Cooling Off Period and Contract for Sale

Brian Cannan: Today I'm with Greg Jemmeson from Jemmeson Fisher Solicitors and Accountants. Good afternoon Greg.

Greg Jemmeson: Hi Brian

Brian: Well we're going to talk about cooling-off periods and contracts and how they work so explain a cooling-off period with a contract.

Greg: Okay essentially every contract for sale of land has a statutory box in it which sets out the cooling-off period. Now cooling-off period generally occurs when it's an exchange of contracts for private treaty. The cooling-off period which is five clear business days.

Brian: Clear?

Greg: Clear business days.

Brian: So if we exchange today?

Greg: Yes

Brian: It doesn't start until tomorrow.

Greg: That's right.

Brian: If we exchange tonight?

Greg: It won't start until tomorrow. That's right. And of course you take into account public holidays as well. Now, a cooling-off period does not come into play if the property is sold under the hammer at an auction or the property is exchanged on the day an auction has occur but being passed in before midnight and if the purchaser obtains what's known as a 66w certificate which is explained by a solicitor or a conveyancer which is basically waiving their rights to a cooling-off period.

Brian: Okay, so what you're saying is that for someone to buy real estate and they just go to an office and exchange contracts they automatically get five business day cool off.

Greg: That's right.

Brian: They have to go to a solicitor and get a 66w to waiver that cooling off period.

Greg: That is correct.

Brian: Okay.

Greg: Now one of the things and problems I quite often get asked about is can I extend the cooling-off period or can I shorten the cooling-off period? Simple answer is yes but there has to be a specific way that is done. If the agent makes any amendments to the cooling-off within the body of the contract itself, that can render the whole contract void because that is a statutory term within the contract and therefore the purchaser now has the right to walk away from the contract.

Brian: So that goes back to the black box again, doesn't it.

Greg: Again it does.

Brian: Can't do anything unless it's in the black box.

Greg: Okay now what would happen with the extension or the reduction of the cooling-off period that can be done by way of a 66w rather than waiving it just making an amendment to what the cooling-off period would be.

Brian: How can you expand from five days? We're hearing a lot go from five to ten days now.

Greg: Essentially a lot of people do it by agreement okay extending it because essentially the contract comes to an end after the five days it should always be done in writing my preference is by way of 66w but quite often it will be done by correspondence between the respective solicitors which can be relied upon by the parties.

Brian: So can an agent extend the five-day cooling-off period?

Greg: No he can't he has no authority to do that. That would have to be done by the respective parties solicitors and conveyances.

Brian: And how long can you have a cooling-off period for, if you agreed to?

Greg: As long as the parties require. And it could be infinite obviously probably become a frustrated contract but it's not uncommon to see them bumped out to ten days but again by consent of the parties and put in writing by the respective legal representatives.

Brian: So when the contract exchanged let's say that we've got a tenant in the property and we've exchanged contracts today the five days starts off tomorrow the tenant is on an ongoing tenancy agreement and you've got to give the tenant 30-day notice. When would you suggest to the agent to give that 30-day notice?

Greg: Best practice would be not until the cooling-off period had expired.

Brian: So if that then took it over that 30 days over the settlement date and the agent should really notify the solicitor?

Greg: All the parties in it, essentially the solicitor should be advised that there is already a party in occupation of the premises so it's not vacant possession, which would be noted on the front page of the contract and then they need to be able to make arrangements with the prospective purchasers solicitor noting that affectation to the property.

Brian: But if they wanted vacant possession and the settlement date so we have removed it to 20-day cooling-off period and that took us over the settlement period you would need to notify the solicitors.

Greg: Well we ran into it into dangerous grounds here that if a notice to the tenant is given the property is vacated and then the purchaser fails to proceed then what would happen here is the purchaser may be up for some potential damages because we are we're unable to get a new tenant.

Brian: Right okay, well I hope that clears it up for a lot of people. Greg I appreciate it, thank you very much.

Greg: Thanks Brian.