“Cooling off” rights carry serious practical, financial, and contractual implications for Vendors and Purchasers of Victorian real estate. As a Purchaser, you stand to lose the following if the purchase is not handled properly:
- Loss of your 10% deposit or a large portion of it; and /or
- Being locked into a binding Contract against your wishes.
As a Vendor, you should also arm Purchasers with information about exceptions to Purchaser rights. Don’t be a statistic!
What is “cooling off”?
Section 31 of the Sale of Land Act 1962 enables a Purchaser of Victorian real estate to exercise their cooling off rights to terminate a Contract of Sale within three (3) clear business days of the Purchaser (rather than the Vendor) signing the Contract. If a Purchaser terminates the Contract, deposit monies are refunded to the Purchaser, except for the sum of 0.2% of the purchase price of the Contract OR $100.00, whichever is greater.
A Purchaser’s cooling off rights only apply to private sale of residential properties, not auctions. Moreover, a Purchaser’s cooling off rights do NOT apply in the following circumstances:
- if the Purchaser is a corporation (company);
- if the Purchaser is an Estate Agent;
- if the Contract was signed within three (3) business days before or after an auction;
- if the property is used primarily for industrial or commercial purposes;
- if the Vendor and the Purchaser have entered into the Contract of Sale on prior occasions on similar terms; or
- if the property is more than twenty (20) hectares and is used primarily for farming.
It is important to note that should a Purchaser wish to exercise their cooling off rights, they must serve the requisite notice either to the Vendor directly, or to the Vendor’s agent, being the Vendor’s solicitor or conveyancer, although not the estate agent.
In the recent landmark Victorian Supreme Court decision of Tan v Russell  VSC 93, the Court held that an estate agent did not have express authority to receive such notice of termination as the estate agent was not an “agent” for the Vendor for this purposes. The Court further held the estate agent’s role did not go beyond attempting to market or sell the property. Consequently, the Purchaser forfeited their deposit monies and the Vendor succeeded in their claim.
Whilst cooling off is a statutory right, it should only be considered as a last resort. The concept of caveat emptor or “buyer beware” is significant in real estate transactions, whereby a Purchaser must take all necessary steps to conduct their due diligence when purchasing a property.
Such steps could include paying $500.00 to engage professionals to conduct building and pest inspections at the property, or obtaining the requisite finance pre-approval prior to the purchase. Special conditions to reflect these can be included in your Contract of Sale as part of negotiations to offer additional protection.
In the event the Contract is withdrawn due to the non-performance of the above correctly drafted special conditions, then the deposit monies are refunded in full without deduction.
For Purchasers: It is crucial that notices of cooling off be served on the Vendor directly, or the Vendor’s lawyer or conveyancer who has authority to receive termination notices.
For Vendors: Obtain independent legal advice to determine if the cooling off notice was served appropriately prior to refunding any deposit monies to the Purchaser.
Our property lawyers can assist by reviewing your Contracts and including Special Conditions prior to your execution for your protection and peace of mind. This is a complimentary service. Contact us today to discuss your options with our experienced lawyers!
Stay tuned for the next instalment on 20/10/16
Feel free to contact one of our DE property or finance specialists today on 9863 7621 or email for expert guidance, whether a home buyer, a residential or commercial investor, or purchasing through your SMSF. We’ll assess your specific legal and finance position and give you the peace of mind you need BEFORE signing any property contract or banking documentation.
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