By Brendan Leahy, Naked Real Estate
Most settlement delays are not dramas. A bank is slow, a mortgage discharge has not come through, documents have not been returned, or the electronic workspace is not ready. Both sides still intend to complete. This is a money question, not a survival question, and it is worth understanding before you panic, because the rules are more specific, and less symmetrical, than most people assume.
This is one part of a bigger picture. For how delay fits alongside the finance clause and an outright refusal to complete, see the full guide, can a buyer or seller back out of a WA contract.
General information only, not legal advice. Your special conditions can change the outcome, so read your contract and get advice on it.
Time is of the essence, but the clock has a specific shape
Settlement is due on the agreed date, and time is of the essence under the contract. But the interest mechanism does not bite the instant settlement is a day late. It activates only if settlement remains incomplete more than three business days after the settlement date. Termination is a separate process again, and a delay on its own does not cancel anything.
The rule is not symmetrical, and buyers should know it
Most people assume whoever caused the delay pays. That is not what the standard conditions say.
If settlement is not completed within three business days after the settlement date for any reason not attributable to the seller, the buyer must pay the seller interest on the balance of the purchase price and any other money payable at settlement. If the delay is attributable to the seller, the seller allows the buyer compensation on the same basis, as a deduction from the purchase price.
Those are different tests, deliberately. A buyer can end up paying interest for a delay that was nobody’s fault in particular, or that was caused by their own bank or settlement agent. The seller only pays where the delay is actually attributable to them. So if you are buying, that is a reason to stay on top of your lender and settlement agent, not to assume a delay
outside your control is a delay outside your wallet.
The rate, and the panic it causes
The prescribed rate under the 2022 General Conditions is 9 per cent per annum, calculated daily. It is not 9 per cent per day. I have seen that misunderstanding cause genuine panic.
Interest runs from and including the original settlement date, up to but excluding the day settlement actually occurs. So the three-business-day period is not a grace period that shifts the start date. Once the clause applies, the calculation reaches back to the settlement date.
What it looks like in practice
Take a sale at $1.2m with a $50,000 deposit already paid, so the balance is $1,150,000. At 9 per cent per annum, that is 1,150,000 x 9% divided by 365, about $284 a day. A fourteen day delay is therefore around $3,970.
That figure is illustrative. Interest is calculated on the balance plus any other money payable at settlement, so the real number depends on the adjustments, and your settlement agent works out the actual figure.
The interest is the whole claim, not the start of one
This is where a lot of online advice goes wrong. Where settlement ultimately proceeds under the ordinary delay provisions, the interest or compensation is generally the whole contractual claim arising from that delay, not the beginning of a list. The standard conditions say the parties intend it as the best estimate of the damages caused by the delay.
So where the sale still completes, you generally cannot stack removalist costs, temporary accommodation and inconvenience on top of the interest. The interest is the remedy. That cuts both ways: it caps what a frustrated party can chase, and it makes the delaying party’s exposure calculable rather than open-ended. The position can change if court proceedings are instituted, or if the situation has moved beyond an ordinary delay into a default, which is another reason to get advice once a delay stops looking like a delay.
You cannot claim interest if you were not ready yourself
The delay provisions do not reward a party who was not in a position to settle. A seller who was not ready, willing and able to complete on the settlement date is not entitled to interest until they are ready and have given the buyer notice of that fact. If that notice comes within three business days of the settlement date, interest still runs from the settlement date. If it comes later, interest runs only from the day the notice was given. The same principle applies in reverse to a buyer claiming compensation for a seller delay. This is why settlement agents need to establish what actually caused a delay rather than assuming.
There is a process for claiming it
A party who wants interest paid at settlement must serve a notice on the other party no later than two business days before settlement, setting out the basis of the claim and the amount, which can include a daily figure. If the other party disputes it, the disputed amount is still paid at settlement and held by a representative. If the dispute has not been resolved or taken to court within twenty business days after settlement, the money goes to the party claiming it. The key point: a dispute about interest does not stop settlement. Both parties still have to complete.
Electronic settlement changes the picture
Most settlements now happen electronically, and the standard conditions deal with that separately. A party is not in default where they are prevented from complying because the other party or the other party’s bank has not done something in the workspace, or where settlement fails because a system at Landgate, the Office of State Revenue, the electronic network operator or the Reserve Bank is down. And while the workspace is locked for settlement, neither party can exercise a right to terminate. So before anyone starts talking about default, the first question is usually practical: what actually happened in the workspace, and whose obligation was outstanding.
Delay is not termination
The three-business-day rule is about money, not about the contract ending. Nothing in the delay provisions cancels the contract. If a delay hardens into a refusal to complete, that is a different situation with its own process, covered in what happens when a buyer or seller refuses to complete. And if your delay is really a finance problem, see the finance-clause trap, because that runs by different rules again.
Frequently asked questions
Does a WA contract end if settlement is a few days late?
No. Time is of the essence, but a delay triggers interest or compensation once settlement is more than three business days late, not termination. Ending the contract requires the separate default process, or repudiation.
Who pays interest for a late settlement?
The tests are not symmetrical. The buyer pays the seller interest for a delay not attributable to the seller, which can include the buyer’s own bank. The seller pays the buyer compensation only where the delay is attributable to the seller.
How much is the interest?
The prescribed rate under the 2022 General Conditions is 9 per cent per annum calculated daily, not per day. On a $1.15m balance that is roughly $284 a day. Your settlement agent calculates the actual figure on the real balance and adjustments.
Can the other side also claim removalist or accommodation costs?
Generally not, where the sale completes under the ordinary delay provisions. The interest is intended as the whole claim for the delay, not the start of a list. That can change if the matter moves into default or court proceedings.
The bottom line
A late settlement is usually a money question with a calculable answer, not the end of the contract. Know that the interest test favours the seller, that the rate is 9 per cent a year and not a day, and that a party who was not ready themselves cannot claim. Stay on top of your lender and settlement agent, return paperwork the moment it arrives, raise any problem early, and get advice as soon as a delay starts to look like something more than a delay.
Truth. Strategy. Sold.
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About the author: Brendan Leahy has been selling homes throughout the Perth Hills and Foothills since 2002, with more than 1,500 personal sales.
General information only, not legal advice. If settlement may be delayed, speak to your settlement agent and a property lawyer.
