The three business days after the settlement date are commonly called a grace period. Settle inside them and neither party can claim compensation. Pass them and the grace period falls away entirely, because the interest is then calculated from the settlement date itself and not from day four.
How the grace period actually works
The parties can settle within three days after the settlement due date and no penalties will be payable. If settlement falls on day four, penalty interest is then backdated from the settlement date, provided the other party was ready, willing and able to settle then.
Who pays
Once the grace period is passed, the party who caused the delay pays the party who did not. The interest is calculated on the balance of the purchase price payable, from the settlement date to the date settlement is actually completed. It is paid at settlement.
You have to be ready yourself
Your right to compensation depends on you being ready, willing and able to complete on the settlement date. So does your lender if you have one.
Ready, willing and able means everything on your side is done: funds available, documents signed, your lender in a position to advance on the day.
If you weren’t ready on the settlement date, you haven’t lost the right outright. It starts from the date you give the other party written notice that you are now ready, willing and able. That notice is worth giving the moment it becomes true, because it starts the clock.
If the delay is your own lender’s fault
You’re the one in default, not the bank, so far as the other party is concerned. The contract is between buyer and seller and it doesn’t care who on your side caused it.
The rate
Interest runs at 9% per annum, calculated daily, on the balance of the purchase price. Your settlement representative will calculate the amount payable on the actual figures.
What to do when you know you will not settle on time
- Tell your settlement representative as soon as you are aware.
- Get to ready, willing and able as fast as you can, then say so in writing.
- Keep a record of what caused the delay and when.
Frequently asked questions
Is there a grace period for late settlement in WA?
Three business days. Settle inside it and no compensation is payable. Miss it and the interest is calculated from the settlement date, so those three days are charged as well.
Can the seller charge me interest if the delay was not my fault?
The delay has to be attributable to you. The claim fails if the delay was not yours. It also fails if the other party was not ready themselves.
Does penalty interest happen automatically?
No. It’s a right to demand compensation, so somebody has to claim it. Speak to the person handling your file about whether to make a claim or defend one.
Talk to us about your settlement
If penalty interest looks likely on your settlement, the person handling your file will talk you through the options before it becomes a dispute.
We act for buyers and sellers on residential and commercial property settlements across Perth and Western Australia.
Call the settlements team on (08) 9220 4430 or download an itemised quote for your own settlement.
Related: Are any penalties payable if settlement is delayed?
This article is general information and not legal advice. Every property transaction turns on its own facts and on the terms of its own contract.
