The Cooling Off Period (NSW and ACT Properties)

Man signing a contract with a cooling off period in NSW and ACT
Updated: March 19, 2024
First Published: March 18, 2024

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.

Why do contracts contain a cooling off period?

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.

When does the cooling off period start?

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).

How does a buyer cancel a contract?

A buyer can get out the contract during the cooling off period by giving the seller a notice that the contract is rescinded.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 If a contract is not properly rescinded then the buyer will be forced to complete the purchase of the property.

Can a buyer waive a cooling off period?

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.

Does every contract have a cooling off period?

In some instances, a buyer does not receive a cooling off period when they purchase a property. This can include:

  • where a property is purchased at an auction,
  • the purchase of a commercial property,
  • purchasing land that is zoned non-residential, and/or
  • the purchase of large rural properties.

Where can I find out more?

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!

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This article is intended to be general information only and is not legal advice. You should obtain specialist advice based on your specific circumstances before taking any action concerning the matters discussed in this article. The content is current at the date of publication.
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