Settlement FAQs

16 February 2023

1. What is a settlement statement?
The settlement statement sets out who pays what in relation to the property, so that a final amount called the settlement balance, is calculated and is payable by the buyer to the seller. The settlement balance due to the seller is usually split in multiple payment directions to pay the seller’s bank, any outstanding outgoings such as rates, the seller’s legal fees, the balance of any agent’s commission, and any surplus to the seller.

If you are buying property, in addition to the settlement balance, you will also need to pay stamp duty (if applicable) and our legal fees at settlement. The settlement statement includes an amount of the total funds required to settle and if you’re obtaining finance then an estimated amount being provided by your lender, to leave a balance of funds that will need to come from your account. You can authorise your lender to draw these funds from your account or you will need to transfer these funds as directed by us.

2. What is a discharge of mortgage?
The seller is required to give a clean or unencumbered title at settlement (i.e., with no mortgage on title) to the buyer. The outgoing lender will need to register the discharge of mortgage to have it taken off the title and so the cost of registration fee is the seller’s responsibility, and the amount is adjusted in the buyer’s favour.

3. What is the purpose of adjustments?
Generally, the seller is responsible for all outgoings (rates, water, levies etc.) for the period up to and including the settlement date. Buyers are usually responsible for outgoings from the day after settlement. As the outgoings are usually billed quarterly or annually, a pro rata adjustment is made to the outgoings amounts to reflect the seller’s and buyer’s period of ownership.

4. Why is there a rental adjustment on my settlement statement?
If the property is tenanted and there is a property manager, then the property manager will usually adjust the rent between the buyer and seller to reflect the periods of ownership and arrange for any bond to be transferred. If there is no property manager, then the rent should be adjusted on the settlement statement, and we will arrange for any bond to be transferred.

5. What are the main things I need to do to ensure I will be ready for settlement?
(a) If you have not returned any outstanding documents to us or haven’t yet completed your verification of identity, please do so immediately. Delay in returning these documents could delay your settlement. We cannot complete your settlement without you completing the verification of identity requirements.

(b) If you are obtaining finance, please make sure you have signed your loan documents and returned them to your broker or bank, as any delay in doing so may delay settlement. Your bank will likely need to review your loan documents to make sure they have been completed and signed correctly.

(c) If you are obtaining finance and need to contribute additional funds, authorise your bank to draw the additional funds from your account. Usually, you will need to contribute additional funds to those that your bank provides at settlement. The additional funds will be the difference between the amount you owe the seller at settlement and the available funds from your bank loan, plus any stamp duty and legal costs. If your bank is not able to draw additional funds from your account then please let us know immediately so we can advise you of the estimated amount to transfer before settlement.

(d) Review your settlement statement detailing the financial settlement arrangements to Rundl usually a few days before settlement for you to approve. If we do not hear from you then we will assume you agree with the settlement statement. Often the settlement figures are not finalised until the day before or morning of settlement so the draft settlement statement can change at short notice.

(e) Organise your pre-settlement inspection with the real estate agent or seller. You are usually entitled to inspect the property before settlement (usually on the morning of the day of settlement or the day before). You should check the property is in at least as good as condition as it was at the contract date and that any included items are left behind and everything else has been removed. You should contact us immediately if there are any problems with the property as very difficult to do anything after settlement.

(f) If you are selling another property with settlement scheduled on the same day as your purchase (contemporaneous settlements) – we recommend you don’t do it, but if you do, be prepared for delays as you may not be able to have the removalist collect from your old home and deliver to your new home in the one day. Settlement can be delayed. Always have a back-up plan, e.g. plan to stay in short term accommodation or ask us to request early possession of your new home so you can move in before settlement.

6. Why has my settlement been delayed?
Settlement typically involves at least four parties: the buyer, the buyer’s bank, the seller and the seller’s bank. Some common reasons for delays include banks not being ready to settle because their document requirements have not been met, parties not having additional funds required in time for settlement, documents not having been completed or signed properly, the seller’s bank still processing the discharge of mortgage, or there is a dispute about the property and one party refuses to settle (e.g. over the condition of the property at the pre-settlement inspection).

7. What are my rights if settlement has been delayed?
If you are unable to settle on the scheduled date because you or your lender are not ready to settle, then we will advise you of the seller’s rights, which may include the right to some form of compensation, e.g. penalty interest on the outstanding amount and reimbursement of their additional legal costs, and in extreme cases the right to terminate the contract and keep the deposit.

8. What happens after settlement has occurred?
We will confirm with you on Rundl and give you a call to advise you that settlement has been effected. If your matter has settled electronically, the land titles registry will process the registration of the transfer of title and any mortgage documents and the title will usually be updated quickly. Where appropriate, we will give notice of settlement to the local and water authorities.

If you don’t start to receive notices from local or water authorities or strata managers (if applicable) within a reasonable time after settlement, then please let us know so we can follow this up for you. If you haven’t done so after settlement, you will need to contact any utility service providers to the property to open or transfer your accounts with them.

Disclaimer This information is general in nature only and does not constitute legal advice. Lawlab accepts no liability for the content of this information. You should obtain legal advice specific to your individual circumstances. Lawlab’s liability is limited by a scheme approved under Professional Standards Legislation.
Sarjit Chohan
Sarjit Chohan
Legal Advisor

Sarjit is a legal advisor at Lawlab. With a double-degree in both Law and Commerce, he has a strong professional interest in property law and conveyancing. Outside of work, he is passionate about playing soccer and is also quite the movie & television fanatic.

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