Expert advice on managing – or avoiding – the hassle of delayed settlement.
It’s Friday afternoon, and there are thousands of furniture vans throughout Australia waiting to be unpacked. For some, the afternoon isn’t going to end as anticipated. There’ll be no shiny new keys and no reason to pop the champagne cork.
Delayed settlement when using manual processes is unfortunately more common than our clients would like. Whether they are buyers or sellers, any setbacks in the property transaction process is bound to cause hassle and headache. We speak to Russell Cocks, lawyer and consultant, about what you can do to avoid this situation.
The headache of delayed manual settlement
One in five clients of manual conveyancing suffer a delay in settlement and a quarter of these suffer financial implications, according to 2015 data. Russell describes these as often “unintentional delays which have to be rectified at considerable effort.”
While some transactions can be fixed immediately, others require two, three or four days to cure. The 2015 data mentioned above showed the median delay was seven days on average, and one in five people needed to source accommodation during this time. “All of it is downtime,” Russell adds. “Rarely can you recover that time spent fixing up a settlement.”
Here we look at three common reasons for delayed settlement and what you can do to deal with them:
- Bank delays
A failure of one party to be ready for settlement is a key reason for delays. Russell says many delayed settlements are a result of the inability of a financier to complete the settlement.
The best thing you can do to deal with this situation is to keep the lines of communication open with the financier (and to recommend to your client that they take the same approach). However, this situation can still occur despite your best efforts.
- Disorganised clients
Life is busy, and the added complication of moving house means some clients may not find time to complete vital tasks. They may forget to do something, or simply fail to prioritise the steps required for completion of their own transaction.
Vendors may neglect to make arrangements to vacate the property, or fail to present the property in an adequate condition. Keep these potential problems in mind when communicating with vendor clients. In particular, make sure the vendor is aware that the purchaser has a right to inspect the property prior to completion. Warn the vendor that they can’t let the property deteriorate substantially, because the purchaser is entitled to take ownership of the property in more or less the same condition as when they bought it.
When acting for a purchaser, disorganisation usually manifests as a lack of finance – either their personal contribution or their bank’s. Russell’s advice here is clear: “All that the lawyer or conveyancer can do is simply stress to their client at the beginning of the process that they need to keep communication lines open with their lawyer and their financier, and not expect that things will just get done without keeping their finger on the pulse.”
To avoid these situations, it's a good idea to use an app such as SettleMe, which provides your clients with a to-do list and updates on the progress of their settlement.
- Process failures
Sometimes conveyancers simply make mistakes, though these situations account for a very small percentage of unintentionally delayed settlements – perhaps five per cent, says Russell. “It can be as simple as a typo, or forgetting to contact one of the participants involved.”
Even the best of us make mistakes occasionally, but what's important is noticing early and doing what you can to rectify the situation. You can reduce the chances of making a costly mistake by being highly organised and systematic with your workflow. Working with defined processes and templates can help.
Dealing with delay
While delays cause headaches and downtime, it’s important to remember that these delays are "redeemable within a short space of time", Russell says.
Claiming interest is, of course, a right in a standard contract. “The vendor is in a slightly better position because the contract says the vendor can charge the purchaser penalty interest if they delay. But the purchaser can’t charge the vendor any interest, because they’re not owed any money.”
Avoiding delays comes down to one thing, says Russell: “The big C: communication.” While PEXA helps improve communication and reduce process errors, it’s important to always keep the basics in mind too, Russell says. “Make sure you know what your obligations are. Make sure you know what your client’s obligations are. And make sure you know what the bank’s obligations are. Then have regular communication between those three parties.”
Author: Libby Hakim