When entering into a contract of sale for the purchase of property, the Sale of Land Act has provided the buyer with the right, in certain circumstances to ‘cool off’ and end the Contract of Sale without any further liability.
This right to ‘cool off’ has created an exception to the traditional rule of contract law that once you sign a contract it becomes binding and enforceable.
What this means is that a contract for the purchase of residential property will only become binding and enforceable, three clear business days after the buyer has signed the contract.
Three clear business days means that the day of signing is not counted and should a contract of sale be signed by a buyer on the weekend, time doesn’t start ticking until the following Monday. The trigger that starts time ticking is when the purchaser signs the contract irrespective of when the seller signs. Curiously at this stage the contract is still not binding and will not be binding until the seller signs, however time for the buyer will nevertheless start ticking.
Should the seller fail to sign the contract within that three day period, the buyers right to cool off will expire. However the buyer can still end the contract by formally withdrawing its offer to purchase because the contract has yet to come into existence. In this event the purchaser is still entitled to a full refund of any money that may have been paid.
However it is important to be aware that you do not have the right to cool off in all circumstances.
If you purchase at auction or within three clear business days before or after and auction, if you have previously entered into a contract of sale in respect of the same property or if the purchaser is a real estate agent or company you do not have the right to cool off.
Previously a buyer who sought legal advice from a lawyer about the contract of sale before signing that contract, lost the right to cool off. However the law was recently changed to allow a buyer to seek legal advice before signing a contract and still retain their cool off rights.
This means a buyer who has their lawyer review the contract of sale, prior to singing is still entitled to take advantage of the cool off rights and cool off if they so desire.
In order to cool off, notice must be provided in writing to either the vendor, vendors agent or vendors lawyer. There are no formalities as to how this notice is to be provided meaning that a simple hand written letter would suffice.
Once you have cooled off and the contract has been ended the buyer is entitled to a refund of any money, usually the deposit that has been paid. In these instances the seller must return any money which has been paid less $100.00 or 0.2% of the purchase price, whichever is the greater.
Any special condition contained within the contract of sale that attempts to remove the purchasers right to cool off will be unenforceable as is not possible to contract out of the Sale of Land Act.
In fact the Sale of Land Act obligates the seller to expressly include a notice in the contract of sale about the purchaser right to cool off. More often than not this notice will be contained on the front page of the contract of sale. A failure to include the notice will provide the purchaser with the right to end the contract.
As always this article contains general information only and should not be relied on for detailed advice related to your particular circumstances. Should you require such advice, please contact your lawyer.
Adam Zuchowski is a principal lawyer and property specialist with Network Legal & Associates.