When the Vendor Won't Settle

You’ve signed, paid the deposit, lined up the bank, and booked the move. Then settlement day arrives and nothing happens. No keys. No handover. Just a call from your conveyancer saying the vendor is not ready.

The short answer: In Victoria, a buyer usually cannot end the deal the minute a vendor misses settlement. Under the standard LIV/REIV contract, the usual first formal step is a written default notice under General Condition 34, which gives the vendor 14 days to fix the breach, pay interest, and cover reasonable costs. If that period expires and the default is still not fixed, the buyer may be able to end the contract, recover money paid, claim losses, or in the right case ask the Supreme Court of Victoria to order the sale to proceed.

That can feel brutal when your lease is ending, the removalists are booked, and you’re standing in a Melbourne rental with boxes stacked to the ceiling. The good news is that a vendor’s missed settlement does not leave you powerless. The next step is to move quickly, keep your own side ready, and let your conveyancer take control.

Why would a vendor fail to settle in Melbourne?

Most failed settlements come down to money, paperwork, or the vendor’s own next move. The vendor’s lender may not have discharged the mortgage, a joint owner may not be ready to sign, probate may still be pending, or the vendor may simply be trying to buy time.

Sometimes the problem is practical rather than legal. The vendor might still be in the property, the house may not be cleared out, or vacant possession is not available. That is why settlement disputes can overlap with what happens when the vendor won't move out.

Buyers also worry that the vendor is trying to back out altogether. That concern is fair, especially in a rising market. Still, a signed contract is not something a seller can usually walk away from just because they’ve changed their mind, which is why many buyers ask can a vendor cancel a contract of sale in Victoria.

What should I do the moment the vendor misses settlement?

Call your conveyancer and do not make side agreements yourself. A missed settlement can be a short bank glitch, or it can be the start of a real dispute.

Your conveyancer will usually check three things straight away:

1. Is the buyer fully ready, willing, and able to settle?
2. Has the vendor given a proper reason and a workable new date?
3. Is this a matter for a brief extension or a formal default notice?

That first question matters. If you want to enforce the contract, your own finance, duty, insurance, and signed documents need to be in order. If you want a quick refresher on what happens on settlement day, it should normally be a quiet behind the scenes process. When it falls over, there is usually a concrete cause.

How does a default notice work in Victoria?

The formal step is usually a written default notice, and it starts the countdown. Under General Condition 34 of the current LIV/REIV contract, the notice must spell out the default and give the other side 14 days to remedy it, pay interest, and pay reasonable costs caused by the breach.

In plain language, the notice says: settle properly within 14 days or the buyer will exercise further rights. That is why understanding notice of default matters so much. If the notice is poorly drafted or served badly, it can create a second dispute on top of the first one.

Your conveyancer may also discuss lodging a purchaser’s caveat. A caveat records that someone else claims an interest in the land, and it can make it much harder for the title to be dealt with while the dispute is still alive.

Can I force the vendor to settle?

Yes, sometimes. If you still want the property, the buyer may seek specific performance, which is a court order requiring the vendor to complete the sale.

This remedy tends to matter most when the property is hard to replace. Think of a family home near a preferred school zone, a terrace close to the CBD, or a block in a suburb where very little comes up. In those cases, getting money back may not feel like enough.

A conveyancer will often refer the matter to a property litigation solicitor if court action is needed. It is not the first step, though it can be the right one.

Can I cancel the contract and get my deposit back?

Yes, that may be available once the vendor’s default is not fixed in time. Under the current standard contract, if the buyer gives a proper default notice and the vendor still does not comply, the contract can end and the buyer is usually entitled to repayment of money paid under the contract, plus interest and reasonable costs.

For buyers, this is often called rescission. It is worth keeping that separate from a mutually agreed deed of rescission, which is used when both parties decide to unwind the contract together.

The deposit issue matters too. If the deposit is still held in trust, recovery is usually cleaner. If it was released early under section 27, getting it back can be slower and much more stressful.

How does penalty interest work when the vendor is late?

Penalty interest is meant to compensate the innocent party for delay. Under the current standard Victorian contract, default interest is tied to the rate fixed under the Penalty Interest Rates Act 1983 (Vic), which is 10% per annum. Older contracts may use a different formula, so the actual contract still needs to be checked.

The calculation is usually based on the money owing under the contract during the default period, not the full purchase price. If the balance due at settlement is $810,000, 10% per annum is about $221.92 a day, which means five days is roughly $1,109.60.

