How often do we get to settlement date only to discover one of the parties' banks isn’t ready to settle? Whether it's because documents aren’t finalised or funds aren’t ready for settlement, the bank is just not in a position to settle.
It doesn’t matter whether it’s the bank that isn’t ready or one of the parties forgot to transfer funds for settlement, the situation isn’t as bad as it was a few years ago.
Instead of being in a position where one of the parties have defaulted under the contract for not completing settlement on time, if your contract is the latest version of an REIQ Houses and Residential Land contract, clause 6.2 of the contract provides an automatic extension period, our saving grace!
Clause 6.2 of the REIQ Houses and Residential Land contract states that either the buyer or seller may (at any time up to 4pm on the settlement date) extend the settlement date by giving notice of a new date for settlement which must be no later than 5 business days after the scheduled settlement date. More than one extension may be given under this clause but the new date for settlement may not be a date later than 5 business days after the scheduled settlement date. When the clause talks about the scheduled settlement date, this means the date put down in the contract, as extended by methods other than the method in clause 6.2 itself.
This clause benefits both the buyer and seller and can be exercised at any time up to 4pm on the day of settlement. If there is an agreed extension of the settlement date without a party using their rights under clause 6.2, the benefit of this clause still remains unless the benefit is waived.
It is though critical that the extension is done correctly. The correspondence invoking the extension needs to be carefully worded.
The right for "extensions by convenience" under clause 6.2 of the REIQ Houses and Residential Land contract is not an automatic right in all contracts – it is a right that comes from the contract itself. Therefore, it can be negated or modified by special conditions. Many other standard forms of contract published by the REIQ and others now include similar clauses.
If you would like further information about this and how it can help you, feel free to call our office on 07 3009 6555 for a quick chat!