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Delayed settlement... solved? (maybe)

Discussion in 'The Buying & Selling Process' started by Perthguy, 8th Jun, 2016.

  1. Perthguy

    Perthguy Well-Known Member

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    Myself and my investment partner have a contract to purchase a property in Western Australia.

    We asked for early settlement because I am travelling in July and the house needs renovating, so we wanted to get some work done before I leave. There have been some delays in settlement while the seller and the sellers bank got some things sorted.

    We were advised yesterday that the sellers bank would not set a settlement date due to an undisclosed reason. According to the contract, the deadline for settlement is Monday.

    Today my investment partner called the real estate agent and asked him to:
    1) advise the seller to contact their bank rep and let them know that if settlement does not occur by Monday, the buyers will be seeking penalty interest.
    2) advise the seller's settlement agent to advise the bank in writing that if settlement does not occur by Monday, the buyers will be seeking penalty interest.

    This afternoon we were advised that settlement will be on Friday. Fingers crossed that it will happen this time.

    Out of interest the issues have been:
    1) a caveat on title, registered after the contract was signed, that the seller's settlement agent did not know about
    2) an undischarged Retail Lease - Bank Guarantee, with the property under contract as security, relating to a business that the seller sold last year
    3) undisclosed issue at the seller's bank

    This is one of our more interesting property purchases.
     
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  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Can you legally get penalty interest in WA? Generally, things tend to be in the sellers favour rather than the buyers.
     
  3. Perthguy

    Perthguy Well-Known Member

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    I have no idea. We just told the agent to tell the seller to tell the bank that we will be seeking penalty interest because we want to bank to hurry up and set a settlement date. The bank is in the eastern states, where penalty interest is common and penalty interest usually gets their attention.

    The seller was happy to comply because she just wants settlement to be over and the house sold. This is the third contract over this property as the previous two contracts failed to complete. Both the agent and seller just want settlement to happen and be done with it. In that situation, they are both happy to do what it takes to get the job done. Even if that means bluffing the bank a little to get them moving ;)
     
  4. Perthguy

    Perthguy Well-Known Member

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    It turns out yes, buyers can be compensated for delayed settlement:-

    Delay in settlement
    Similarly, if the buyer is ready to settle and the seller causes settlement to be delayed for longer than three business days, the seller must pay compensation on the balance of the purchase price from the original settlement date. The amount is calculated daily at the interest rate set down in the General Conditions and may be deducted by the buyer from the money owed.
    https://www.commerce.wa.gov.au/sites/default/files/atoms/files/propertysettlementfactsheet.pdf

    Good to know. Thanks for asking the question! ;)
     
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  5. legallyblonde

    legallyblonde Well-Known Member

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    I understand how if settlement is delayed the vendor is stuck with extra expenses (aka paying the loan for longer), but I wouldn't have guessed it would go the other way too... Given that you aren't liable for anything until settlement.
     
  6. Perthguy

    Perthguy Well-Known Member

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    I know what you are saying but failing to settle within the timeframe specified in the contract is a breach of contract. The contract sets out the remedy for the breach, being that the seller must pay compensation to the purchaser. In my case, I am actually paying loan interest now, as the loan has been drawn down. So it is costing me with settlement being late.
     
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  7. Big Will

    Big Will Well-Known Member

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    I don't see why a purchaser wouldn't be able to make a claim for extra expenses.

    E.g. I bought a house and also sold my old house, the day of settlement is Wednesday and I have a truck coming to pick up stuff on Thursday to move as Friday I will settle my house (or maybe we are doing a joint sale/purchase settlement.

    If I was unable to settle due to the vendor until Monday I will need seek remedy as it could be;

    a) pay for storage for my stuff along + hotel room + food (as I am unable to cook) + extra interest on my bridging loan + stress (e.g. what if I had to take a day off work to sort out the mess you have left me with?).

    b) Not allow settlement on my old property and have to deal with those incurred cost, see point a.

    c) If I had a rental and my lease was up on Friday and they have re let the property whose issue is it now (see point a on additional costs)..

    Every one has costs in these transactions if one person isn't able to meet their contract obligations then there are penalties that both parties are able to claim.
     
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  8. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    If it's for a PPOR, you can be homeless in the meantime. There's definitely a cost to that.
     
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  9. jim1964

    jim1964 Well-Known Member Premium Member

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    As a removalist, the amount of times we would be sitting outside the clients new home waiting for settlement to go through to unload into the new home,and the dreaded phone call there is a problem here would amaze you.And it GETS EXPENSIVE.Storage costs can be a 4 week minimum stay,whether you use 1 day or 31,you cant say we can deliver it tomorrow and leave it on the truck overnight, as you had another job on the next morning, then you have to pick up at storage again and unload, @ $155PH( this was 5 years ago) it adds up very quickly.
     
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  10. Big Will

    Big Will Well-Known Member

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    This is exactly why I wouldn't see why a purchaser couldn't claim against the vendor for failure to complete settlement.

    I say why I cannot see is I am no lawyer but I do have some legal sense :).
     
  11. Westminster

    Westminster Tigress at Tiger Developments Business Member

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    I hope it gets sorted out. I once couldn't settle a property I was selling, on time, as my bank lost the title (idiots!) so it had to applied for and that took 3mths. In the meantime I was liable for the penalty rate set out in the contract.
    Thankfully we were able to come to an agreement where they didn't charge me for being late and I let them live there for free during that time and my bank reimbursed me all costs due to the late settlement as it was them that lost the title.
     
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  12. Ed Barton

    Ed Barton Well-Known Member

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    Like damages for 'stress'
     
  13. Perthguy

    Perthguy Well-Known Member

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    Settlement is booked in now, so I am crossing my fingers that it happens.

    I feel bad for the seller and agent. They have had a hell of a time trying to sell this property. The agent has managed to process to contract three times and the seller has had to accept a lower price each time as the market has fallen. Now the seller is trying to settle and the bank keeps holding it up for various reasons. Must be frustrating for them too.

    I should know by tomorrow afternoon if settlement actually goes through this time.
     
  14. Big Will

    Big Will Well-Known Member

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    Hope it all goes smoothly for you :)
     
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  15. Perthguy

    Perthguy Well-Known Member

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    Smoothly for us but not the settlement agent! Settlement took about 40 minutes! That is an exceptionally long settlement in WA. The last one I went to took under 10.
     
  16. Perthguy

    Perthguy Well-Known Member

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    Settlement is done so our tactic worked. There was just one final hurdle that we were aware of but did not know the exact issue. Turns out it was this: because the property is subject to a Seizure and Sale Order and the order had lapsed, it had to be extended to today to allow settlement to happen. All that happend in the last 48 hours, so someone has been busy.

    Anyway, settlement is all done. Even though it hasn't really been stressful as such, it has taken emotional energy. Getting the word through that it has all gone through is kind of an anti-climax. Still happy it is done though but feeling drained.

    I will be happy tomorrow when we start demo. My favourite part of any reno... :)
     
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  17. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Hooray! Just in time for the weekend! ;)
     
  18. Perthguy

    Perthguy Well-Known Member

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    It's great! You know what I will be doing on the weekend :)
     
  19. Big Will

    Big Will Well-Known Member

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    Yay glad it went well.

    Enjoy smashing some things.
     
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  20. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Farewell, walk through bathroom! :D
     
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