“Delays trigger penalty interest and cost recovery. The specific consequences depend on who caused the delay and the contract terms.”
Property settlement delays in Victoria are governed by the sale contract — typically a standard Law Institute of Victoria (LIV) contract — and by the Vendors and Purchasers Act 1958. What happens when settlement doesn’t occur on the scheduled date depends on which party is responsible for the delay.
Penalty interest for purchaser delay
If the purchaser (buyer) cannot settle on the due date, the vendor is entitled to penalty interest on the purchase price for each day of delay. The penalty interest rate is set out in the contract — commonly the cash rate plus a margin, or a fixed rate specified in the contract. This runs from the scheduled settlement date until actual settlement.
Vendor delay: the purchaser’s remedies
If the vendor cannot settle — for example, because they have not vacated, or a caveat is outstanding — the purchaser is not required to pay penalty interest. The purchaser may also be entitled to recover holding costs (additional rent, storage) incurred because of the vendor’s delay.
Issuing a Notice to Complete
If either party cannot settle and the delay is becoming prolonged, the non-defaulting party can issue a Notice to Complete — typically requiring settlement within 14 days. If settlement still does not occur, the non-defaulting party may have the right to rescind the contract and claim the deposit (if buyer is in default) or sue for damages (if vendor is in default).
The practical reality in 2026
Most settlement delays in 2026 are finance-related — buyers whose pre-approvals were based on rate assessments that have since moved, or lenders recalculating serviceability closer to settlement. If you are a buyer and you have concerns about your finance settlement, communicate with your broker and conveyancer as early as possible. A short extension is typically easier to negotiate before the scheduled settlement date than after.
→ You may wish to speak with a licensed mortgage broker to assess your personal circumstances. This is general information only. Individual circumstances vary and scheme details change regularly. Verify current eligibility, caps, and terms with official sources before making decisions. Speak with a licensed mortgage broker for advice tailored to your situation. All loans are subject to lender approval.
Sources: Law Institute of Victoria, Contract of Sale (Residential) — Conditions; Vendors and Purchasers Act 1958 (Vic); PEXA, Electronic Settlement Victoria; ASIC MoneySmart, Buying a Home 2025.
