interest charged on settlement delay

Did your conveyancer request a extension of settlement without penalty pre settlement date?

Which state are you in? In Tasmania the situation is that if the standard form contract was used then the builder would not be entitled to charge any penalty interest for a simple 2 or 3 week delay, but would be entitled to charge you for any losses he’s actually incurred. Therefore if he’s incurred interest costs to his bank in the amount of $3,000 for the delay he can charge you that. You would be within your rights to ask him for evidence of those costs – ie copies of his bank statements showing how much interest he incurred.

However he is not entitled to delay settlement if you do not pay this. This compensation is effectively separate from the settlement process. Therefore if you turn up to settlement without the $3,000 he will still be obliged to settle. He may then sue you for the $3,000, or he may consider that it’s not worth it. For $3k many people would consider it’s not worth it.

I also agree with @terryw about your bank paying for it.

Therefore it may be worth you asking your lawyer the following questions:
– what if I don’t pay the interest, will he still have to settle on the 18th?
– if he still has to settle on the 18th, what can he do then to get the $3k?
– does the contract allow him to charge penalty interest?
– can we make my bank pay this – as it was their fault?
– is the 10% interest rate written into the contract? If not can we ask him to verify the interest he’s charging?

To repeat myself, this is the situation in Tasmania IF the standard form contract is used and other terms have not been incorporated into it. This is not necessarily the situation in your case – your state may be different and even if your contract looks like the standard one it may have had other terms drafted into it (some agents have been doing that lately). Therefore do not rely on what I’ve said here. Use it as a bit of guidance if you like to assist you in talking to your lawyer, but only act on the advice of your lawyer. On that note, are you using a lawyer or a conveyancer? If it’s a conveyancer then you may want to ask them to refer it to a lawyer. Conveyancers aren’t really qualified to deal with disputes.

If you had all of your loan contracts properly signed and returned before the bank’s cut off dates then it may be their fault and they may pay. If not it doesn’t appear their fault, but they may still pay – all or part.