What is a Cooling Off Period? Know your rights when buying Real Estate

In essence a cooling off period is a legal obligation between two parties that have entered into a contract of sale; that allows a defined period of time for the purchasing party to change their mind and withdraw from the sale without incurring any penalty.

It is worth noting:
That upon signing a Contract of Sale the Vendor (current owner) does not have a cooling off period. So this means they are bound by the contract and must oblige the sale. Be under no illusion though the vendor can pull out of the sale under extreme circumstances. But it is very costly/tricky and only in extremely rare circumstances can it be done.

With this in mind; the cooling off period allows the purchaser the necessary time to withdraw from the Contract of Sale. This is deemed by the state’s legal system and as stipulated by the legally binding contract of sale. Each state has its own pre-defined cooling off period and does vary.

The table below outlines the various states position and periods. Noting the table is correct as of  August 2017

STATE COOLING OFF PERIOD
QLD – Queensland Five business days
VIC – Victoria Three business days
WA – Western Australia None
NSW – New South Wales Five business days
ACT – Australian Capital Territory Five business days
NT – Northern Territory Four business days (if purchaser isn’t represented by a registered solicitor or conveyancer
SA – South Australia Two business days
TAS – Tasmania None  (currently under review)

The cooling off period is always “Business Days” (Monday to Friday). This does not include the weekend (Saturday/Sunday) or public holidays. The official start time is the midnight of the day of signing and ends at midnight on the last day. So let’s look at a couple of examples:

Scenario 1 – Bob & Jane sign a contract of sale for the purchase of a property on Tuesday 2nd in NSW for demonstration purposes.

Day & Date (no public holidays) Contract Signed Commentary
Monday 1st
Tuesday 2nd Signed contract Cooling off period will start at 12pm (midnight tonight)
Wednesday 3rd Cooling off period starts
Thursday 4th Cooling off period in force
Friday 5th Cooling off period in force
Saturday 6th N/A weekend Does not count as not a traditional business day
Sunday 7th N/A weekend Does not count as not a traditional business day
Monday 8th Cooling off period in force
Tuesday 9th Cooling off period ends Cooling off period will end at 12pm (midnight tonight)
Wednesday 10th
Thursday 11th

 

Scenario 2 – Bob & Jane sign a contract of sale for the purchase of a property on Tuesday 2nd in NSW for demonstration purposes with a public holiday involved.

Day & Date (public holiday) Contract Signed Commentary
Monday 1st
Tuesday 2nd Signed contract Cooling off period will start at 12pm (midnight tonight)
Wednesday 3rd Cooling off period starts
Thursday 4th Cooling off period in force
Friday 5th Cooling off period in force
Saturday 6th N/A weekend Does not count as not a traditional business day
Sunday 7th N/A weekend Does not count as not a traditional business day
Monday 8th – Public Holiday N/A public holiday Does not count as not a business day due to public holiday
Tuesday 9th Cooling off period in force
Wednesday 10th Cooling off period ends Cooling off period will end at 12pm (midnight tonight)
Thursday 11th

 

So what is required to “Cool Off”?

To cool off and terminate the contract of sale:
You must provide the vendor (current owner) a written letter (signed and dated) within the specific times of the cooling off period as per above example. Your notice to cool off cannot be verbal and must be in writing! It is not uncommon if there is a buyer/sales agent that is handling the sales process, to be handed the written authority to terminate/liaise with the vendor. The delivery method can be either hand delivered to the agent/vendor, mailed to the agent/vendor. But the key is it has to be “delivered” within the defined cooling off period and times.

As you can see knowing your position and rights is very important! If you have any doubt what so ever, it is always recommended to contact your property solicitor or conveyancer for further information.

As always, happy purchasing 🙂

 

For further advice you can go to state government websites or:

ACCC (Australian Competition and Consumer Commission)

www.accc.gov.au

Real Estate Institute of Australia

www.reia.asn.au

 

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