During settlement, what happens if the buyer's mortgage funds are not available on the agreed settlement date?
Correct Answer
B) The buyer may be in default and liable for penalty interest
If a buyer cannot complete settlement on the agreed date due to unavailable mortgage funds, they may be in breach of contract and liable for penalty interest and potentially other damages, unless they have a finance clause that has not yet expired.
Why This Is the Correct Answer
Settling on the agreed date is the buyer's contractual obligation. If the buyer's loan funds are not ready and no finance condition still protects them, the buyer is in default. Standard contracts let the vendor charge interest on the unpaid balance for the delay, and the vendor can also serve a notice to complete, making time essential, and terminate if the buyer still fails to settle.
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