Under residential land and house contracts, buyers are generally, under legislation, entitled to a cooling-off period.

When can I terminate under Cooling-Off?

The right to terminate under cooling-off is limited to contracts where it is residential land (including off the plan) and it can be either for vacant or built on property. It is only available for 5 business days beginning when the buyer receives a fully signed contract. This means that:

1. You don’t calculate the 5 business days from the Contract Date. This is one of the biggest errors buyers can make. The contract is usually dated the same day the seller signs and it can take up to a week for a copy of the fully signed contract to come back to the buyer or buyer’s solicitor. The buyer doesn’t lose those days. The cooling-off period begins when the buyer receives a copy of the fully signed contract (even if this 4 days after the Contract Date). You usually have more time under the cooling-off period than you think!

2. It is 5 Business Days. Business days means that the calculation excludes Saturday, Sunday and public holidays. Often this means that if the buyer gets a copy of the contract between Tuesday to Friday, they will also get the weekend to think about whether or not they wish to proceed with their purchase.

3. The cooling-off period starts on the day the buyer receives a fully signed contract. This means you count that first day, regardless of what time it is received, so even if a buyer receives the contract at 11pm on a Monday night, it will commence from that day. Meaning, provided there are no public holidays that week, the cooling-off period ends at 5pm on that Friday.

When doesn’t Cooling-Off apply?

The right to terminate under cooling-off does not extend to:

1. Contracts for commercial land or buildings.
2. Contracts formed on a sale by auction.
3. Contracts formed with a registered bidder within two clear business days after the property passed at auction.
4. Contracts formed by exercise of any option.
5. Contracts if the buyer is a public listed company, or a State or Territory.
6. Contracts if the buyer is purchasing 3 more lots at the same time (whether or not they are buying under one contract or several).

Interestingly, contracts ‘formed on a sale by auction’ is wider than properties sold under the hammer and can relate to contracts formed around an auction.

Please contact our office if you are concerned about whether the cooling-off period applies or not to your contract.

Will I be charged the termination penalty?

Importantly, there is a catch to the seller charging termination penalty.

The seller is able to charge the buyer 0.25% of the purchase price, if the buyer terminates under the cooling-off period.

How much can I be charged for the termination penalty?

Please refer to our other blog for more information on this, however, subject to how much deposit is being held at the time of termination, the penalty is 0.25% of the purchase price.

Therefore, if the purchase price is $500,000.00, the termination penalty would be calculated as follows:

$500,000.00 x  0.25 = $1,875.00.

Who do I need to tell?

A buyer must give formal notice to the seller of a termination of the contract under the cooling-off period and that is why it is important you engage a lawyer who can:

1. remind you of the due date for the cooling-off period;
2. correctly notify the seller’s lawyer in writing of the termination; and
3. do this in the correct manner and by the due date and time.

I want to terminate my contract under the cooling-off period, who should I talk to?

If you are getting cold feet or sweating over the commitment, contact us. We will be able to walk you through the process and advise if you have any other options apart from the cooling off period.