So you have signed the contract for your dream home. Pretty exciting stuff. Following this, prior to the contract moving forward towards settlement, you, the purchaser has the opportunity to ‘cool-off’. In a nutshell the ‘cooling-off’ period is a legislated requirement that enables the purchaser to undertake building or other inspections as well as providing some time to think rationally about what is a significant purchase.
The cooling -off period is 2 days in length. That is, 2 clear business days from the date that the Form 1 (more information about this here), is served to the purchaser. The two business days does not include weekends or public holidays. So if you were served the Form 1 on Friday morning you would actually have until late on Tuesday to effectively cool off.
How do I go about cooling-off?
Should you decide at any time during the ‘cooling-off’ period that you no longer wish to purchase the property you may be released from the contract, ‘no questions asked’ through the submission, in writing, of a ‘cooling-off’ notice. The notice may be given to the vendor or agent in person. Alternatively, it is appropriate to send a copy via registered mail, fax or email. While you must provide a copy of this in writing (within the cooling off period) many people will also make attempts to contact the real estate agent in person to alert them to your decision and indicate how and when the notice will arrive. Please note that a telephone call to an agent will not suffice as the purchaser is required by law to provide this notice in writing.
The options on how to cool off will be spelled out within the Form 1.
Whichever way you choose to convey your cooling-off notice to the vendor it is critical that you keep evidence of this. That is a copy of the notice along with any verification that it was sent and delivered. Should it be determined that this notice was never served you will be responsible for the purchase of the property.
Do I lose my deposit if I cool off?
Absolutely no. Any deposit of $100 or more must be fully refunded should you cool-off during the 2 day period.
What about finance?
The 2 day cooling-off period will not be sufficient to allow for finance approval to be processed. In light of this it is advisable for purchasers to seek pre-finance approval before signing a contract. Alternately, purchasers may specify that the contract is conditional, ‘subject to finance approval’.
Are there any times when cooling-off is not permitted?
When purchasing a property via auction you will not have the right to cool-off. In this instance any inspections or investigations must be undertaken prior to the auction date. Furthermore it is critical that the vendor makes available to you a copy of the Form 1 prior to auction. This document discloses appropriate information about the property which will assist you to make a decision about whether or not to bid.
Occasionally potential buyers wish to have the ‘right to cool-off’ waived as a strategy to close a sale. This sometimes occurs when purchasers wish to sign a contract prior to the auction date of a property. Should a purchaser find themselves in this situation it is a requirement that they speak to a lawyer who will explain the possible implications of this and, in the lawyer’s presence a certificate waiver may be signed.
The Law recognises that purchasing a property is a massive step with serious financial implications. At Welden & Coluccio Lawyers we strongly recommend that purchasers utilise the time provided by cooling-off as an opportunity thoroughly evaluate the property so that any purchase is undertaken with eyes fully open.