What Happens When A Purchaser Defaults

purchaser defaults

Defaulting on a real estate contract occurs when the buyer or the seller fails to meet the terms of the agreement. Normally, this happens after all contingencies have been removed from the contract.

Well, the seller could default first. But let’s focus on what happens when a purchaser defaults. So if the vendor is in this situation, we’d act for him/her.

When someone defaults on a contract, there are a number of ways to resolve the problem. If a purchaser does not pay their deposit, for example, we would remind them that they have breached the contract by not making that payment and ask them to rectify the problem. If they do not rectify it, we can serve them with a default notice. A default notice tells you that you have breached the contract and therefore must comply with the terms of the contract. It also lists any additional costs you will incur if you do not comply.

A purchaser who defaults on a contract has up to two weeks to remedy the situation. If the problem is not fixed within that time frame, the seller must serve a rescission notice or termination notice ending the contract.

Conveyancers can serve a default notice on their clients that simply states that they are in default and need to act in order to keep their contract going. But if you’re looking for a more flexible option, we can serve a dual notice that is both a notice of default and a termination notice rolled into one. Your solicitor will be able to advise you on which option is best for your case.

Now, what can you get out of it? Well, if the purchaser defaults, meaning that they haven’t paid the deposit yet, then you’ll have to pursue them through the courts for that deposit. If it’s something like a settlement or some other term of the contract that hasn’t been met and they’ve defaulted on that, then hopefully you’re already holding a 10% deposit. So that’s automatically forfeited to the vendor. You would also be paying your agents’ fees or any other fees out of that 10%.

If you’ve suffered other losses due to the breach, you can seek compensation for them. However, you’ll need to take legal action in order to do so. It’s not an automatic right—the contract will say that the vendor can seek compensation for other financial losses or damages as well. So it’s an automatic in terms of the contract will say that the vendor can seek other financial losses or damages, but it doesn’t mean that you can just say, “I’ve incurred all these fees and you also have to pay me that.” So to be able to pursue that, you will need to take further legal action.

Obviously, we want to try and negotiate, because what we’re all trying to do here is settle that property. So our clients are still hoping to purchase that property, so we want to work through any issues and see if we can settle. It might be that they need a little more time or money, but if so those costs would have to be covered by our clients as vendors. If not—we’ll serve notice on them.

I hope that helps. Essentially, any breach of contract is grounds for terminating a lease, particularly if it relates to payment of the deposit or other conditions specified in the contract. Some firms automatically issue a default notice when a tenant does not settle on the settlement date. Again, this depends on your client and whether or not you can negotiate with them; sometimes it’s best just to terminate the contract.

If you’re a landlord or seller and have further questions about going through with the process to terminate the agreement, please call Easy Move Conveyancing or email us at settle@easymove.net.au for advice and guidance about the matter.


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