Not a simple answer. Is it ever?
The very meaning of the word contract is that it is a binding agreement between parties. A Contract for Sale of Property is therefore a binding contract between a buyer – or buyers as a group – and a vendor or vendors.
There are differences in Contracts for Sale of Property between states. For our purposes, we are simply answering this question for New South Wales. If the property you are buying or selling is not in NSW, then please contact us for specific interstate advice.
Canceling a property deal isn’t easy, but there are extenuating circumstances where it is possible to do so. If there are missing documents that should have been attached to the contract, or the terms of the contract have been found to be in error or do not comply with what was verbally agreed, or if some undertaking or promise has not been met, then there are grounds for cancellation of a Contract for Sale. Let’s unpack that and work through it. Firstly though, cooling off may provide an easy answer.
We’re not suggesting you douse yourself with a bucket of water. Every property sale contract contains a cooling off period during which the buyer may withdraw with no reason given. Being aware of the end date of the cooling off period is therefore a vital piece of information.
With the exception of auction sales and off-the-plan purchases, which have different cooling off rules, the cooling off period for residential properties ends at 5pm on the fifth day after exchange of contracts, and there is usually a penalty. The buyer must provide a written notice, and may be required to pay the vendor 0.25% of the purchase price (which equates to $250 per $100,000).
Vendors (sellers) canceling
For sellers, the answer to the original question is pretty much a No, but if the purchaser has breached the contract in specific ways, then that No becomes a Maybe. If the contract contains a specific rescission clause, then that may be the out the vendor can use. A rescission clause is meant to protect the vendor against certain circumstances not being met, for example, if the purchaser has been unable to pay all of the deposit by the prescribed date or dates (if an installment basis had been agreed), or to secure the necessary finance to complete the purchase, then a vendor may exercise their rescission rights and cancel the contract.
Having foresight is imperative. If you are a vendor and you believe the purchaser may default on payment, then having your lawyer include a Rescission clause in the contract is essential wisdom. Without such a clause, you may be stymied.
Purchasers have more grounds for cancellation of the contract. Aside from the cooling off instrument, if a vendor fails to disclose any defects in the property that cannot reasonably be discovered by the usual building inspections, then there may certainly be grounds for cancellation. Another example would be if the vendor makes a false or misleading statement in the contract.
Honesty and good intentions are the cornerstone to every contract, but sometimes best intentions can go awry. Ensuring your Contract is correctly drawn up is the first step to smooth sailing on your sale or purchase.
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