Many buyers and sellers believe the hard work is done once contracts are exchanged. In fact, the period between exchange and settlement is when most problems arise — finance delays, defects discovered at pre-settlement inspection, disputes over fixtures, and more. Here is what happens during this period and how to protect yourself.
What Happens After Exchange?
Once contracts are exchanged, both parties are legally committed to the transaction. The settlement date is agreed and recorded in the contract. From exchange, a series of tasks must be completed before settlement can occur.
For Buyers
- Finance: If you have a finance condition, your lender will arrange a valuation and issue formal loan approval. Your solicitor will coordinate with your lender to prepare mortgage documents.
- Stamp duty: Your solicitor calculates and arranges payment of transfer duty to Revenue NSW, which must be paid before or at settlement.
- PEXA workspace: Your solicitor sets up and verifies the PEXA (electronic settlement) workspace and confirms settlement figures.
- Pre-settlement inspection: You are generally entitled to inspect the property shortly before settlement to ensure it is in the same condition as at exchange and vacant possession is available.
For Sellers
- Discharge of mortgage: If you have a mortgage, your lender must arrange a discharge and coordinate with your solicitor for PEXA settlement.
- Removal of personal belongings: All items not included in the sale must be removed. Items that are "fixtures" (fixed to the property) generally remain unless excluded in the contract.
- Final readings: Arrange final utility meter readings. Your solicitor will calculate adjustments for rates, water, and strata levies up to the settlement date.
Common Problems Between Exchange and Settlement
Finance Delays
A buyer whose finance is delayed approaching the settlement date needs to communicate immediately with their solicitor. If settlement cannot occur by the agreed date, the other party may issue a "notice to complete" — giving a short extension (usually 14 days) with time of the essence. If settlement still does not occur, the contract may be terminated and the deposit forfeited.
Pre-Settlement Inspection Issues
If the pre-settlement inspection reveals that chattels included in the sale have been removed, the property has been damaged, or it is not in the same condition as at exchange, the buyer should immediately notify their solicitor. Depending on the circumstances, settlement may be delayed while the matter is resolved.
Defects Discovered
Defects discovered after exchange are generally the buyer's problem — this is the principle of "buyer beware" (caveat emptor). However, if the seller actively concealed a defect, different rules may apply.
Settlement Day
In NSW, settlement now occurs electronically through PEXA. On settlement day, funds are transferred, the mortgage is discharged, and title is transferred — all electronically and simultaneously. Physical attendance is not required. Your solicitor manages the entire process.
At James Papas Solicitors, we handle all aspects of conveyancing from pre-exchange advice through to settlement and beyond. Call us on (02) 9633 3122. Your first consultation is free.
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