Cooling Off Period- What Does it Mean When Purchasing Property in NSW?

COOLING OFF PERIOD What Does it Mean When Purchasing Property in NSW?

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INTRODUCTION

The cooling off period is a period of time in which a buyer may terminate a contract for the sale of real estate.

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.

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WHAT IS THE COOLING OFF PERIOD IN REAL ESTATE The cooling off period is a five business day period that begins on the date that the buyer or the buyer’s conveyancer or solicitor receive 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 real estate he has made an offer to buy.

The cooling off period allows time for:

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Pre-purchase inspections

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Obtaining building and pest reports

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Obtaining unconditional approval of financing to purchase the property (if required)

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Other due diligence a buyer must undertake to determine if the property is a good investment

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TERMINATING THE CONTRACT DURING COOLING OFF PERIOD

Written Notice Terminate the contract during cooling off period

Paid

25% of the

purchase price

No Money deposited

25% of the = purchase price

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 percent 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 percent cost owed by the buyer exceeds the deposit, the seller can take legal action to pursue the money as a liquidated debt.

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Liquidated Debt

TERMINATING THE CONTRACT DURING COOLING OFF PERIOD If the buyer does not terminate the contract by the close of the cooling off period, 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 ďŹ nancing.

Any conditional clauses included in the contract must be negotiated between buyer and seller and both parties must agree.

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WHEN DOES THE COOLING OFF PERIOD APPLY? The cooling off period applies to most residential real estate contracts, with “residential property” 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 does NOT apply to vacant or developed land used exclusively for nonresidential purposes; to property sold by public auction; to properties that exceed 2.5 hectares in area; or to 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 they will sign a contract to sell the property.

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GET THE HELP FROM US

Owen Hodge Lawyers provides legal assistance to individuals and businesses purchasing or selling property in Sydney. 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, please contact us!

1800 770 780 www.owenhodge.com.au

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INDIVIDUAL AND COMMERCIAL LAW SPECIALISTS Enhancing the lives of our clients by providing acquisition of wealth, protection and management of assets and the transfer of wealth throughout generations.

CALL 1800 770 780 VIEW www.owenhodge.com.au VISIT Level 3, 171 Clarence Street, Sydney NSW 2000 Level 2, 12-14 Ormonde Parade, Hurstville nsw 2220