As the name suggests, a cooling-off period means you can literally take a walk around the block and ‘cool off’ from any potentially hot-headed decisions you’ve made. It’s a short passage of time that allows you to sit with the decision you made to buy — one that offers the potential to back out if you change your mind. It’s legally-endorsed ‘thinking time’ and can be applied to both goods and services.
For larger purchases such as a property, you’ve hopefully arrived at your decision in a calm and collected manner rather than having rushed in guns blazing. If you haven’t, then the cooling-off period may just be the ice pack you need for any impulsive actions that have the potential to leave you financially injured.
In Australia, the length of cooling-off periods varies from state to state and generally ranges from 2 to 5 business days. This applies to the contracts for the sale of residential property and starts from the day the buyer receives a copy of the contract (which will have been signed by both parties).
In the instance of a contract that arrives on a weekend or a public holiday, the cooling-off period starts on the next business day.
Here’s a quick look at the state-by-state breakdown of cooling-off periods:
- Australian Capital Territory — 5 business days
- New South Wales — 5 business days
- Northern Territory — 4 business days, but can be changed if both parties agree
- Queensland — 5 business days
- South Australia — 2 business days
- Tasmania — no cooling off period for any sale (why Tassie, why?)
- Victoria — 3 business days
- Western Australia — no mandated period, but can be included in the contract by request
Using The Cooling-Off Period To Your Advantage
Not everyone in this world is good at making decisions, and even when we do make what we consider a good decision, doubts can creep in, especially when they concern life savings.
Not only does a cooling-off period give your brain time to justify the decision you’ve made, it also gives you a time advantage for any of the following:
- Further inspections — The cooling-off period allows you, as the buyer, to conduct a more detailed inspection of the property.
- A reassessment of your finances — Potentially you went over your own reserve, or have bought something that needs repairs or immediate attention. You can now reassess your financial situation to ensure you can cover all costs and comfortably proceed with the purchase.
- Checking the contracts of sale with a legal review — Again, it provides time to review the contract with your legal advisors to ensure all terms are fair and understood.
In a perfect world, you would have done your due diligence by having crossed most of these things off your list before making an offer. However, sometimes you can be caught off-guard by opportunities too good to miss or potentially too good to be true.
This is be where the cooling-off period can be hugely advantageous, as it protects consumers from hasty decisions and buyer’s remorse, giving them time to evaluate their choices more thoroughly.
Another plus of cooling off: If you’re sure of your decision, you could waive or shorten the cooling-off period to leverage a faster settlement date or even a reduction in price.
It’s totally up to you as the buyer to work with whatever advantage you can wrestle out of the cooling-off period.
If you do take the above route, please note that this agreement must be clearly documented, and the documentation must clearly state the new terms of the either reduced or waived cooling-off period. Any such contractual alteration can be carried out by your conveyancer or property solicitor.
When Buying A Property, Do I Legally Have To Be Offered A Cooling-Off Period?
Sales from auctions do not have a cooling-off period and you will need to have all of your ducks in a row before you bid. So if it’s looking like you’ll end up buying at an auction, please note that you’ll be issued a copy of the sales contract before the actual auction day.
However, if you’re purchasing through a private treaty, not only are you able to negotiate the sale price (in private with the seller or real estate agent), but you’ll also be able to set or accept the terms of your cooling-off period (in all states except Tasmania).
While a private treaty process generally affords you a cooling-off period, the process of the private treaty is not always transparent because you don’t know how many other people you may be up against in the negotiation. The other ‘interested buyers’ the agent talks about may be real or they may in fact be imaginary.
A Cooling-Off Period vs. Sales Contract Clauses
Most of us have never seen a legal contract of sale before we attempt to buy property. Structured within a typical sales contract are clauses that can void the contract of sale, such as ‘pending finance’ or a ‘pending pest/building inspection.’
A pending finance clause is the proverbial ‘get out of jail free card’ should you be unable to secure the amount required for the sale within the settlement period. Easy! But a finance clause won’t cover you if you find out there’s $20,000 worth of termite damage. If you happen to find out this type of information during the cooling-off period then you can breathe a sigh of relief and start to look for the nearest exit.
Unlike specific clauses, a cooling-off period can shelter all under its broad umbrella — be it pests, structural damage, or lenders who aren’t quite able to come to the party.
How To Terminate The Contract During The Cooling-Off Period
So you’ve had a think about it, got the reports back, and it still just doesn’t feel right. Even if all your reports come back all tickity-boo, you may still feel like you don’t want to go ahead with the purchase.
You don’t need to justify your decision, but what you do need to do is terminate the contract before 5 p.m. on the final day of the cooling-off period. Again, your legal advisors can take care of all of this for you, should you decide to proceed with a withdrawal.
They’ll usually need to notify the vendor’s real estate agent of your intention to withdraw. This notice must be in received in writing — yes, that includes all forms of written communication, the old fashioned kind of letter or fax (which somehow seems more dated than an actual letter?), but also extends to email.
Will you lose money if you terminate the contract during the cooling-off period?
So you’ve bitten the bullet and called it off. Can you just walk away without any penalty? The answer is — usually.
If the contract is cancelled by the buyer within the cooling-off period, the seller may still be entitled to a 0.25% penalty on the deposit amount owed to the seller. This is a fine print issue that varies from contract to contract. However, the remainder of any money that passed hands at the time of sale must be returned to the buyer within 14 days.
On the flip-side of this, you might wonder if the vendor can cancel the contract from their side during the cooling-off period? Thankfully, the answer is a firm no. If the vendor chooses to pull out of the agreement, they may face legal action from their real estate agent and/or you as the buyer, so the benefit of this legal ‘run through the sprinkler’ is all yours.
Once the cooling-off period ends, the contract becomes 100% binding. If you decide to withdraw after this period, you’ll risk losing the deposit and may face additional legal consequences. It’s crucial to use the cooling-off period wisely to avoid any regrets later.