Good morning everyone
Contract for sale of Land – Cooling Off Period.
I have had requests for me to explain the contract for sale of land and the cooling off period when you buy a property in New South Wales.
It is important for purchasers and vendors to be aware of the law and the terms of the contract and it is always essential, in my opinion that purchasers be provided with a written advice. That advice must include all appropriate enquiries that are appropriate to be undertaken to ensure that the property suits their needs and circumstances. When you purchase a property, you’re buying one of the most expensive assets that you’ll ever own. The contract for sale will determine the conditions of the sale and provide all matters that affect that particular property. Nearly all contracts for sale of land use the New South Wales Law Society and Real Estate Institute of New South Wales contract. This contract endeavours to balance the rights and needs of both the seller, most often referred to as the vendor, and the buyer most commonly referred to as the purchaser.
All contracts that I have reviewed or drafted have additional clauses included to amend the Law Society/Real Estate Institute contract to further protect the vendor. I usually negotiate with vendors to either amend or have deleted any additional clauses which adversely impact upon the purchaser. A contract for sale of residential land must by law include a cooling off period unless the purchase is by way of an auction or the purchaser’s solicitor or conveyancer provides a certificate that you have been given appropriate advice and consent to the cool off period being deleted. This is a period when you have the ability to terminate the contract. If you decide to terminate the contract during the cooling off period you will forfeit 0.025% of the purchase price. If the contract is not terminated prior to 5.00 pm of the fifth business day of signing the contract, the contract becomes unconditional unless separate conditional clauses have been included. If you are buying off the plan the period is 10 business days. It is important to note that business days includes any public holiday/s. During the cooling off period the seller is not permitted to sell the property to any other buyer.
I believe and counsel my clients to always have their finance approval in writing and to have finalised their due diligence and enquires prior to ever signing a contract as some enquiries require more time than is allowed. The cooling off period was introduced to allow the buyer to have time to determine whether to continue with the purchase of the property or to withdraw from the contract. The cooling-off period purportedly allows time for:
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Pre-purchase trade and building inspections
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Obtaining building and pest reports
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Obtaining unconditional approval of a home loan to purchase the property.
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Other due diligence a buyer must undertake to determine if the property is a good investment
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The buyer must provide written notice to the seller’s solicitor if the buyer wishes to terminate the contract during the cooling-off period. The buyer must pay .25 per cent of the purchase price to terminate the contract during the cooling-off period. The money may be deducted from any deposit the buyer has placed. If there is no money deposited or if any deposit does not cover the quarter percent of the purchase price, the seller can take legal action to pursue the amount as a liquidated debt.
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If the buyer does not terminate the contract by the close of the cooling-off period, the buyer typically must complete the contract. However, it may be possible for the buyer to negotiate with the vendor to include a separate condition allowing termination of the contract even after the close of the cooling-off period, if financing is not secured. Any conditional clauses included in the contract must be negotiated between buyer and seller and both parties must agree.
Once a contract has been signed and the cooling off period, if any has expired, the purchaser is totally committed to finalise the purchase. Any failure to finalise the purchase results in the deposit being forfeited and the purchaser fully liable for any of the losses incurred by vendor. If the property is sold for less than the price that was contracted, within 12 months of the failure to purchase, then the vendor is able to sue for any difference and the costs that the vendor has incurred.
If you or someone you know needs assistance with the sale or purchase of a property, please do not hesitate in contacting me.
Wishing everyone a wonderful Chinese New Year with much health, happiness and prosperity in the Year of the Dragon.
Kind Regards,
Jeffrey
0419 233 670
[email protected]
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