The Hidden Trap in Delayed Settlements: What You’re Not Being Told

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In Victoria’s property market, it’s not uncommon for buyers or sellers to ask for a little “extra time” before settlement.

It might seem harmless—just a few extra days to finalise finance, line up removalists, or wrap up renovations. But if you don’t understand the legal and financial traps of a delayed settlement, that extension can quickly become very expensive.

At Victorian Property Settlements, we regularly assist clients who’ve been caught out—either paying thousands in penalty interest or unknowingly breaching the contract.

Let’s unpack what really happens when a settlement is delayed.

1. The Myth of “Flexible Settlement”

Buyers often assume that if both parties are polite and communicating, there’s no harm in extending settlement informally.

Wrong.

Under the standard REIV/LIV Contract of Sale of Land, settlement is a fixed legal deadline. If you don’t settle by 4pm on the nominated day, you are technically in default, and the other party may:

  • Serve a default notice

  • Charge penalty interest (often 10%+ per annum)

  • Terminate the contract after 14 days

  • Sue for loss of bargain

Even a 24-hour delay can cost thousands.

2. Why Buyers Are Most at Risk

Buyers who fail to settle on time face some of the harshest consequences:

  • You must still pay the full purchase price

  • You may forfeit your deposit

  • You can be sued for damages if the vendor resells for less

  • And your lender won’t cover the interest penalties

We’ve seen buyers lose $50,000+ in penalty interest and legal costs over short delays—especially when they assume finance or paperwork would be sorted in time.

3. Sellers Aren’t Immune Either

Sellers can also fall into traps—especially if they:

  • Haven’t fully discharged a mortgage

  • Haven’t obtained the required certificates (e.g. Owners Corporation, pool compliance)

  • Haven’t vacated the property in time

This is particularly problematic in back-to-back settlements, where a vendor delays their own sale, causing the chain to collapse.

4. Informal Agreements Don’t Protect You

A common scenario:

“We emailed the other side to say we needed two extra days—they didn’t object, so we thought it was fine.”

Unless a written variation is formally executed by both parties, there’s no legal protection from a default notice. Polite conversation is not enforceable.

5. The Right Way to Delay a Settlement

If you genuinely need more time, we can help you:

✅ Draft a formal Deed of Variation
✅ Negotiate a reduced penalty rate
✅ Add protections into the special conditions before you sign

At Victorian Property Settlements, we routinely build in flexible but legally binding conditions when we know delays might arise—like finance delays, subdivision registration, or probate.

Summary: Delay Is a Legal Event, Not a Courtesy

Whether you’re buying or selling, don’t assume a delay is no big deal. Every extra day past the due date may be costing you financially—or putting the deal itself at risk.

Need advice about a delayed settlement or upcoming risk?
Contact Victorian Property Settlements today for practical advice that protects your interests.
📞 Call us on (03) 9783 0111 or visit www.victorianpropertysettlements.com.au