Failed Property Settlements Expected To Rise
The most common reasons why property settlements don't go through.
On Saturday Sydney recorded another strong clearance rate of 80.01 per cent from 757 listings. That marks the 18th weekend out of the past 20 with a clearance rate above 80 per cent.
With interest rates at an all time low the Sydney property market, along with many other capital cities, is booming. Competition is intense and prices are achieving well over the reserve in record sales times.
However, it’s estimated that about 5 to 10 percent of sales are hit by some kind of serious problem that can threaten, delay or even prevent a settlement from going through. With families racing to purchase and move into their new home before Christmas, there is bound to be buyers that will be left out in the cold.
For the buyer the implications can mean you’re left without a roof over your head, become potentially liable for significant financial costs including forfeit of deposit and loss of the property.
“With the increase in sales, it makes sense that there will be an increase in settlement failures” LawPath CEO and Founder Paul Lupson says.
“Problems with settlement are extremely stressful, costly and often preventable. Make sure you are well prepared and have engaged expert counsel to avoid potential issues” says Paul.
While you are not legally required to use a conveyancer, the preparation, execution, verification and lodgement of legal documents can be confusing and easily misunderstood if unfamiliar.
LawPath solicitor Olivia Terziovski from Boutique Lawyers says “Don’t be blindsided at settlement, there are a number of checks and balances that are required and any number of these falling through can result in a settlement crash. Be prepared and don’t get caught out.”
“It’s not uncommon to see a gas and water connection issue, where the new owner needs to cover installation costing up to $35,000. In relatively new dwellings settling without a home warranties insurance certificate can cost then new buyer up to $200,000 if structural defects are later found” says Olivia.
Common areas to beware of during property settlement:
- “caveat emptor”: due diligence of property reveal structural issues damp, pests/termites, unsound structure, no council approval to build, allotment issues or easement or drainage restrictions.
- Lack of disclosure: discovering after purchase murder or suicide has occurred in the property or other such disclosure issues. The property has a heritage listing or the land has been confirmed as a future road-works site.
- Undisclosed debt: the seller still owes money for rates or mortgage.
- Property title and surveying report: Title search is unsatisfactory, the owner is involved in an ownership dispute resulting in claimant checks over property, a surveying issue is identified with fence boundary.
- Property damage and/or missing fixture: The owner has not left the property in a satisfactory state and/or has removed costly fixtures.
- Home Warranty Insurance Certificate: If you are purchasing a dwelling that is less than 6 years old, ensure that the Vendor has provided a Home Warranty Insurance Certificate prior to settlement to ensure that in the event where your home has structural defects (not yet evident to you at the time of settlement) you are protected.
- Some issues stop exchange of contracts from proceeding include:
- The certificate of title is missing;
- The seller’s mortgage is undischarged;
- Incorrect spelling of names or settlement information;
- Incorrect name on bank cheques, or cheques not delivered in time;
- Finance not approved;
- A party fail to attend settlement.
It is important that your conveyancer reviews everything after contracts have been exchanged. If you have just recently purchased a property and have a settlement question, ask Paul or a LawPath Lawyer a question now.
Dominic is the CEO of Lawpath, dedicating his days to making legal easier, faster and more accessible to businesses. Dominic is a recognised thought-leader in Australian legal disruption, and was recognised as a winner of the 2015 Australian Legal Innovation Index.