What you should know before accepting an offer on your property.
A cooling-off period refers to the number of business days during which a property buyer can walk away from a legal agreement to purchase a residential property. Buyers who do this usually have to pay the seller a small termination fee, of around 0.25% of the purchase price of the property. Any deposit above this amount is usually refunded.
If you are selling a house, you aren't entitled to a cooling-off period. Once a vendor signs the sales contract they’re obliged to go through with the sale, subject to the conditions of the contract.
This guide explains exactly where you stand if you buy a residential property and then break the sale contract during the cooling-off period.
Do all buyers in Australia get a cooling-off period?
Other than Tasmania and Western Australia, all states and territories have a standard cooling-off period for properties that are not sold at auction.
Is there always a cooling off period?
There are two major exceptions to mandatory cooling-off periods:
- Properties sold at auction have no cooling-off period
- In some states, for normal house sales the buyer can sign an agreement that waives their right to a cooling-off period.
Australia-wide cooling-off rules
What happens if a buyer breaks their sale contract during the cooling-off period?
Buyer payment to seller if sale is cooled-off
|State||Cooling-off period||Sale price paid to cool off|
|ACT||5 business days||0.25%||$1,000|
|NSW||5 business days||0.25%||$1,000|
|NT||4 business days if purchaser isn't represented by a conveyancer or solicitor||Nil||Nil|
|QLD||5 business days||0.25%||$1,000|
|SA||2 business days||Small holding deposit is forfeited (up to $100)||$100|
|TAS||None||100%||$400,000 (sale must proceed)|
|VIC||3 business days. Cooling-off period doesn’t apply if 3 days before or after a public auction. Industrial/commercial and farms can be exempt.||0.2%||0.2%|
|WA||None||100%||$400,000 (sale must proceed)|
- Do sellers get a cooling-off period on sales?
No, a cooling-off period is only for the buyer, not the seller. Once a seller has signed the sale contract, they cannot back out of that sale.
- Can buyers pull out of a property sale after the cooling-off period ends?
No, buyers must go through with the purchase as detailed in the terms of the contract, after the cooling-off period has finished.
- What is considered a business day?
A business day is any day from Monday to Friday, not including public holidays. A business day ends at 5pm in the world of home sale contracts. If you hand in your signed notice to use your cooling-off rights after 5pm on the last day of the cooling-off period, it will be too late.
Agency cooling-off period for sellers in NSW
Sellers in New South Wales who enter into an agreement with their real estate agent to sell their property, have a one-day cooling-off period, including Saturday, to exit that agreement with the agent. To take up the cooling-off period, the seller must give the agent a "notice of rescission" signed by all clients by 5pm on the day of cooling off.
Extra general information
Cancelling a real estate agent listing
If you’re unsatisfied with your real estate agent and you’d like to suspend the listing agreement, most agents are willing to cooperate if you provide a sufficient reason.
How to cancel a real estate agent listing
Make sure you have the right to cancel the listing by enquiring about it when you first sign your contract. If you decide to withdraw a listing, you will need to ask your agent directly to cancel the listing agreement. Take the following steps:
- Re-visit listing agreement. Most listing agreements include a clause that allows you to cancel the contract without penalty. Be cautious of a listing contract that omits a clause that allows you to withdraw from the listing, and keep in mind that some contracts may outline that the agent will still be paid commission even if the contract is cancelled. This is because the agent may be out of pocket for any advertising costs that have already been incurred.
- Contact your agent. You’ll need to speak with your real estate agent directly to notify them of the reason for cancelling the listing. If your agent won’t agree to cancel the listing, request a cancellation from the general manager of the agency. Typically real estate agents will cancel the listing upon your request as they want to uphold their reputation. However, in the event that the general manager refuses to cancel the listing, you should seek legal advice from a solicitor that specialises in property legislation. They will be able to facilitate the process on your behalf so you can terminate the contract effectively.
- Follow up with agent. After you’ve made initial contact with the agent, it’s a good idea to follow up to ensure that the listing has been officially terminated and your property is no longer on the market.
