The Conveyancing Act 1919 (NSW) allows purchasers a five day business period commencing the next business day after exchange during which time the purchaser can decide to pull out of the contract and not continue with the purchase (pursuant to section 66S). The cooling-off period is a good opportunity for you to obtain your unconditional finance approval from your bank, arrange pest/building/strata inspection reports and make any other enquiries you wish about the property before committing to the contract.
The cooling-off period can sometimes be negotiated with the Vendor’s Solicitor
to be extended if you require further time to finalise the property inspections and/or obtain finance approval.
If you do decide to pull out of the contract, a Notice of Rescission needs to be sent to the vendor’s solicitor before the expiry of the cooling-off period (ie. 5pm on the final day of the cooling-off period). You are then penalised 0.25% of the purchase price (e.g. $1,000 on a $400,000 purchase, or $2,000 on a $800,000 purchase) (section 66V).
If you decide to continue with the contract, you just need to make sure that the balance of the deposit is paid to the deposit holder (usually the real estate agent) before the expiry of the cooling-off period, otherwise you will be in breach of the contract and the vendor would have rights to terminate.
Vendors have the right under section 66W to not allow you a cooling-off period. In this case, your solicitor needs to complete a “Section 66W Certificate” certifying that they have explained to you that there is no cooling-off period and that you understand that you will be bound by the contract as soon as it is exchanged.
You also do not have a cooling-off period if you purchase a property at auction. If you are the successful bidder, you are required to sign and exchange Contracts at the auction, and pay the agreed deposit. You do not have the benefit of a further period of time in which to obtain a pest and building inspection report, finance approval and/or negotiate amendments to the Contract. These all need to be attended to prior to the auction. To assist our clients, Shire Legal offers a complimentary pre-auction review of Contracts.
Most importantly – vendors do not have a corresponding right to pull out of the transaction during the cooling-off period. The cooling-off period only gives rights to the purchaser.
Please feel free to contact the team at Shire Legal if you have any questions.