‘Cooling off’ is a term used to describe a period of time following a purchase when the purchaser may choose to cancel. In real estate, a ‘cooling off’ period is much the same, although there are rules and variables associated with it.
According to Section 31 of the Sale of Land Act, a purchaser who signs a contract or contract note for the purchase of real estate can terminate the contract within three clear business days from the day the purchaser signed it. This applies to residential private sales or small rural property sales.
The definition of three clear business days as interpreted by conveyancers is three full business days (not including the day of sale). A business day is any day other than a weekend or a public holiday. The three days also do not include the day in which the contract was signed. For instance, if you signed a contract on a Monday morning, then you would have until 5pm on Thursday to ‘cool off’.
If the buyer decides not to proceed with the purchase they must give written notice to the seller or the seller’s agent within the three day timeframe and in doing so, will be entitled to a full refund of money paid, less $100 or 0.2 per cent of the purchase price (whichever is greater).
The cooling-off period does not apply when:
- The property was purchased at a public auction or within three clear business days before or after a public auction
- The property is used mainly for industrial or commercial purposes
- The property is more than 20 hectares and used mainly for farming
- A contract was previously signed for the same property with the same terms
- The buyer is an estate agent or corporate body
When it comes to commercial property, the purchase of such is not protected by cooling off rights, though the purchase of residential property by a corporate company or business is.
Sometimes there may be uncertainty as to whether the right to ‘cool off’ still applies. This may occur in instances such as:
The cooling off period of three clear business days has expired and the vendor has not accepted the purchaser’s offer then the vendor makes a counter offer in which the purchaser accepts.
In this scenario, the cooling off period will commence from the day the purchaser accepts (both verbally and in writing) the vendor’s counter offer. The right to cool off is not excluded, as the vendor did not accept the first offer from the purchaser. Where the vendor has not accepted the offer, there is no contract to found a right to ‘cool off’.
In conclusion, cooling off should never be relied upon as a safety measure. Cooling off is of no value to a purchaser – other than as a last resort. It should never be relied upon as an alternative to obtaining sound legal advice or doing thorough research.