If you’re buying or selling a property in NSW, you’ll come across section 66W certificates. This article looks at what these certificates do and when you’ll need one.
Buying a property can be complex. Signing away hundreds of thousands of dollars to buy a home will most likely be the biggest financial decision you ever make, so it’s vital that you make the right decision.
When you’re buying property in NSW, a five-day cooling-off period applies after you’ve exchanged contracts with the seller. This allows you to get building and pest inspections done and ensure you are happy to go through with the purchase of a property. But in certain circumstances you may wish to waive your right to a cooling-off period in order to guarantee a quick sale. This is where a section 66w certificate, also referred to as a 66W certificate or an S 66W certificate, comes in.
Why is there a cooling-off period?
Once you’ve signed a contract to buy a house in NSW, a cooling-off period begins and lasts five business days. This grace period is included in contracts to safeguard you, the buyer, and gives you the opportunity to change your mind about going through with the purchase. It begins when you and the vendor exchange contracts and ends at 5pm on the fifth business day.
As you’re hunting around for the right home, trudging from one open home inspection to the next, you’re usually up against other potential buyers in the same situation. In an effort to get in quick before someone else snaps up the property, you put in an offer that is soon accepted. Then, with very little thought given to whether or not you’re making the right decision, you and the seller exchange contracts.
The five-day cooling-off period allows you to back out of the contract if you decide the property is not right for you. For example, you may get a professional to conduct a building and pest inspection, which turns up a number of potentially expensive defects, or you may simply decide the property is not in the ideal location for you. If this happens during the cooling-off period, you can withdraw from the contract and pay a fee of 0.25% of the sale price to the vendor.
It’s also worth mentioning that cooling-off periods only apply to private settlements, not to properties sold at auction.
What is a 66W certificate?
While the cooling-off period does offer an important level of protection for homebuyers in NSW, there are certain situations where you may decide that you would like to waive your right to a cooling-off period. For example, if you’re unlucky enough to be buying in a seller’s market, the vendor may request that you waive your right to this period in order to guarantee a quick sale. If there are several people interested in buying the property, your willingness to forego the cooling-off period may make your offer more attractive to the vendor.
Waiving your right makes the contract legally binding and means you’re unable to back out of the contract. There is a legal provision for this under the Property, Stock and Business Agents Act 2002. If you provide the vendor a completed S 66W certificate before or during the exchange of contracts, you can waive your right to the cooling-off period.
A 66W certificate is needed by NSW property buyers who want to waive their cooling-off period. There are different requirements that need to be met in other states and territories. For example, buyers in Queensland will need to obtain a lawyer’s certificate, while Victorian buyers must seek legal advice.
How do I use a 66W certificate?
If you want to bypass the cooling-off period when buying a property, you’ll need a completed 66W certificate. This certificate must be signed by a licensed conveyancer, solicitor or barrister who must be working for you, not the vendor. The certificate will also need to be in writing and meet the requirements of section 66W of the Conveyancing Act 1919.
The certificate should also state that its purpose is to eliminate the cooling-off period and explain that the conveyancer or solicitor who signs it has explained the effect of the certificate to you.
What are the risks of waiving the cooling-off period?
- You’re locked in. Waiving your right to a cooling-off period means that contracts are legally binding once they have been exchanged with the seller.
- You may not know whether the property is right for you. With all the excitement and pressure that comes with buying a property, you might get caught up in everything else that’s going on and fail to examine the purchase from all angles. Does the property have all the features you want, such as enough bedrooms? Is it in a great location for you and your family? Often, your opinion of something can change simply by sleeping on it, so don’t waive the cooling-off period unless you’re sure the property is right for you.
- You might not know of any defects. If the necessary pre-purchase building and pest inspections haven’t been carried out, you could be buying yourself a wide range of problems. The property could have a termite problem, building defects or unapproved structures that could end up being very costly. Knowing about them ahead of time may very well prompt you to back out of the purchase, so make sure you’re fully aware of what you’re getting yourself into when buying the property.
- You might not be able to get financing. What happens if you’re locked into a property purchase contract but you soon discover that you’re unable to get the home loan you need to buy your dream home? If you intend to waive the cooling-off period, make sure you have your financing sorted out first.
- Pulling out later. If you waive your right to a cooling-off period but then later decide to rescind the contract after the exchange, you’ll need to pay a penalty as stipulated in the contract. This is usually 10 per cent of the purchase price but may be more in some cases.
Finally, it’s worth mentioning that you also have the option of reducing or extending the cooling-off period if the seller agrees, so speak to your legal adviser for more information.