In this video I answer six common questions about cooling off periods you should be aware of before buying a property with or without one.
Watch now: https://youtu.be/9MA5zXxT44w
TRANSCRIPT
Buying a Property – Your Rights During a Cooling Off Period (4.5 mins)
Hi everyone and welcome to another video in my buying a property series on residential property in NSW. I’m Alexandra and in today’s short video, I’ll be covering 6 things you need to know about cooling off periods.
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A quick disclaimer that my videos are general and informational only. They are not intended as legal advice and shouldn’t be relied on as such. Please see the full disclaimer in the description box below.
Okay, so an issue which arises at the time of exchange of contracts is the issue of the ‘Cooling off’ period. I also have a video on what exchange of contracts is linked in the description box below if you’d like to know more on exchange.
Point 1: How long is the cooling off period? By law it is written into the contract that if you buy a property by private treaty you will have 5 business days, after exchange of contracts, to change your mind and withdraw from the contract, which is what we call the cooling off period. You’ll have 10 days if the property is an off-the-plan sale.
Point 2. Withdrawing from the contract is not for free though. If you do exercise your right to withdraw within the cooling off period you must pay the vendor 0.25% of the purchase price. So using an example of a $1,000,000 property, you would lose $2500 for exercising your right to ‘cool off’ and withdraw from the contract.
Point 3: You are not entitled to any cooling off period if you buy your property as the successful bidder at an auction OR on the same day as an auction after the property was passed in.
Point 4: Although you have the right to a cooling off period when you purchase a property by private treaty, the seller (who’s known as the vendor) also has the right to ask you to sign a document waiving that right – and they usually do. The reason is that the cooling off period may be in your favour as purchaser, but it is not in the vendor’s favour. The vendor can’t sell the property to anyone else in the 5 business days you as the purchaser have to change your mind. So it is likely that you will be asked to sign a “s66W certificate” which waives your right to a cooling off period and is provided to the vendor’s solicitor for exchange of contracts. If you then change your mind and want to back out of the contract, you’ll forfeit the 10% deposit you paid to the vendor on exchange (and may also be considered in breach of contract, depending on the circumstances).
Point 5: Why might you prefer to exchange with a cooling off period? Well, examples might be that you really want to secure the property but still need to obtain outstanding information to inform your final decision on whether or not to go ahead with the purchase, such as:
- Getting your bank valuation and unconditional loan approval; and/or
- Having more time to consider your pre-purchase property inspections, such as pest, building or strata inspection reports. Although bear in mind that you should always try to arrange your pre-purchase property inspections before exchange because depending on the type of report or certificate you have ordered, it often takes longer than 5 business days to obtain. Stay tuned for my upcoming videos on each of the pre-purchase property inspections your lawyer will typically recommend if you’d like to know more.
Point 6: My last tip for your today is – If you have exchanged with a cooling off period, you have until 5pm on the fifth business day to give written notice of your intention to withdraw from the contract. And I do mean 5pm, and not a minute later. Even if it’s 5:01pm on the fifth business day, the vendor is completely within their rights to say, too bad, you didn’t withdraw in time and now you have to proceed with the purchase OR forfeit your 10% deposit. So, for your (and your lawyer’s peace of mind), please let your lawyer know of your decision to back out of the contract as early as you can before the deadline. Don’t leave it literally to the last minute, as your lawyer will need time to give the vendor’s lawyer written notice of your decision to withdraw from the contract and get that to them before that 5pm deadline. And there have been instances, of course, when things intervene, for example, technology can get in the way and suddenly the server is down or the computer freezes or whatever. Don’t take that chance!
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