When buying a property, there's a critical stage after you sign the contract called the 'cooling off period'. This is where you can cancel the sale for any reason you like – despite the fact you've signed a legally binding contract to purchase the property.
If you decide to walk away from the property within the cooling off period, cancelling the contract may incur a financial penalty, generally equivalent to 0.20% to 0.25% of the final sale price of the property.
Cooling off periods only apply to a private settlement (or private treaty) when buying a house.
They do not apply when you're buying a property through an auction. However, if the seller and buyer personally negotiate the contract after the auction, a cooling off period may apply.
The rules regarding cooling off periods can vary between states and territories, with WA and Tasmania having no cooling off period whatsoever.
You can get an idea of the differences between states below:
State | Cooling off period | Percentage of sale price you forfeit | |
|---|---|---|---|
| ACT | 5 business days | 0.25% | $1,250 |
| NT | 4 business days | 0 | Nil |
| NSW | 5 business days | 0.25% | $1,250 |
Queensland | 5 business days | 0.25% | $1,250 |
SA | 2 business days | Small holding deposit is forfeited (up to $100) | $100 |
Victoria | 3 business days | $100 or 0.20% (whichever is greater) | $1000 |
WA | Nothing mandated by law, but you can add a clause in your contract | 100% | $500,000 |
Tasmania | Nothing mandated by law, but you can add a clause in your contract | 100% | $500,000 |
The cooling off period when buying a house can go up to five business days. It starts on the day you received a copy of the signed contract and ends at 5PM on the last day of the period.
It is advisable to ask for a notice of receipt when the contract is delivered as a proof when the cooling off period started.
During this period that your solicitor or conveyancer should make enquiries to detect any problems with the property. These enquiries may include a building and survey report, or the certificate of compliance secured from the local office. If there are any problems, you can use the cooling off period to terminate or cancel the agreement.
When you wish to rescind the agreement, you have to write a letter or notice of termination to the agent. You do not need to give any explanation as to why you are cancelling the contract. This letter should be rendered within the cooling off period and not after since you will be bound by the contract after that.
There are 3 ways you can render the letter of termination – given personally to the agent, mailed or delivered to the agent’s business address, or delivered to a place assigned in the agreement should a cancellation take place.
As the seller, once the contract is terminated within the cooling off period, you must give back the deposit within 14 days after the cancellation, with the penalty already deducted.
If you are selling your house and have had your sale cancelled within the cooling off period, find out you can put your home back on the market.
As the buyer, you can choose to waive or shorten the cooling-off period. You will need to put this in writing and clearly state:
Waiving the cooling off period might make your offer more attractive to the seller; however, you should exercise caution before waiving it. Be sure that your conveyancer has already made all the necessary inspections like pest and building inspections. You should also make sure that your finances are ok, which means your loans have been approved.
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About maybe using cooling off period for problems on house! we moved in a month ago! after 9 days the ceiling fell in above the main bedroom due to water and 5 year rubbish accumulating in gutters – day 22 we have a water leak which is showing a big mould mark on garage ceiling, apparently the stairs are illegal from front door to upper floor (main rooms) there could be land slippage due to cracks around the pool and water has damaged through varandah meaning that 5″ legs holding it up have to be replaced – surely the pre-inspection should have found all these?? Wendy – we want to move out! also to rub it in the road was noisey when we did the inspection and agent said that it is noisey some saturdays due to trailers – during mid week the noise starts at 5am and finishes 10pm – it is horrendous and the house shakes and the windows wobble. HELP
Hi Wendy,
Thanks for your message and for visiting finder.
Sorry to hear you experienced this. Cooling off periods is a time where you can cancel the sale even though you’ve signed the contract. This cooling off period starts on the day you sign and is usually five business days long, Sundays and public holidays not included, but it varies by state. If you change your mind about buying a property during this time, you can cancel the sale.
If you wish to back out of a contract after the cooling-off period has ended, it could be costly.
Your contract will contain details about the penalties imposed if you decide to withdraw from the binding agreement you have signed after the cooling-off period has expired. You’ll most likely have to pay default penalties and compensate the seller for any losses they have experienced. Plus, you will also lose the money you have already put towards legal and conveyancing fees, building and pest inspections, and any other property purchase expenses.
