Time and Settlement in Property Contracts - NSW

What time does settlement take place on the Settlement Date?

The earliest time for settlement is generally 2pm. Banks and lenders are usually unable to settle at an earlier time.

Can I or the Vendor extend Settlement Date?

The Settlement Date can only be extended by mutual agreement by the you and the Vendor. This is unless the contract contains an additional clause specifically allowing either or both parties to extend or change the Settlement Date.

What happens if I cannot settle on the Settlement Date?

If you fail to settle on the Settlement Date, the Vendor is entitled to:

• issue a Notice to Complete requiring you to settle within at least 14 days;
• charge you daily penalty interest at a rate specified in the contract—the penalty rates are usually between 6% and 12%; and
• charge you any other late settlement fees specified in the contract, e.g. notice to complete fee, settlement cancellation/reschedule fee.

If you then fail to settle by the required settlement date specified in the Notice to Complete, the Vendor can:

• terminate the contract;
• keep the deposit of up to 10% of the purchase price; and
• sue you for damages and any loss on resale (if the Vendor resells the property within 12 months after the termination).

What happens if the Vendor cannot settle on the Settlement Date?

If the Vendor fails to settle on the Settlement Date, you are entitled to:

• issue a Notice to Complete requiring the Vendor to settle within at least 14 days;
• charge the Vendor late settlement fees if allowed in the contract, e.g. notice to complete fee, settlement cancellation/reschedule fee, however, note that it is uncommon that the contract allows the Purchaser to charge the Vendor this type of fees.

If the Vendor then fails to settle by the required settlement date specified in the Notice to Complete, you can:

• terminate the contract;
• have the deposit refunded to you; and
• sue the Vendor to recover damages for breach of contract.

Why should I consider the possibility of an extension of the Settlement Date?

You should always take the possibility of an extension of the Settlement Date into account, particularly if settlement on the nominated Settlement Date is critical to you or your plans, such as when arranging removalists or moving dates, booking contractors, organising insurance, giving ‘Notice to vacate’ to tenants living on the property being purchased.

Why is it important to strive to meet the original deadlines despite the possibility of extension?

It is still crucial for both parties to strive to meet the original deadlines to avoid penalty interest (for the Purchasers) and extra charges and potential complications or disruptions to their plans. For instance, if you have aligned the settlement date with the end of a lease or the commencement of renovations, any delay could have significant implications. Therefore, careful planning and communication between all parties involved remain essential to facilitate a smooth and timely settlement process.

What are Settlement Adjustments?

At settlement, besides the balance of the purchase price payable to the Vendor, necessary adjustments to the following are made on a pro-rated basis:

• rents;
• profits;
• council rates;
• water, sewerage and drainage service and usage charges;
• strata and community title levies;
• land tax;
• any other periodic outgoings;
• so that the Vendor is entitled to and liable for the above up to and including the adjustment date, after which the Purchaser will be entitled and liable.

The following outgoings are the Vendor’s liability and must not be adjusted on settlement unless otherwise agreed by the parties:

• surcharge land tax;
• first home buyer choice property tax.

What is the adjustment date?

The adjustment date is the earlier of:

• the settlement date; and
• the date the Purchaser takes possession of the property — for instances where the Purchaser moves into, gets access to or starts receiving rent for the property before settlement.

E.g. The settlement date is 14 September 2024. If the parties agree that the Purchaser will move into the property on 1 September 2024, the adjustment date is 1 September 2024. Otherwise, the adjustment date is 14 September 2024—the settlement date.

At settlement, council rates are adjusted for the current financial year (1 July 2024 to 30 June 2025) so that the Vendor is liable for rates from 1 July 2024 up until and including the adjustment date, and the Purchaser is liable from after the adjustment date.