Real Estate Cooling Off Period
Understanding the cooling off period when buying property in Victoria.
Firstly, lets understand what cooling off means and who it applies too.
When purchasing property in Victoria, Section 31 of the Sale of Land Act 1962 states that buyers are entitled to a cool off period. They have 3 clear business days in which to change their mind and withdraw from the contract of sale. The first day of the cooling off period starts the first business day after the buyer signs the contract.
For example, if the buyer signs on Wednesday, Day 1 is Thursday, Day 2 is Friday and Day 3 is Monday. The weekend doesn’t count as they are not business days. It does not matter when the vendor signs the contract, even if it is a few days later.
When cooling off does not apply.
• The sale is at or within 3 clear business days before or after a publicly advertised auction
• The parties have previously entered into a contract for the same property in similar circumstances
• The purchaser is an estate agent or a corporate body (e.g. a company)
• The property and/land is over 20 hectares and used mainly for farming
• The property’s main use is for industrial or commercial purposes
Is there a cost to “cool off” when purchasing a property?
In the event of a buyer deciding to “cool off”, there is a financial penalty payable by the buyer to the vendor. The cost is $100 or 0.2% of the property purchase price, whichever is the highest amount. This amount will be deducted from the initial deposit paid by the buyer. If the initial deposit is not enough to cover the cooling off fee, the agent will seek the balance from the buyer.
How to Exercise the Cooling Off.
Exercising the right to cool off is not a difficult task. Section 31 of the Sale of Land Act 1962 states that the vendor must be given written notice that the buyer intends to terminate the contract of sale by exercising their cooling off rights. This notice must be given during the cooling off period.
A hand written notice is sufficient to terminate the contract and must be given to the vendor or the vendor’s real estate agent or solicitor/conveyancer.
Ideally, any cooling off notification should go through both parties solicitors just to prevent any confusion of valid serving of notice.
What are the other options to terminate a contract of sale?
If your cooling off period has expired , termination of the contract can only be in relation to terms and conditions of the contract, such as finance not being approved or the building inspection identifying major structural faults.
By signing a contract of sale, you are entering into a legally binding document. If you suddenly wish no longer to proceed, then legal advice is highly recommended.