Settlement and early ownership

What happens if you can't settle on time

Why a buyer's liability on default isn't capped at the deposit, how the standard default-notice and resale process works, and what to do immediately if settlement is at risk.

The deposit is not the limit of your risk

Most buyers assume the worst case of failing to settle is losing the deposit — commonly 10% of the purchase price. That assumption is wrong, and it matters: a buyer who genuinely can't settle can end up liable for far more than the deposit alone. Consumer Affairs Victoria's own guidance on this is deliberately brief and points straight to a solicitor rather than spelling out the mechanism itself (Consumer Affairs Victoria, verified 20 Aug 2026) — because the actual process is set by the general conditions of the specific Contract of Sale, not by a government page. This guide explains that mechanism in plain terms, grounded in named legal-practitioner sources, and — more importantly — what to do if you think you might be heading toward this situation.

How it actually plays out

Under Victoria's standard Contract of Sale, a vendor generally has to give the buyer a written default notice first, allowing 14 days to fix the problem — including paying any reasonable costs and interest. If the default isn't remedied within that period, the vendor can end the contract, keep the deposit, take possession, and resell the property (Pearson Chambers (Victorian barristers' chambers), verified 20 Aug 2026). The part that catches buyers out: if the resale price is lower than the original contract, or the vendor incurs reasonable resale costs (agent fees, marketing, legal costs), the vendor can claim that shortfall from the defaulting buyer — with the deposit already forfeited credited against that claim, not kept on top of it. A $70,000 deposit forfeited against a $100,000 total loss still leaves the buyer owing the $30,000 difference.

Interest accrues on top

Separately from any resale shortfall, default or penalty interest can accrue on the outstanding amount for every day settlement is delayed. Victoria's general statutory penalty interest rate, fixed under the Penalty Interest Rates Act 1983, has been 10% per annum since 1 February 2017 (Supreme Court of Victoria, verified 20 Aug 2026) — the standard Contract of Sale typically sets its own default-interest rate with reference to this statutory figure, commonly a margin above it, rather than using it directly. Confirm the exact default-interest clause in your specific contract; don't assume a single number applies everywhere.

The most common trigger: signing at auction

The scenario that comes up most often is a buyer signing at auction, where the contract is generally unconditional from the start — there's no cooling-off period (Consumer Affairs Victoria, verified 30 Jul 2026) and no standard finance or inspection condition unless the seller specifically agreed to one beforehand (Consumer Affairs Victoria, verified 30 Jul 2026). A buyer who wins at auction on the strength of loan pre-approval, then finds the lender won't fund the specific property (a low valuation, or a policy issue like contamination history or a zoning restriction the lender won't lend against), has no contractual condition to fall back on. See the risks of an unconditional offer for how pre-approval differs from a lender's actual commitment to fund a specific property.

If you think you might not be able to settle

Contact your conveyancer or solicitor immediately — before the settlement date passes, not after. Acting early genuinely changes the outcome: a solicitor may be able to negotiate a short extension with the vendor's side, explore bridging or short-term finance, or otherwise vary the contract by agreement, none of which is available once a default notice has already been issued and expired. Waiting and hoping the problem resolves itself is the single most costly thing a buyer in this position can do.

Practical checklist

If settlement is genuinely at risk

• Contact your conveyancer or solicitor immediately, before the settlement date passes
• Get the exact default-notice and default-interest terms from your specific contract, not a general figure
• Ask about a short extension or a variation agreed with the vendor's side
• Explore bridging or short-term finance options with your broker if the issue is finance-related
• Don't wait and hope the problem resolves itself — a default notice, once issued and expired, closes off most of these options

Questions for a professional

• What does our specific contract's default notice and default-interest clause actually say?
• If I can't settle on the scheduled date, what are my realistic options right now?
• Given how the finance/valuation issue arose, is a short extension or variation realistic here?

Official resources

• Consumer Affairs Victoria: Property deposits for sellers
• Supreme Court of Victoria: Penalty interest rates

Sources and methodology

• Deposit Forfeiture for Melbourne First Home Buyers | Pearson Chambers — Pearson Chambers (Victorian barristers' chambers) (retrieved 20 Aug 2026)
• What happens if the buyer defaults or can't settle? | Zettle Conveyancing — Zettle Conveyancing (retrieved 20 Aug 2026)
• Penalty Interest Rates | Supreme Court of Victoria — Supreme Court of Victoria (retrieved 20 Aug 2026)
• Property deposits for sellers | Consumer Affairs Victoria — Consumer Affairs Victoria (retrieved 20 Aug 2026)
• Buying property at auction — Consumer Affairs Victoria (retrieved 30 Jul 2026)

Figures on this page are drawn from Delora's local knowledge graph, refreshed from these primary sources and checked for changes on a regular schedule. If a figure here looks out of date, the official source above is always the authority — please let us know.