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A standard residential Contract of Sale is subject to a five (5) business days cooling-off period. In effect, this means that the buyer may terminate the Contract for any reason whatsoever during the five (5) business days from the time the buyer or their Solicitor receives a copy of the Contract signed by all parties. The buyer will then have until 5pm on the fifth business day in which to terminate the Contract if they choose to do so. A five (5) business days cooling-off period means that weekends and public holidays are not included.
The buyer does not have to provide a reason or justification for the termination to the seller, however they do have to notify the seller in writing by 5pm on the fifth business day that they are terminating the Contract under the cooling-off period.
Sellers are allowed to elect if they will charge the buyer a 0.25% penalty interest on the purchase price of the Contract when a Contract is terminated during the cooling-off period. If a seller elects to charge this penalty the amount due and owing will usually be deducted from the deposit held and paid to the seller. If a buyer elects to terminate under the cooling-off period then the seller must authorise for the balance of the deposit to be refunded to the buyer.
Under the recent changes to the legislation in December of 2014, the Property Occupations Act allows a buyer to waive the cooling-off period by providing written notice to the seller. In the past buyers would be required to seek legal advice and provide a certificate evidencing this advice had been received before the cooling-off period could be waived. We recommend that buyers should never provide notice waiving the cooling-off period without first seeking legal advice.
If your circumstances are such that it would be in your best interests to waive the cooling-off period, we would suggest confirming the consequences of taking such action with your Solicitor or Conveyancer. These circumstances may arise in an instance such as if the seller will only accept your offer if you agree to make the Contract unconditional, which means there are no rights to terminate.
There are some circumstances when the cooling-off period does not apply. The most common circumstance is that the cooling-off period does not apply to Contracts by sale at an auction, although there are other circumstances as well.
If you are in a situation where you require further information in relation to the above, please do not hesitate to contact a member of our team for current and practiced advice.
Revised 27 May 2016
This document offers general information only and should not be relied upon as legal advice under any circumstance. Please contact your solicitor for clarification on any areas.