NOTICES TO COMPLETE IN NSW
All contracts in NSW have conditions which manage what happens if a settlement is delayed.
Standard clause 15 in the most recent 2018 Contract for Sale of Land sets out that the buyer & seller must complete by the agreed date for completion and if they do not, either buyer or seller may issue a Notice to Complete if they are entitled to do so.
Most contracts have additional special conditions which set out the agreement in terms of the Notice to Complete, the consequences of the Notice being issued and the way in which the notice must be served.
The contract is likely to set out, if a party issues a Notice to Complete, the other party must complete within 14 days of the Notice being issued. Most contracts allow that if the parties do not complete within that time frame then the party who issued the Notice is entitled to terminate the contract for breach of contract.
ISSUING NOTICE TO COMPLETE
A party issuing the notice to complete must be ready, willing and able to complete so they must have all their ducks in a row before issuing the notice.
Notices should be issued strictly in accordance with the contract provisions which may differ in each matter.
CONSEQUENCES OF ISSUING A NOTICE TO COMPLETE:
Depending on the contract, different consequences will apply if a party terminates the contract after a Notice to Complete is issued.
- If a vendor issues the notice, it is likely that the purchaser will have to pay legal fees, damages and interest to the vendor as well as lose their deposit in accordance with standard clause 19; and
- If a purchaser issues the Notice to complete they should receive a refund of their deposit and possibly have rights to claim legal costs and damages (although not in all matters).
It should be noted that if a vendor issues the Notice, at the end of the 14 days, they have rights to extend the time available to settle by agreement, withdraw the notice or terminate the contract.
If a purchaser issues the notice to complete, if at the end of the 14 days the matter has not completed, they can terminate the contract and obtain their deposit back but they may not be able to unilaterally extend the time available to settle or withdraw the notice. If the parties agree to settle after the 14 days has expired, then the notice could be said to have been abandoned and the settlement may proceed by agreement.
This is an important distinction as a purchaser may not be able do anything except walk away from the deal with their deposit unless the vendor agrees to settle at another time, whereas the vendor may withdraw the notice if they issue it or extend the time for compliance with that notice.
ALTERNATIVE TO NOTICE TO COMPLETE FOR PURCHASER:
If a purchaser wants to force the vendor to sell, it may be that instead of issuing a notice to complete they have to file Court proceedings seeking orders from the Court for Specific Performance of the contract – which will mean the vendor must complete the contract and hand over possession.
This option is likely to be a costly one.
CONCLUSION:
There is extensive litigation surrounding notices to complete and they should not be entered into lightly. A buyer must consider if they wish to withdraw or if they wish to proceed. If they still wish to proceed then allowing the vendor some time to sort out the issues, may be the simpler, less expensive option in the circumstances.