You have signed a Contract for the purchase of residential real estate on the weekend, but your solicitor had not seen the Contract before you signed it and has not yet provided you with their advice.
It is vitally important that you let your solicitor know at the earliest possible opportunity that you have signed a Contract. Do not wait until the real estate agent emails you the fully signed Contract.
Time is of the essence during cooling off stage
Contracts for the sale of residential real estate generally give the Purchaser the right to ‘cool off’, which means to end the Contract without providing a reason. However, if you want to take advantage of this right, you must do so within three business days from the date you signed the Contract. This is a legal right and the Vendor cannot contract out of it.
The date the Vendor signed the Contract is irrelevant for calculating when the cooling off period ends. It is therefore crucial that you get the proper legal advice as early as possible after signing a Contract.
Agents will sometimes hold off notifying your solicitor of your purchase until the Vendor has also signed the Contract. Some agents have even been known to hold off doing so until the cooling off period has lapsed.
It is your responsibility to let your solicitor know and ideally to provide a copy of the Contract signed by you to them. If you don’t have a copy of your signed Contract, the solicitor will contact the selling agent to obtain one urgently.
Your solicitor will then review the Contract and Vendors Statement and provide you with his or her advice. If you then decide to end the contract you need to let your solicitor know immediately to ensure this can be done within the three business day timeframe.
Consequence of cooling off
If you are exercising your cooling off rights, you do not need to give a reason as to why you are ending the Contract, and you are entitled to receive most of your deposit back. Once you have given notice that you are cooling off, the Contract is at an end and you do not have any further obligations to the Vendor.
However, the Vendor is entitled to keep 0.2% of the purchase price as compensation for their costs incurred due to your change of mind. Depending on the purchase price, cooling off a contract can therefore be pretty costly to you.
Consequence of missing the three business day window
If you do not end the Contract within 3 business days of signing it, you are locked in. You may however be able to end the Contract for another reason, for example:
1. The Contract is subject to a condition being met – for example finance approval, satisfactory pest/building inspection or registration of a plan of subdivision. In this case you can end the Contract if the condition is not met by the due date. However, you should get advice from your solicitor about the exact requirements of the condition and on what terms you can end the Contract.
2. There is a defect in the Contract or Vendors Statement – for example the Vendor has not disclosed a recent building permit. If you believe there is such a defect you should get your solicitor’s advice, as it may not be straight forward. If you end the Contract without proper justification, you will be in breach of Contract and the Vendor may be entitled to keep the entire deposit and sue you for any additional loss they have suffered due to your breach.
Exceptions to the rule
There are some exceptions to the general rule, and you do not have the right to cool off the Contract under the following circumstances:
- You bought the property at a public auction, or within three business days before or after an advertised public auction;
- You are buying the property in the name of a company;
- You have bought a commercial or industrial property;
- You have bought a farming property more than 20 hectares in size; or
- This is a replacement Contract for a previous Contract between yourself and the Vendor on essentially the same terms as the previous Contract.
Seek legal advice before signing
If you are thinking of buying a property, it is always best to have your solicitor check the Vendors Statement and proposed Contract before you sign them. That way your solicitor can alert you to any possible areas of concern, and may also be able to negotiate more favourable special conditions for you.
This is particularly important if you are preparing to bid at auction, or if your purchase falls under any of the other exceptions mentioned above.
If you have signed a Contract, either before or after getting advice, let your solicitor know immediately. Don’t wait for the agent to notify them or for the Contract to be countersigned by the Vendor, as you may miss the very short window you have to end the Contract under the cooling off provisions and this approach be very expensive and stressful.