Conveyancing and the cooling-off period
Conveyancing concerns the transfer of ownership from one person to another; that is, from the seller to the buyer. However, before the exchange happens, several stages have to occur, one of which is the cooling-off period. The cooling-off period begins the day there is an exchange of contracts, provided that it is a business day, and ends at 5pm on the fifth business day. However, if a property is acquired through an auction, a cooling-off period does not apply. During the cooling-off period, both parties have the right to cancel the contract. If this happens, a penalty will apply to the person who cancels the contract. If the cooling-off period ends and neither the seller or the buyer expressed any intention to cancel, they are legally bound to the contract.
Can a vendor pull out of a contract?
If you sign a contract to sell your house but then get cold feet, either during or after the buyer’s cooling-off period, there’s little you can do. There is no cooling-off period for sellers in Australia. Once contracts have been signed and exchanged, you are locked into the sale of your property under the terms you have agreed to.
As you will then be legally obliged to go through with the sale, it’s essential that you’re certain that you want to sell your home before you sign anything.
If you want to back out of a contract after it's been signed, you'll need to speak to a solicitor regarding your options.
Clear business days defined
The cooling-off period is effective when a property is acquired through a private treaty. This period usually consists of five clear business days. However, the cooling-off period can be extended or shortened, depending on the agreement of both parties.
In conveyancing, clear business days refers to regular business days including Saturday. Thus, if the exchange of contract happens on a Sunday or a holiday, the cooling-off period will commence the next day and will end after five days at 5pm.
What happens during the cooling-off period?
If you buy a property, the cooling-off period is, in theory, a grace period during which you can evaluate if the property is right for you. It also gives you time to re-think whether you will be able to comfortably manage the financing you have organised for the purchase. If you change your mind and cancel the contract during the cooling-off period, there is nothing the seller can do. However, there is a provision to compensate for any fees and effort already undertaken.
If you decide to terminate a contract, you will have to pay a penalty equivalent to 0.25% of the property’s purchase price. Thus, if the property cost $300,000, the penalty will be $750. The seller will then refund the deposit within 14 days, but may deduct the penalty from the amount. If you want to cancel the contract, you should give a letter of cancellation to the agent, informing them of your intent. You can either personally hand over the letter, or mail it to the agent’s business address.
Waiving the cooling-off period
It is possible for a buyer to waive the cooling-off period as long as the property is not sold through an auction, as stated under the Property, Stock and Business Agents Act 2002. If a buyer wishes to waive this right, they must sign the Office of Fair Trading waiver form one business day before signing the contract or agreement. Known as the 66W certificate, the form must be given to the seller or the seller's agent, and state that the lawyer is acting independently from the seller, that he will not gain any benefit or profit, and that he has informed the buyer about the impact and effect of waiving the cooling-off period.
Situations when the cooling-off period does not apply
The cooling-off period gives the buyer a chance to do further research before they commit to the sale contract. However, there are cases when this period does not apply, the most common one being when a property is sold at auction. After a property is sold at auction, the exchange of contracts takes place immediately, leaving no time for a cooling-off period. The Conveyancing Act 1919, Section 66T states that a cooling-off period does not only apply in situations where the client or buyer gives you prior to the exchange of contracts a 66W certificate which states that he is waiving the cooling off period. The Act also states that there is no cooling off period if the contract is made the same day as the property was put up for sale in an auction. Another situation that may nullify the cooling off period is when you consulted a lawyer before the signing.
The Conveyancing Act 1919, Section 66T states that a cooling off period does not only apply in situations where the client or buyer gives you prior to the exchange of contracts a 66W certificate which states that he is waiving the cooling off period. The Act also states that there is no cooling off period if the contract is made the same day as the property was put up for sale in an auction. Another situation that may nullify the cooling off period is when you consulted a lawyer before the signing of contract. The conveyancing process is often different from state to state. Therefore, it is better to ask your solicitor to give you light how conveyancing is done in the area where you live. It is imperative that you know and exercise your rights when dealing with legal matters such as conveyancing.
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