When purchasing property in NSW or the ACT, every buyer is entitled to a cooling off period. The cooling off period is usually 5 business days but can be extended by agreement.
The cooling off period is only for the benefit of the buyer. During the cooling-off period, buyers have the opportunity to reflect on their decision, seek advice, or consider their ability to complete the purchase.
A cooling off period serves as a consumer protection measure, ensuring that individuals are not pressured into making hasty decisions and have an opportunity to withdraw from a contract if they change their mind.
A cooling off period also allows the buyer to lock in their purchase while they undertake further enquiries about the property, without the fear of being gazumped. Gazumping refers to a situation in real estate transactions where a seller accepts a higher offer from another buyer after previously agreeing to sell to a different buyer at a lower price.
The cooling off period starts on the date the contract of sale is exchanged. It ends at 5pm on the 5th business day after exchange (unless a longer period is negotiated with the seller of the property).
A buyer can get out the contract during the cooling off period by giving the seller a notice that the contract is rescinded. The buyer will forfeit a small amount of the price of the property if they rescind the contract (usually 0.25% of the agreed purchase price).
It is very important a buyer seeks legal advice before giving a seller notice to rescind a contract. There are certain things that must be included in the notice of rescission for it to be valid. If a contract is not properly rescinded then the buyer will be forced to complete the purchase of the property.
A buyer can waive their right to a cooling off period when they purchase a property.
However, they must firstly obtain legal advice and their solicitor will need to issue a certificate under:
The certificate provided by the buyer’s solicitor confirms that the buyer has been provided with legal advice and understands the implications of waiving the cooling off period.
When a contract is exchanged without a cooling off period, the contract is binding on the buyer and the seller. The contract is called ‘unconditional’.
If the buyer does not proceed with the purchase after a contract is unconditional, they will likely lose the 10% deposit they paid. The buyer may be required to pay damages to the seller.
In some instances, a buyer does not receive a cooling off period when they purchase a property. This can include:
We offer a free 15 minute consultation for clients who are buying or selling property in NSW or ACT. Just reach out and let us know how we can help!
