All Topics / Help Needed! / interest charged on settlement delay

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  • Profile photo of asouasou
    Participant
    @asou
    Join Date: 2015
    Post Count: 23

    Hi,

    My property was supposed to settle on the 23rd Dec last year. However, the bank wasn’t ready for it even though I submitted all my documents on time. And then the xmas and new year shutdown came. Therefore, the settlement date had to push back until the 18th Jan. The builder sent me a bill and charged interest during this time at 10% p.a. (about $3k). I wasn’t too happy about this because I didn’t cause the delay and I have to pay up for it. This is an off the plan property and it was supposed to finish early last year. I don’t even get anything when they delay the project. I spoke to my solicitor about this and she said there isn’t anything I can do in this case. I am bad luck and this is not something negotiable with the vendor. Can anyone give me advise on my terrifying experience?

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Quite normal to pay penalty interest if you do not meet the settlement date. If the lender caused significant delays outside of their expected timeframes in many cases they will compensate you for the penalties charged – however being Christmas period they very clearly advise that if you do not have your loan approved and documents signed early, there will be delays.

    When was the loan submitted, approved, docs signed etc?

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of RedwoodRedwood
    Participant
    @redwood
    Join Date: 2013
    Post Count: 340

    Did your conveyancer request a extension of settlement without penalty pre settlement date?

    Redwood | REDWOOD | SMSF | PROPERTY | FINANCE
    http://redwoodadvisory.com.au
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    SMSF - PROPERTY INVESTMENT - WEALTH CREATION AND FINANCE SOLUTIONS

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    parties can only charge what is agreed to in the contract. If the contract was a NSW standard contract of sale then the vendor can charge the purchaser interest for late settlement. After 14 days they could even rescind and keep your deposit – subject to the exact agreement. Other states have similar issues. So you may have got off lightly. I am not sure why, but all of these off the plan matters seem to settle around christmas for some reason.

    If it was the bank that caused the delay then they will generally reimburse you for additional expenses such as this so check with your broker. Even where it is not the banks fault blame them anyway and ask for compensation and they will probably give you some without digging too deep.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of asouasou
    Participant
    @asou
    Join Date: 2015
    Post Count: 23

    I am aussuming my solicitor didn’t ask for settlement extensions. I had my loan pre-approval done before it was actually completed. However, it looks like there was another chain of processes and documents I was required to sign after the building was officially completed.

    Profile photo of Corey BattCorey Batt
    Participant
    @cjaysa
    Join Date: 2012
    Post Count: 1,010

    Being the christmas period it wouldn’t have helped, as I’m sure you would have been given only 14 days to complete once given notice by developer. If your loan wasn’t fully approved by early December the chances of settlement were SLIM.

    Corey Batt | Precision Funding
    http://www.precisionfunding.com.au
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of JBCJBC
    Participant
    @jbenjamin
    Join Date: 2014
    Post Count: 34

    Which state are you in? In Tasmania the situation is that if the standard form contract was used then the builder would not be entitled to charge any penalty interest for a simple 2 or 3 week delay, but would be entitled to charge you for any losses he’s actually incurred. Therefore if he’s incurred interest costs to his bank in the amount of $3,000 for the delay he can charge you that. You would be within your rights to ask him for evidence of those costs – ie copies of his bank statements showing how much interest he incurred.

    However he is not entitled to delay settlement if you do not pay this. This compensation is effectively separate from the settlement process. Therefore if you turn up to settlement without the $3,000 he will still be obliged to settle. He may then sue you for the $3,000, or he may consider that it’s not worth it. For $3k many people would consider it’s not worth it.

    I also agree with @terryw about your bank paying for it.

    Therefore it may be worth you asking your lawyer the following questions:
    – what if I don’t pay the interest, will he still have to settle on the 18th?
    – if he still has to settle on the 18th, what can he do then to get the $3k?
    – does the contract allow him to charge penalty interest?
    – can we make my bank pay this – as it was their fault?
    – is the 10% interest rate written into the contract? If not can we ask him to verify the interest he’s charging?

    To repeat myself, this is the situation in Tasmania IF the standard form contract is used and other terms have not been incorporated into it. This is not necessarily the situation in your case – your state may be different and even if your contract looks like the standard one it may have had other terms drafted into it (some agents have been doing that lately). Therefore do not rely on what I’ve said here. Use it as a bit of guidance if you like to assist you in talking to your lawyer, but only act on the advice of your lawyer. On that note, are you using a lawyer or a conveyancer? If it’s a conveyancer then you may want to ask them to refer it to a lawyer. Conveyancers aren’t really qualified to deal with disputes.

    Profile photo of asouasou
    Participant
    @asou
    Join Date: 2015
    Post Count: 23

    This is in NSW. I have already got my mortgage broker to ask the bank if they can do something about this. Hopefully, the bank will reimburse the full amount. I already had my loan pre-approved before settlement. It was clearly the bank’s process problem and I shouldn’t be paying for their operational inefficiency.

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    If you had all of your loan contracts properly signed and returned before the bank’s cut off dates then it may be their fault and they may pay. If not it doesn’t appear their fault, but they may still pay – all or part.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069

    Can anyone give me advise on my terrifying experience?

    It’s the unfortunate reality with OTP purchases.

    The developers can typically delay settlement for months – but if you’re not ready to settle when they are, you’ll be hit with penalty interest. They can be quite ruthless!

    You could ask your conveyancer/solicitor about options – but in reality, I don’t think there’s a whole lot that can be done.

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

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