In a private property sale of residential property in Victoria, the property is advertised and prospective buyers are invited to make offers to the seller or the seller’s agent, and the sale does not go to auction.
For residential properties and rural properties less than 20 hectares, buyers have three business days to think about their decision and change their mind after signing the contract and withdraw from the contract of sale. The cooling-off period gives the buyer time to consider the offer. It begins from the date the buyer signs the contract, not from the date the seller signs it. The cooling off period does not apply to the purchase of Commercial Properties.
When does the Cooling off period commence and end?
Section 31 of the Sale of Land Act 1962 states that buyers are entitled to a cooling off period. The first day of the cooling off period starts the first business day after the buyer signs the contract. For example, if the buyer signs on Wednesday, Day 1 is Thursday, Day 2 is Friday and Day 3 is Monday. Weekends and public holidays do not apply only business days. It does not matter when the vendor signs the contract, even if it is a few days later.
Withdrawing from the contract of sale
If a buyer decides they no longer want to buy the property, the purchaser can cool-off by giving written notice to the seller or the seller’s agent. Upon serving notice, the purchaser will be entitled to a full refund of any moneys paid, less $100 or 0.2 per cent of the purchase price, whichever is greater.
The cooling-off period does not apply if:
- 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;
- the buyer previously signed a contract for the same property with the same terms;
- the buyer is an estate agent.
How to Exercise the Cooling Off.
Section 31 of the Sale of Land Act 1962 states that the vendor must be given written notice that the buyer intends to terminate the contract of sale by exercising their cooling off rights. This notice must be given during the cooling off period.
A hand written notice is sufficient to terminate the contract and must be given to the vendor or the vendor’s real estate agent or solicitor/conveyancer.
Ideally, any cooling off notification should go through both parties solicitors or conveyancers just to prevent any confusion of valid serving of notice.
Terminating after the Cooling off Period has expired?
If the cooling off period has expired, termination of the contract can only be undertaken in relation to the terms and conditions as set out in the contract, such as finance not being approved or the building inspection identifying major structural faults.
By signing a contract of sale, the purchaser is entering into a legally binding document. Purchasers wishing to no longer proceed should seek legal advice prior to any attempts to rescind.
Uncertainty as to whether the Cooling off period applies can arise, instances of uncertainty may occur where:
- the cooling off period of three clear business days has expired; and
- the vendor has not accepted the purchaser’s offer; and
- 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.
By default written offers expire after three (3) days. If the vendor has not accepted a buyer’s offer after three clear business days then the offer is withdrawn. Prospective buyers should insert an expiry time frame to provide an added level of protection in the event that:
- the buyer wishes to end the contract under the cooling off provisions, but fails to do so within time or correctly; and
- the vendor fails to accept the offer within the buyer’s offer deadline.