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The Cooling Off Period
The standard contract for sale includes a five day “cooling off” period during which the Purchaser can change their mind and back out of the sale without any penalties. Although it has traditionally been included in land or property sales contracts, BE AWARE that nowadays, the COOLING OFF PERIOD RARELY APPLIES. Vendors often require the Cooling Off Period to be removed from the contract, because they need to know that their sale is “locked in”.
Here’s how it works:
- Firstly, there is no Cooling Off Period for properties sold at auction. The auction contract that you sign in order to be a registered bidder will indubitably contain a section that requires you to waive your rights to a Cooling Off Period. When the gavel comes down, the highest bidder is bound by law to complete the purchase.
- During sale by private treaty, the Purchaser may require additional time to arrange their finances (for example confirmation of a loan, or the sale of their own property) and they can ask the Vendor to EXTEND the cooling off period for a further period.
- The Cooling Off Period can be set to be longer than five days if both parties agree (for instance, eight days or any other number). Be aware that Vendors may be reluctant to agree to this, but if you can convince them you have a legitimate reason, they may be open to it. Your solicitor can help with negotiating an extended Cooling Off Period.
- A long Cooling Off Period is obviously desirable to the Purchaser. The longer you have to re-consider your purchase, the better. Another advantage of exchanging with a Cooling Off Period is that it takes the property off the market and the Purchaser is protected from being “gazumped” by someone else after contracts are signed – e.g, someone else making an offer to the Vendor and closing the deal.
- Nevertheless, Vendors will rarely agree to extending the five day Cooling Off Period, or in many cases, to any Cooling Off Period at all. The reason for this is often that the Vendor needs to lock in to another purchase and needs to be assured of their sale before committing themselves.
- The domino effect of locking into a contract and having the Purchaser pull out of their contract would be disastrous for the Vendor. That’s why they’ll often seek to remove a Cooling Off Period from the sale contract, if at all possible.
- To avoid the Cooling Off Period, most Vendors insist that a Certificate (known as a Section 66W Certificate) be provided by the Purchaser’s Solicitor, which means that there will not be any Cooling Off Period after the contracts are signed.
The takeaway message is this: ask your solicitor to clarify the terms of the Cooling Off Period when they review your sales contract. Be aware that the Vendor may have insisted on no Cooling Off Period, and that this is fairly common practice, because of their desire to lock in a sale. If this is the case, make your final decision before sale contracts are exchanged!