A few weeks ago we revealed the four most common causes of settlement delays. However, the most common types of settlement delays aren’t necessarily the worst.
Instead, the longest settlement delays can be the ones that cause the most hassle – not to mention the massive amounts of penalty interest involved!
Long settlement delays often result from one of three situations:
1. A lost Title
The Certificate of Title proves that the seller owns the property, so losing it is a big road bump in your property transaction.
Landgate holds a copy of the Title for every property in Western Australia, but applying for a replacement is a painful process. You’ll need to provide Landgate with documents such as original rates notices from your shire council and statutory declarations from each person who has had contact with the Title.
Despite the hassle involved, it’s not uncommon for us to see several lost Title cases each year. Sometimes, the owner of the property simply lost track of their Title and other times, the banks (who hold Titles that are under the mortgage) misplace them.
In the past, we’ve seen sellers who have only discovered on the scheduled day of settlement that they’ve lost the Title. The normal turnaround time for Landgate is about four weeks, so sellers, find your Title early to avoid a potentially long delay!
2. Nowhere to go
Often, people need to sell their existing property in order to purchase a new one – leading many people to become buyers and sellers at around the same time.
This situation is common (and often necessary), but it also poses a risk: if an owner-occupier sells their house before finding a new one, they could be left with nowhere to go at the settlement date.
Sellers who are about to become renters are also exposed to this risk if they can’t find a rental property promptly. We’ve seen sellers delay settlement for over a week while they scramble to find a new property to live in.
To avoid having to choose between delaying settlement or becoming homeless, ensure you have somewhere to go after settlement and take any special circumstances into consideration while the contract is being written up.
3. Tenants in the property
According to the Joint Form of General Conditions, buyers are entitled to vacant possession of a property, unless that property is sold subject to a lease.
If tenants are living in the property past the settlement date but no lease is mentioned in the contract, the buyer can choose to delay settlement (while charging penalty interest) until the property is vacant.
Since periodic leases require 30 days’ notice of cancellation and fixed-term leases normally run for six or twelve months, forgetting to account for a tenancy could lead to months of delay. To avoid a long, costly delay, always account for tenants in the Offer and Acceptance when there is a lease in place.
All three of these situations can be avoided with careful planning and foresight. To help reduce the risk of long settlement delays, ensure the Title is found promptly, ensure the move is carefully planned, and take special circumstances (such as tenants) into account.
Image by Prem Anandh P via Flickr.