Understanding a ‘Notice to Complete’ | The legal effects, benefits and risks of a Notice to Complete

In NSW, conveyancing contracts will generally include an additional condition stating that if settlement and/or other contractual obligations are not fulfilled on the agreed date, then a Notice to Complete can be issued. A Notice to Complete is essential in conveyancing and property contracts where it compels timely performance and reduces the likelihood of prolonged disputes or indefinite delays during property settlements.

What is a Notice to Complete?

In New South Wales, a Notice to Complete is a formal document issued under a contract for sale by either the seller or purchaser when the other party does not settle or perform by the agreed completion date. This notice serves as a final warning which requires the defaulting party to complete and fulfil their contractual obligations within a specified time period, typically 14 days. If they fail to do so, the party who issued the notice can terminate the contract.

Before issuing a Notice to Complete in NSW, the sender must be “ready, willing, and able” to settle. This means having all the necessary documents, finances and approvals required for settlement.

What is the legal effect of a Notice to Complete

Once served a Notice to Complete, the recipient is placed on strict notice that failure to comply within the prescribed timeframe constitutes a repudiation of the agreement. The issuing party, provided they are “ready, willing and able” to complete, may then exercise significant rights including terminating the contract, retaining any deposit paid, and pursuing damages for loss suffered. Note that Courts demand strict compliance with contractual and statutory requirements when serving such notices. Any defect in form, timing, or service can render the notice invalid.

If the seller issues the notice and the purchaser does not comply:

1. The seller may terminate the contract
2. The seller can retain the deposit (usually 10% of the purchase price)
3. The seller can claim damages, including legal fees and interest

If the purchaser issues the notice and the seller does not comply:

1. The purchaser can terminate the contract
2. The purchaser may recover the deposit and potentially claim damages, depending on terms of the contract.

What renders a Notice to Complete invalid?

Common grounds that may render a Notice to Complete invalid include the following:

1. The issuing party must be “ready, willing and able” to complete the transaction and must not be responsible for causing delay
2. A valid notice may only be served after the contractual settlement date. Issuing it earlier, when completion was still possible can render it invalid
3. The notice must comply strictly with contract requirements. It must be properly drafted, dated, and delivered via the agreed method. A defective form or improper service can invalidate the notice.
4. A notice must set out a reasonable timeframe in light of the circumstances. Courts have set aside notices offering too brief or ambiguously defined timeframes. In general, 14 calendar days is considered the standard acceptable practice
5. If the notice does not comply with contractual obligations. The notice must be consistent with the Contract.

How does this impact you? What should your next step be?

If you are the recipient of a Notice to Complete, time is of the essence.

1. Your first step should be to carefully review the details of the notice . Ensure that all the information referred to (e.g. contractual obligations, date of settlement, deadlines provided) is accurate and complete.
2. You should then consult with your lawyer to understand your rights and obligations. A notice is a formal legal document where the help of a lawyer may be required, specifically to help decipher if the Notice to Complete is valid.
3. In some cases, the notice may be invalid. This could give you grounds to contest the notice. If you believe your notice to be invalid, ensure to consult with a lawyer as soon as possible.
4. Finally, it is essential to confirm your ability to settle in the agreed time period by securing outstanding finance and ensuring all documentation is in order. If compliance within the specified notice period is not possible, seek legal advice promptly to explore whether the notice is valid or whether an extension can be negotiated with the party that issued it.

For the party issuing the Notice to Complete, the impact is also significant. Before issuing a notice, the party must be “ready, willing and able” to complete, with all funds, approvals, and documents prepared. Any defect in the Notice to Completecan render it invalid and undermine the party’s position.

Ultimately, the most effective way to avoid significant stress, financial exposure and potential litigation associated with a notice is to ensure that all contractual obligations are met by the agreed settlement date. Timely completion prevents unnecessary costs such as legal fees, interest and damages.

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