Cooling Off Period – Melbourne Victoria – FAQ
A purchaser of real estate in Victoria is entitled to “cool off” within 3 days of signing a contract, subject to certain conditions. On this page we will examine the cooling off right, demonstrate why cooling off is always a poor option, and explain the correct way to cool off.
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URGENT: Cool off NOW!
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What is “cooling off”
According to Section 31 of the Sale of Land Act a purchaser who signs a contract or contract note for the purchase of real estate can terminate the contract within 3 clear business days from the day the purchaser signed it.
The sale must be for land other than land used primarily for commercial or industrial purposes, and land larger than 20 hectares used primarily for farming.
In addition to these restrictions, there is no cooling off right if:
- The sale is at or within 3 clear business days before or after a publicly advertised auction;
- The parties have previously entered into a contract for the same property in similar circumstances;
- The purchaser is an estate agent or a corporate body (e.g. a company); or
- The sale is at or within 3 clear business days before or after a publicly advertised auction;
NOTE: It is most important to remember that the cooling off period starts when the PURCHASER first signs the contract, even though the vendor may not sign until a few days later!
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Pre-purchase contract checking and advice service!
What’s wrong with “cooling off”
Cooling off happens after the event
The need to cool off indicates that there is trouble; the purchaser is in “hot water” and needs to cool off. Now, wouldn’t it be better to avoid getting into hot water in the first place?
The point to be made here is that cooling off is not an option that any purchaser should consider using. Cooling off is a last resort, to be used when the purchaser realises that a mistake has been made.
A purchaser who knowlingly accepts risks by signing a contract without properly investigating the matter is as foolish as the swimmer who dives into muddy water without first checking the depth.
Cooling off can be manipulated
We regularly receive complaints from clients who have been misled by estate agents who know how to use the cooling off provisions against purchasers. Here is a common example:
Withholding The Contract: The estate agent has the purchaser sign the contract on Saturday, and says that the vendor cannot sign until she returns from a weekend trip. The vendor signs the contract on the Monday, but the estate agent holds the contract until the Wednesday before posting a copy to the purchaser’s lawyer. The lawyer remains unaware of the purchase (see previous item). By the time the contract is received by the lawyer the cooling off period has expired;
Cooling off costs money
Cooling off is an inconvenience to the vendor. After all, the vendor has been told that the property is sold and now finds that the sale has collapsed. Whether it is a form of compensation for the vendor, or something of a deterrent to stop frivolous cooling off, the fact is that a purchaser who cools off must pay $100 or 0.2% of the purchase price, whichever is the greater amount.
Conclusion
Cooling off should never be relied upon as a safety measure. Cooling off is of no value to a purchaser other than as a last resort where a purchase has been impulsive, made as the result of a mistaken belief, or has been poorly researched. It should never be relied upon as an alternative to the obtaining of sound legal advice, and thorough checking and research.
NOTE: Cooling off is a first-aid kit, it is not a safety measure!
STAY SAFE…
Find out about our FAST and consumer-friendly
Pre-purchase contract checking and advice service!
Avoiding the need to “cool off”
Have the property checked
A purchaser can avoid having to rely on the cooling off period by properly inspecting and checking the property before buying.
The rule caveat emptor (Buyer Beware) applies in real estate sales, and it is important that the purchaser investigates all quality matters and legal issues. (For details on what to look for and what to watch out for, read through our pre-purchase information email, available from our Pre-Purchase Assistance For Purchasers page.)
The best way to have the property checked is to engage professionals to do it. Sure, it costs money to have professionals involved, but they do have the expertise, the equipment, and the insurance to allow them to carry the responsibility. (But be aware of any disclaimers or limitations to that responsibility.)
Examples of the types of services available can be found at:
The expert on most matters will be YOU, the purchaser. Some things a purchaser may want to consider:
- Visit the neighbourhood at night and “listen to the night”. Do the local hoons screech their tyres as they leave the nearby 24 hour convenience shop?
- Is broadband cable available?
- What about public transport?
- Consider schools for now and in the future.
- Have you considered maintenance costs or future extensions?
Obviously, the list of possible considerations is endless, and the 3 day cooling off period rarely allows sufficient time to investigate everything properly.
Have the Section 32 Vendors Statement checked
Of course we’re going to suggest that a purchaser should have us check the Section 32 vendors statement and contract before signing; after all, it’s one of the services we offer. But seriously, we do offer this service for a very good reason, and our clients’ testimonials support this.
Having the Section 32 vendors statement checked before purchase provides the purchaser with information about its contents, but even more importantly the purchaser is able to discover what should be in the statement, but is not.
Have the contract checked by a lawyer
There have been numerous occasions where we have advised clients against making a purchase, the most outrageous being the inclusion of a special condition in an auction contract which requiried the purchaser to assume responsibility for an on-going 2 year legal battle over a non-existent carpark in a block of units!
Real estate contracts are ALWAYS prepared in favour of the vendor, and are more or less imposed on the purchaser by the estate agent. The role of the lawyer is to interpret the conditions of the contract, particularly the Special Conditions, and to advise the purchaser. An unfair contract can be “evened up” so that the purchaser’s needs are accommodated. Vendors will usually concede matters if it may make the difference between sale or no sale. And this is how real estate sales are properly negotiated.
STAY SAFE…
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Pre-purchase contract checking and advice service!
How to “cool off”
The process of cooling off is not difficult. Section 31(3) Sale of Land Act requires that the vendor must be given notice that the purchaser wishes to terminate the contract.
The notice must be in writing, and it must be delivered to the vendor or the vendor’s agent or solicitor. This means that a hand-written letter will be sufficient to end the contract.
NOTE: What if the party receiving the notice is dishonest, and denies having received it? This is where things can become difficult, and evidentiary problems arise. If you are thinking about cooling off, contact us for personal advice on how to effectively serve notice in your particular circumstances.
STAY SAFE…
Find out about our FAST and consumer-friendly
Pre-purchase contract checking and advice service!
If it’s too late to “cool off”
If the cooling off period has expired a purchaser cannot rely on it as a way out of the contract. However, there may be other options available:
- Has the offer actually been accepted by the vendor?
- The vendor may have made a counter-offer.
- Is there another condition of the contract that provides an exit?
- Perhaps there has been some technical breach which gives rise to a right to cancel.
- There may be Section 32 vendors statement deficiencies which affect the validity of the sale.
While there may be other options available, their availability depends on the circumstances of the particular case. When it gets to this stage urgent personal legal advice is necessary. We strongly advise that a purchaser who has second thoughts about a purchase should contact us
for advice as to possible options.
NOTE: Remember that cooling off is a first-aid kit, it is not a safety measure – don’t sign anything without getting legal advice first!
