specific Performance (to require you to comply with the contract and settle); or
  • Damages and specific performance.

If the buyer terminates the contract, they may do all or any of the following:

  • Recover the deposit and any interest earned;
  • Sue the seller for damages.

Hopefully an extension request will not come to any of these scenarios! However, it is possible and it does occur. The best way to make sure that you are protected is to make sure that you do everything that you can to prepare for settlement.

For information on how you can prepare for settlement, see here.

Expert advice and handling of your conveyance is important. Sajen Legal are property and conveyancing experts that will assist you with your legal needs. Contact us if you require any assistance with your conveyancing or property issues.