What is the Cooling-Off Period When Buying a Residential or Commercial Property?
A cooling-off provision in residential real estate contracts allows buyers to leave quickly. Although it serves as a safety net for purchasers, every cooling-off provision has limitations, and using the right to withdraw from the contract would incur costs. Cooling-off provisions should only be used as a last resort.
The Basic Limits
Only residential real estate purchasers are eligible for cooling-off periods in states and territories. A property seller cannot normally cancel a deal once it is signed. Auction properties do not have cooling-off provisions.
Note that not all jurisdictions need a cooling-off provision in the selling contract. Western Australia has no such rule. Even in such places, specifics vary. New South Wales has five business days, whereas South Australia has two. Always consult your attorney or reliable conveyancing experts like Ownit Conveyancing regarding cooling-off period eligibility and restrictions.
In NSW, sellers may terminate a real estate agent’s contract to sell their home within one day. On cooling-off day, by 5 p.m., a seller must provide the agent a “notice of rescission” that has been signed by every customer.
Day counting
It should come as no surprise that this is a fruitful source of litigation. NSW considers Monday through Saturday from 9 am to 5 pm “business days.” Signing a contract of sale on Sunday at 6 pm delays the cooling-off period by 15 hours. Sundays and public holidays are not cooling off periods.
A buyer who waits until 5:45 pm on the final day of the cooling off period must complete the acquisition as per the contract. Consider hiring an expert to calculate the time duration instead of estimating days.
Smart purchasers request notification of receipt when the contract is sent to prove the cooling-off period starts. Buyers and sellers commonly negotiate regarding prompt withdrawal notification. We no longer argue about missed calls or unopened emails.
Removing or Changing the Cooling-Off Requirements
Buyers may decide to forego the cooling-off period in a hot seller’s market to bolster an offer’s appeal. This has to be done legally by the terms of the Conveyancing Act 1919 by giving the buyer a document known as a Form 66W certificate. The legal representative of the buyer must sign this certificate.
By contractual agreement, buyers and sellers may also decide to reduce or prolong the cooling-off period.
Pulling the Plug
It won’t be completely easy for a buyer to withdraw from the selling agreement by using the cooling-off option within the allotted time. In New South Wales, cancellations are subject to a penalty equal to 0.25 percent of the property‘s final sale price. The fine will be around $2,500 if the property is worth a million dollars. The penalty is meant to compensate for the seller’s missed opportunities and potential litigation costs. Within 14 days of the cancellation, the seller must reimburse the buyer’s deposit minus any allowed penalties.
In addition to the financial hardship of cancellation, buyers should be advised that sellers with a history of contract cancellations can be reluctant to accept an offer in a subsequent transaction.
To fully comprehend the provisions of the cooling-off period, buyers should carefully read contracts and, if necessary, get legal counsel.