If you’re unsure about your rights in this situation or the implications of withdrawing from a contract after the cooling-off period, discuss your options with a solicitor.
Don’t hesitate to message us back if you have more questions.
Cheers,
Nikki
if a company buys a house do they get a cooling off period?
if they cancel the purchase , how much of the deposit do they loose?
Hi Jason,
Thank you for your inquiry.
1. if a company buys a house do they get a cooling off period?
Yes, corporate bodies (companies) can get a cooling off period when they purchase a residential house. Although please note that the residential land is limited/confined to
1. land where there are up to 2 places of residence, or
2. vacant land on which a residence can be lawfully constructed, or
3. a single community lot or strata unit for residential purposes, but the land area is not greater than 2.5 hectares.
The purpose of this condition is to protect small companies who buy a property for investment purposes.
2. if they cancel the purchase, how much of the deposit do they loose?
Since the rules on cooling off periods differ from one state and territory to another, basically, the possible amount/percentage of sale price a company can lose is listed above. It is best that you also inquire with your solicitor what rules apply in your location.
Cheers,
May
Hi there,
I have signed the contract of sale to buy a property in Victoria. but due to some reasons I cooled off the contract. I signed on 05.05.16 and requested solicitor to cool off on 09.05.16. my solicitor says I am still able to cool off. my solicitor sent them email at 2010 hours. but vendor’s solicitor has been telling me that I cant cool off as it was sent after 8 pm. Plz advise.
Hi Mister,
thanks for the email.
Unfortunately we can’t provide legal advice regarding this. I would recommend contacting your solicitor or seeking a second opinion to find out what your next steps could be.
Sorry I couldn’t be of any help,
Marc.
Dear Sir/Madam
I had an offer accepted for the purchase of a property in Canberra. My lawyer met me for ten minutes and got me to sign the contract and a waiver of a cooling off period without an explanation as to why it was required/no advice was provided on this matter. I was pressurized to sign these documents from my own lawyer. During the interim, the lawyer was also negotiating the conditions of the contract (e.g. is the oven included etc). I was never provided a copy of the contract to review before it was exchanged. I have now entered the cooling off period, but my rights have been taken away from me.
Could you please advise me as to how I could address this matter with urgency. Thank you
Moonwalker
Hi Moonwalker,
Thanks for reaching out. I’m sorry to hear about your situation.
In the ACT, you have the right to a cooling off period which is five business days once the contracts have been exchanged. If your lawyer did not explain the terms of the contract to you and if they (or the agent) coerced you into signing the contract as you mentioned above, then this is a breach of their duty of care.
I recommend contacting your lawyer directly to understand why the cooling off period was waived. If you are unable to resolve the matter, then I strongly suggest that you seek independent legal advice to discuss your options.
The Australian Securities and Investments Commission (ASIC) provide free legal counselling online which you may find useful.
All the best,
Belinda
If a buyer terminates a contract to buy a house without a valid reason months after the contract was signed, how does the seller get compensated? Does the seller have to take that person to court ? This would be out of the question for many people as the lawyer costs of $500/hour,are not affordable. I live in W.A. This is a situation that is causing us an enormous amount of stress at the moment .Would love to hear what you think about this. Thankyou
Hi Angelique,
Thanks for reaching out, and I’m sorry to hear that this is causing you stress.
All Australian states and territories have a standard cooling off period for non-auction sales, except for Tasmania (TAS) and Western Australia (WA).
If a buyer terminates a contract after the contract was signed, then the seller may seek to keep the deposit and the buyer may also have to pay other penalties to the seller. However, if the contract does not proceed for valid reasons, such as if the buyer genuinely could not access finance, then the deposit may be refunded.
I recommend getting in touch with Western Australian Department of Commerce to discuss your options. The Australian Securities and Investments Commission (ASIC) offers free legal advice which you might find useful.
Alternatively, you may need to get professional help by speaking with a conveyancer or solicitor for your property and conveyancing needs.
All the best,
Belinda
Many thanks for your for input.