Purchasing a property is an exciting milestone in many people’s lives and settlement of the transaction can be an exciting and suspenseful time that need not be complicated by delay. Time is of the essence in property transactions; so much so that it is noted in clause 22 of the standard terms of sale for land in Western Australia known as Joint Form of General Conditions for the Sale of Land published by the Law Society of Western Australia and REIWA. So, what can you do, as a buyer or a seller, if the other party is delaying settlement?
Contracts after going unconditional
Upon all stipulated preconditions outlined in the agreement being met, your contract will become unconditional. Common conditions include the property passing building and termite inspections and the buyer being approved for finance or selling their own property.
Once the contact has become unconditional, the parties are obligated to do all necessary things to proceed to settlement in a timely manner. It is essential to ensure when entering into a contract for a property transaction that you obtain independent advice to fully understand your obligations, so as not to incur any penalties for delaying the transaction.
The best practice in any case of delay is to maintain communication with all interested parties and, where necessary, request an extension of time on the condition or on settlement in writing as soon as it becomes apparent that it may be required.
Entitlements Following Delay
As time is of the essence to a contract for sale of real property, settlement must be completed within 3 business days after the agreed upon settlement date. If settlement is delayed at the fault of the Buyer, once settlement does occur the Buyer must pay to the Seller interest on the purchase price of the property and any other money payable at settlement. Further to this, the Seller is entitled to be paid rent up to and including the date the Buyer takes possession of the property.
Similarly, if the delay is longer than 3 business days and is the fault of the Seller, they must deduct from the purchase price an amount equal to interest on the purchase price and any other money payable.
Interest
Interest under the Joint Form of General Conditions is payable at a rate of 9% per annum calculated daily, however this can be modified by agreement of the parties to be increased or decreased.
The abovementioned interest is subject to the issuing of a “ready, willing and able notice.” When a party is ready, willing and able to proceed with the transaction, they should give notice of this fact to the other party, preferably before the settlement date.
If you give this notice before the settlement date, on the settlement date or within 3 days of the settlement date, and the other party causes a delay, the interest payable will be calculated as being payable from the agreed date until such time as the transaction actually settles. If the notice is given after 3 business days of the settlement date, interest will be calculated from the date of the notice until such time as the transaction settles.
Default Notice
In the event that the other party continues to unreasonably delay settlement, you may issue a default notice which:
- specifies the default of the other party;
- requires the party in default to remedy their default;
- specifies a time period for the defaulting party to remedy; and
- specify the action you intend to take if the default is not remedied.
You must allow the defaulting party at least 10 business days to remedy the default, however you may allow longer if you wish.
If the notice is issued to the Buyer, at the expiry of the period on the notice, the Seller has a number of rights, including but not limited to:
- Sueing the Buyer to compel them to carry out the transaction (Specific Performance) and/or compensate the Seller for damages incurred as a result of the Buyer’s default;
- Retaking the Property; and
- Terminating the contract.
If the Seller chooses to terminate the contract, they will also be entitled to:
- Keep the deposit paid by the Buyer, up to 10% of the total purchase price and give back to the Buyer any amount the paid in excess of 10% of the purchase price;
- Sue the Buyer for any damages they have incurred as a result of the Buyer’s default; and
- Resell the property.
If the notice is issued to the Seller, at the expiry of the period on the notice, the Buyer may also sue the Seller for specific performance and damages or terminate the contract. If the Buyer chooses to terminate the contract, they are entitled to:
- Be repaid the deposit and any other money paid to the Seller;
- Any interest the Seller has been paid on the Buyer’s deposit or other moneys;
- Interest on any money paid by the Buyer to the Seller under the contract at a rate of 9% per annum calculated daily from the date the money was paid to the Seller until it is returned to the Buyer.
Conclusion
It must be noted that the Joint Form of General Conditions can be modified by contract, so it is important to seek independent legal advice when entering into a contract for the sale of land.
If you have entered into a contract which does not alter the Joint Form of General Conditions, following are the key takeaways from this article:
- Ensure you are prepared for settlement prior to the agreed date and if you foresee a delay, give written notice as soon as possible.
- Give notice that you are ready, willing and able to proceed with settlement as soon as possible.
- There is a 3 business day grace period for delaying settlement.
- Interest is payable at 9% per annum if there is a delay greater than 3 business days by the party causing the delay.
- Calculation of interest will be either from the agreed date of settlement or the issuing of a ready willing and able notice by the other party, whichever is the later.
- Each party has rights regarding the performance or termination of the contract in the event of extensive delay.
If you believe that your purchase or sale of a property is being delayed by the other party, please contact the experienced commercial team at Lynn & Brown Lawyers so that we can assist you.
About the Authors: This article has been co-authored by Sam Richardson and Steven Brown. Sam undertook his studies at Murdoch University fresh out of high school in 2020 at 17 years old, keen to pursue and interesting and challenging career. Since November of 2022, he has been with Lynn and Brown as a clerk but following the conclusion of his studies, he will be staying with our Wills and Estates team as a Law Graduate. Steven is a Perth lawyer and director, and has over 20 years’ experience in legal practice and practices in commercial law, dispute resolution and estate planning.