Buyers often hear about penalty interest for late settlement when they are the party running late. The same topic matters here because interest and costs sit inside the default process.

There is also a duty point to watch. In some Victorian deals entered into on or after 1 July 2022, late settlement interest of $5,000 or more can trigger a reassessment step with the State Revenue Office after settlement.

What losses can a buyer usually claim?

A buyer may be able to claim more than the deposit and default interest. If the vendor’s breach has cost you money, some of that loss may be recoverable.

Common examples include:

• conveyancing and legal costs caused by the default;
• extra rent or temporary accommodation;
• storage and removalist rebooking fees;
• bridging finance or other reasonably foreseeable expense caused by the delay.

Keep every receipt and invoice. A damages claim is always easier when the paperwork is neat.

What if the vendor goes bankrupt before settlement?

This is the version buyers fear most. If the vendor becomes bankrupt, or a company vendor goes into liquidation, a trustee or liquidator may take control of what happens next.

That can turn an ordinary settlement dispute into an insolvency problem very quickly. The sale may still complete, though it may not. This is one reason prompt advice matters. A purchaser’s caveat can help protect the buyer’s position because it records the buyer’s claimed interest on title.

How can Melbourne buyers protect themselves before signing?

The best protection starts before exchange. Careful contract review cannot stop every problem, though it can spot trouble early.

Ask your conveyancer to review the title, the section 32, the settlement period, the deposit terms, and any special conditions in a contract of sale. Small wording changes can shift real risk onto the buyer.

It also helps to:

1. think carefully before agreeing to early deposit release;
2. keep your lender updated the moment a delay is likely;
3. book the final inspection properly and raise vacant possession issues early;
4. check which version of the standard contract you signed.

A lot of these disputes feel bigger because real life is happening around them. School runs, lease end dates, a wet Friday move across town, and a removal truck sitting on the kerb all add pressure. Good preparation does not remove the stress, though it gives you better footing.

Frequently asked questions

What happens if the vendor doesn't settle on the agreed date in Victoria?
The buyer will usually move to a formal default notice if the delay is not fixed quickly. Under the standard LIV/REIV contract, that notice gives the vendor 14 days to remedy the breach, pay interest, and cover reasonable costs. If the vendor still does not comply, the buyer may be able to end the contract, recover money paid, and claim losses.

Can I claim penalty interest if the vendor is late settling?
Yes, penalty interest can form part of the buyer’s rights when the vendor is in default. Under the current standard contract, the rate is tied to the statutory penalty interest rate, which is 10% per annum. It is usually calculated on the money owing under the contract during the period of delay.

Do I get my deposit back if the vendor defaults?
Often, yes. If the contract is properly brought to an end after the vendor’s unremedied default, the buyer is usually entitled to repayment of money paid under the contract, together with interest and reasonable costs that are payable. The position is cleaner if the deposit is still being held in trust.

What is a notice to complete in Victoria?
People often say ‘notice to complete’, though the standard Victorian contract uses the term default notice. It is a formal written notice that identifies the breach and gives the defaulting party 14 days to remedy it, pay interest, and pay reasonable costs. It is usually the step before termination rights or court action.

Can I force the vendor to sell me the property if they refuse to settle?
Sometimes, yes. A buyer who still wants the property may seek specific performance in the Supreme Court of Victoria, asking the court to order the vendor to complete the sale. That path is more likely to matter where the property is hard to replace and the buyer has stayed ready to settle.

What should I do if the vendor goes bankrupt before settlement?
Tell your conveyancer straight away and get advice fast. Bankruptcy or liquidation can change the dispute because a trustee or liquidator may step in and control what happens next. A purchaser’s caveat may help protect your position, though speed matters.

Does it matter if I bought at auction or private treaty when the vendor defaults?
The core default remedies are much the same once there is a binding contract. Auction and private treaty sales differ at the front end, especially around cooling off and conditions, though a vendor’s failure to settle is still dealt with through the contract and the usual default process.

Talk to Pearson Chambers before it gets worse

If your vendor has missed settlement, gone quiet, or asked for more time without a clear plan, get advice early. Fast action can protect your deposit, preserve your position, and stop a bad settlement day turning into a much bigger dispute.

Pearson Chambers Conveyancing assists Melbourne buyers with missed settlements, default notices, vacant possession problems, and contract review before signing. For tailored guidance, or for a complimentary Section 32 contract review, email contact@pearsonchambers.com.au.