When buying residential property, purchasers (unless an exception applies – see further below) have “cooling off” rights. “Cooling off” rights afford purchasers a legal right to end a contract within three clear business days of the date that they sign the contract of sale.
But what happens if the vendor makes a counteroffer?
It is well established that when a purchaser signs a contract of sale, the “cooling off” period commences (even if the vendor has not signed the contract).
However, the vendor may not accept the purchaser’s offer and may make a counteroffer (eg. different price, different settlement period, different conditions of contract).
If the purchaser accepts the vendor’s counteroffer, the three business day “cooling off” period resets – giving the purchaser three clear business days to “cool off” from the date that it accepts the vendor’s counteroffer.
What happens if a vendor does not sign within the “cooling off” period?
If the vendor does not sign the contract within the purchaser’s “cooling off” period, then the purchaser’s “cooling off” rights still expire after 3 clear business days. However, the risk to a vendor in delaying signing until after a purchaser’s “cooling off” rights have expired is that a purchaser can withdraw its offer to purchase the property up until the vendor has signed the contract and the contract has been exchanged between the parties.
What happens if a purchaser “cools off”?
If a purchaser elects to “cool off” (which must be effected strictly in accordance with the requirements of the Sale of Land Act 1962), the purchaser will be entitled to have its deposit refunded (less $100 or 0.2% of the purchase price, whichever is greater).
What are the exceptions?
The “cooling off” period does not apply if:
- The purchaser brought the property at or within 3 clear business days of a publicly advertised auction;
- The property is used mainly for industrial or commercial purposes;
- The property is more than 20 hectares in size and used mainly for farming;
- The parties previously signed a similar contract for the same property; or
- The purchaser is an estate agent or a corporate body.
