In Victoria, subject to some limitations explained later, all purchasers of residential property and small rural properties (under 20 Hectares) have a three day cooling off period after signing the contract of sale.
The cooling off period provides the purchaser with the ability to withdraw from the Contract within three clear business days of signing the Contract of Sale without any reason for a small penalty.
Time for cooling off
"Three clear business days" means the day the purchaser signs is not included in the count and the time for counting the three business days begins the next business day after the purchaser signs. If for example, the purchaser signs on Monday the three clear business days are Tuesday, Wednesday and Thursday. Business days do not include weekends or public holidays, this means that if a purchaser signs on Friday the three clear business days are Monday, Tuesday and Wednesday and the Friday, Saturday and Sunday are not counted.
The time begins to elapse from the purchaser signing regardless of when the vendor signs, however, if you wish to withdraw and the vendor hasn’t yet signed there are other options for which you should seek specific legal advice from OFRM’s property team.
How to cool off
If you wish to cool off the notice has to be in writing and has to be served on the vendor or their agent within the three clear business days.
In the Victorian Supreme Court case last year, Tan v Russell, the court found that the vendor’s Real Estate Agent is not the vendor’s agent for the purposes of serving a cooling off notice. Accordingly it is vital you contact us within the three clear business days to ensure the notice requirements are validly complied with or you may be unable to withdraw from the Contract.
Cost of cooling off
Under the Sale of Land Act if a purchaser utilises the cooling off period the purchaser is liable to pay, at the vendor’s discretion, a penalty of $100 or 0.2% of the purchase price. In practice this means that a purchaser may need to pay 0.2% of the purchase price for purchases over $50,000. The purchaser is then entitled to a refund of all other deposit money paid under the Contract.
Limitations on the Cooling off period
The purchaser will not be able to cool off in the following circumstance:
- The purchase of a non-residential property or a rural property over 20 hectares;
- At an Auction, within three clear business days before the Auction or three clear business days after the Auction.
- If the purchaser is a Real Estate Agent or a company; or
- The parties have previously entered into a contract for the sale of the same property in similar circumstances.
So what does this mean?
Buying real estate can be an emotionally charged process with significant time pressure. The three day cooling off period provides some relief from this. However it is best to obtain legal advice prior to signing wherever possible and to contact us as soon as possible to discuss any issues as failing to utilise the cooling off period correctly can have serious consequences. In Tan v Russell, the purchaser lost their full deposit and had to pay the difference in the selling price between what they had agreed to pay and what the subsequent purchaser paid.
For more information or assistance with your conveyancing transactions, please call the Conveyancing and Property Law team on 03 5445 1000.