THE COOLING-OFF PERIOD: YOUR LEGAL ESCAPE HATCH (AND WHEN IT DOESN'T APPLY) NSW
THE COOLING-OFF PERIOD:
Buying a home is a huge decision, and in New South Wales, buyers of residential property are often provided with a safety net: the cooling-off period. This brief window offers a chance to reconsider your purchase after exchanging contracts. It's often thought of as a 'legal escape hatch', but it's crucial to understand exactly how it works and, importantly, when it doesn't apply.
In NSW, for most residential property contracts, there is a cooling-off period of five business days after contracts are exchanged. This means that during this period, the buyer has the right to withdraw from the contract, for any reason, without losing their full deposit. If a buyer exercises their cooling-off right, they will forfeit a small penalty, usually 0.25% of the purchase price, to the seller. The balance of any deposit paid is then returned to the buyer.
The cooling-off period is designed to give buyers a short time after the pressure of making an offer to conduct final checks, such as getting building and pest inspections or obtaining final loan approval.
However, the cooling-off period is not a universal right and does NOT apply in several key situations:
Buying at Auction: The contract is binding the moment the hammer falls.
Exchanging Contracts on Auction Day (After Pass-In): If a property is passed in at auction and you negotiate and exchange contracts with the seller later the same day, the cooling-off period also does not apply.
Commercial Property: The cooling-off period rules under the Conveyancing Act generally apply to residential property, not commercial transactions.
Waiving the Cooling-Off Period: Buyers can choose to waive their cooling-off rights. This is often done when a buyer wants to make their offer more attractive to a seller, especially in a competitive market. To waive the right, your solicitor or conveyancer must provide a 'certificate under section 66W', confirming you have received legal advice about waiving your rights.
The cooling-off period is a limited safeguard, not a substitute for doing your homework before you commit to buying. Always conduct your building inspections, pest reports, and have the contract reviewed by your lawyer before the cooling-off period expires, or ideally, before you even make an offer or bid at auction.
Navigating property contracts requires expert knowledge.
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