The real and unfair world of buying property in NSW
We recently acted on behalf of a Queensland family to buy their new home in NSW.
Once we identified the property that met our client’s requirements, we commenced our negotiations with one of the offer’s essential conditions being a fixed settlement date as opposed to the standard 6 week settlement from date of exchange. This was agreed to by the vendor in writing.
We exchanged contracts with a Section 66W Certificate (waiving the buyer’s entitlement to a cooling-off period).
One business day before the agreed settlement date, the vendor’s conveyancer wrote to our client’s conveyancer delaying settlement by 1week. This posed real difficulties (being renters) and financial loss (thousands of dollars) for our client.
Other than serving a “14 day notice to complete” on the vendor, there wasn’t much else our client could do. Withdrawing from the contract would cost our client their deposit and possibly more should the vendor elect to pursue their expenses and costs including daily interest charges from the buyer.
Serving a “14 day notice to complete” on the vendor equally represented a dilemma for our client.
Either
our client accepts the 1 week extension to the initial settlement date, risking the possibility the vendor could further delay settlement and our client would then be forced to serve the “notice to complete”, adding another 2 week delay to the initial 1 week postponement (total of 3 weeks);
Or
our client does not accept the 1 week extension, serves the “14 day notice to complete” at the end of which the vendor still does not settle, or decides to rescind the contract and refund our client the full deposit. No penalties apply to the vendor in NSW!
Ouch!
Four months of finding the right home are wasted, having to go back to the market, re-applying for finance pre-approval, not to mention the financial loss our client would have incurred (legal, pest and building inspections and other due-diligence reports), additional storage charges for furniture and personal belongings
AND
having to find a new rental property (notice to vacate was issued as settlement date was finalised and the managing agent leased the property to a new tenant!).
Luckily, the vendor settled at the end of the 1 week extension and our clients moved into their new home.
- Unlike the rest of Australia, NSW lags behind in this area of the law which protects the vendor but leaves the buyer in a “no man land” situation. Now, there might be some rationale behind this one-sided approach to penalties etc… being if settlement is delayed through the fault of a purchaser then the vendor is likely to incur additional interest on their existing home loan. The corollary to this is that a purchaser does not incur the same additional interest because their home loan has not been drawn down until the actual settlement.
- This one-sided approach does not take into consideration the vendor might not have a home loan.
It also disregards the financial loss that a purchaser could suffer (like in our client’s case) in the form of aborted removalist fees, annual leave entitlements taken to make the move, temporary accommodation charges, due diligence expenses not to mention the stress having packed all THESE cartons, arranged for the electricity, gas and phone connections etc…. - Should buyers with the genuine need to settle on an agreed date elect to insert a “special condition” in the contract requiring the vendor to pay the buyer the same interest rate on the same principal amount (standard in a NSW contract for sale) that the buyer would have to pay if they do not settle as agreed?
- Should buyers insert a “special condition” in the contract whereby they have the option to rescind on the contract without any penalties and be refunded the full deposit in the event the vendor does not settle as agreed and after having being served with a 14 day “notice to complete”?
Contact Fred Haggar if you wish to discuss this case.
