Settlement

What happens when a Seller delays settlement?

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In accordance with the 2018 Contract for Sale, if either party is unable or unwilling to complete the contract by the date specified in the contract, then either party shall be entitled to serve the defaulting party with a Notice to Complete.

This Notice will give the defaulting party 14 days to complete the transaction.

Much different to buyers defaulting and being issued a Notice to Complete, if a seller does not complete the transaction by the due date, while the buyer is entitled to issue the seller with a Notice to Complete requiring them to complete the sale within 14 day, they are not entitled to charge the seller default interest.

Even though buyers are not entitled to charge penalty interest to the Vendor for not completing on the completion date, the Vendor is still required to complete the settlement within the 14 days set out in the Notice to Complete.

If the seller has still not completed the sale after the expiry of the Notice to Complete, the buyer is entitled to sue and claim damages.

For further information please don’t hesitate to contact:

Christine Johnsen
Licensed Conveyancer & JP
christine@couttslegal.com.au
02 4607 2105

This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.

Explaining a Settlement Adjustment Sheet - Purchasers

A Settlement Adjustment Sheet is used by your Conveyancer or Lawyer when working out council and water rate proportions.

When settlement fall due your conveyancer or Lawyer will have to adjust on current Council and Water Rates as well as any allowances which will need to be made by the vendor to you.

Below is an explanation of how each adjustment is made to ensure that you pay your share and the vendor pays his share.

As you can see from the below example, there are two columns. One “Payable by Purchaser” and one “Payable by Vendor”. For the purpose of this example the settlement date is 22 June 2016.

Payable by Purchaser Column

Up first is your purchase price, less your deposit (normally 10%) which you paid to the agent which gives you a balance. In this example the price is $690,000.00 less $69,000.00 which was paid to the agent, leaving a balance of $621,000.00 due on settlement.

Council Rates – Council Rates are for the period 1 July to 30 June each year. From this example you can see that the council rate for the year are $1,407.08. In the current council year, i.e. from 1.7.2016 to 30.06.2016 there are 366 days in the year. As settlement is on 22 June 2016, that only leave us 8 days in the current council year, therefore we take the yearly amount of the rates $1,407.08 divide it by 366 days in a year and multiply it by 8 days left – which equals $30.76. This amount is the amount you allow to the vendor as the new owner.

Water Rates - Water Rates are for the current quarter. The quarters are as follows:

  • 1 July - 30 September
  • 30 October - 31 December
  • 1 January - 31 March
  • 1 April - 30 June

In this example the current quarter is 1/4/2016 to 30/06/2016 where there is 91 days in the quarter. As settlement is on 22 June 2016 that only leaves 8 days in the current water rate quarter, these 8 days are the 8 days in which you will own the property until the next water rate for the next quarter is struck. Therefore, we take the quarterly rate of $177.91, then divide it by 91 days and then multiply it by 8 – which will equal $15.64. This amount is the amount you allow to the vendor for water rates as the new owner.

Water Usage – As the vendor will no longer own the property from 22 June 2016 and water reads are only done every quarter (3 months) the vendor has used water in his time that he has owned the property, therefore, the vendor must give you, the purchaser, an allowance towards water so that when the final quartlery bill is issued to you, you are able to pay the previous water usage. Your Conveyancer or Lawyer will order a special certificate which provides us with details on:

  1. When the meter was last read;
  2. The vendors daily average in kilolitres; and
  3. The dollar amount per kilolitre – which Sydney Water charge $2.276 per kL

Therefore, to work out the water usage if the last reading was done on 02/06/2016 we calculate the usage to the settlement date of 22 June 2016, there is 20 days. We take the 20 days, multiply is by 0.068 kL (daily average) then multiply it by the daily amount that Sydney Water charge which is $2.276 which will equal $3.10 – this amount is payable by the vendor to you.

Vendor allowance for Discharge of Mortgage

If the vendor has a mortgage it will need to be discharged (taken off) on settlement. Normally, your bank that is lending you the money will charge you this fee as they have to pay this fee to the titles office. Therefore, the vendor is allowing you the amount of $136.30 so when your bank lodges your loan documents at the titles office they will have the vendors mortgage taken off at the same time.

Finalisation of funds due to be paid

To finalise the funds we have to add both columns up.

Payable by the purchaser – balance of funds due $621,000, plus council rates $30.76, plus water rates $15.64 = $621,046.40

Payable by vendor -  Water usage $3.10 plus discharge of mortgage fee $136.30 = $139.40

Then to finalise we take the amount payable by purchase which is $621,046.40 take away amount payable by vendor $139.40 = $620,907.00 – which then becomes the amount due on settlement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.