Cooling off rights in residential contracts
Consider this, every Saturday morning you wake up early at 7am, get dressed and leave your kids with the babysitter, while you and your wife begin the search for your perfect home. Finally, you have found that perfect house in a quite court where you will spend the weekend sipping away coffee in the veranda while your kids play soccer in the backyard. But just before you can make an offer, the Real Estate Agent informs you that the property is already under offer. Disappointed, disheartened you go and inspect the next house on the list. Although you are not as impressed, you are desperate, tired, worn out and you sign the contracts for it. Two days later, the Real Estate Agent calls you and tells you that your perfect dream home is now back on the market. What do you do then?
As most buyers will be aware, generally residential contracts of sale give the purchaser a three-day cooling off period, but what exactly is involved in exercising this right?
The following are some of the conditions contained in the Sale of Land Act 1962:
- the contract must be for the purchase of a residential property;
- the property was not bought at auction or three business days before or after an auction;
- you must not have previously entered into a contract for the same property;
- you must not be a real estate agent
- the right to cool off must be exercised within three clear business days of making the offer, even if the vendor has not yet signed the written offer
Three clear business days does not include the day of the sale or the day on which you signed. For example, if you signed the contract on Friday, you will have until 5pm on Wednesday to cool off.
To exercise your right to cool off, you must notify the Vendor in writing. Best practice is to give written notice to the Vendor’s lawyer by posting or leaving it at their address for service as noted on the contract. However, common practice is by sending an email to the Vendor’s lawyer prior to the date of expiry, followed up by a telephone call to confirm receipt of the email.
New changes to the Sale of Land Act, now allow purchasers to serve the notice to cool off by serving written notice to the real estate agent appointed by the vendor as noted on the contract.
Refund of deposit
Where the purchaser cools off, the purchaser is entitled to a refund of their deposit, minus the penalty. The penalty is capped at either $100 or 0.2% of the purchase price, whichever is greater.
Other ways to terminate the contract
In circumstances where the purchaser cannot exercise the cooling off right, for example, three clear business days have lapsed, the purchaser may have other ways to avoid the contract. For instance, the vendor may not have disclosed all matters required at law and the contract may be void or unenforceable.
We recommend that you speak to a property lawyer if you find yourself stuck in an unwanted contract. Feel free to contact us to explore some options.