The cooling-off period is a period of time in which a buyer may terminate their contract for the sale of real estate before buying a property. Since legislation can vary between States and Territories, here we will be discussing the cooling-off period NSW.
Depending upon how the sales agreement is written, the cooling-off period may be the only time in which the buyer can terminate the agreement. If the deadline is missed and there are no other provisions making the contract conditional, the buyer will need to go through with the contract. Both buyers and sellers of real estate need to understand what the cooling-off period means for them and what their rights are at this point in a real estate transaction. That’s why it’s a good idea to seek expert advice from property conveyancing solicitors.
What is the real estate cooling off period NSW?
The cooling-off period is a five business day period that begins on the date that the buyer, the buyer’s solicitor or the conveyancer receives a contract for the sale of real estate. The cooling-off period ends at 5:00 PM on the fifth business date from the day the contract has been received by the buyer. The seller is not permitted to sell the property to any other buyer during the cooling-off period.
During this five day cooling-off period, the buyer has the opportunity to determine whether to continue with the purchase of the property or to withdraw from the contract. The cooling-off period allows time for:
- Pre-purchase trade and building inspections
- Obtaining building and pest reports
- Obtaining unconditional approval of a home loan to purchase the property (if required – ask a mortgage lawyer if you’re not sure)
- Other due diligence a buyer must undertake to determine if the property is a good investment
The buyer must provide written notice to the seller’s solicitor if the buyer wishes to terminate the contract during the cooling-off period. The buyer must pay .25 per cent of the purchase price to terminate the contract during the cooling-off period. The money may be deducted from any deposit the buyer placed. If there is no money deposited or if the .25 per cent cost owed by the buyer exceeds the deposit, the seller can take legal action to pursue the money as a liquidated debt.
If the buyer does not terminate the contract by the close of the cooling-off period NSW, the buyer typically must complete the contract and go through with the purchase. The contract becomes unconditional at the close of the cooling-off period unless separate conditional clauses have been included. For example, the buyer could include a separate condition clause allowing him to terminate the contract even after the close of the cooling-off period if he does not secure financing. Any conditional clauses included in the contract must be negotiated between buyer and seller and both parties must agree.
When Does the Cooling Off Period Apply?
The cooling-off period applies to most residential real estate contracts, with “residential property” in NSW defined to include:
- Land that has no more than two places of residence on it.
- Vacant land on which the construction of a single place of residence is permitted.
- A strata lot or lots, each of which have only one place of residence that is constructed or that is under construction.
A place of residence is a building used in whole or in part (or designed to be used in whole or in part) as a dwelling for an individual or family. Outbuildings and other buildings incidental to the use of the family residence are also considered to be part of the place of residence.
The cooling-off period NSW does NOT apply to:
- vacant or developed land used exclusively for non-residential purposes;
- selling property at auction;
- properties that exceed 2.5 hectares in area;
- properties, where a contract is exchanged on the same day as the property, is offered for sale in a public auction but is passed in.
Buyers may also waive a cooling-off period. Some sellers require the waiver of this cooling-off period before exchanging contracts.
Getting Help with Real Estate Transactions
Owen Hodge Lawyers provides cooling-off period NSW and other legal assistance to individuals and businesses purchasing or selling property in Sydney. If you’re looking for conveyancing law firms, look no further. We can help you to negotiate a real estate sales agreement with all necessary conditional clauses to protect your interests, and we can provide assistance with due diligence during the cooling-off period.
To learn more, give us a call on 1800 770 780 or contact us via [email protected] to schedule a consultation today.