Buying a residential property is an exciting milestone, but it’s important for buyers to proceed with caution. In most Australian jurisdictions, cooling-off periods provide buyers with a brief window to reconsider their decision after signing a contract. These periods act as a safeguard, helping to prevent impulsive purchases and allowing time for further due diligence.

This article explores cooling-off periods, their purpose, applicability, and how they operate across different Australian jurisdictions. While this information offers a general overview, it is important to note that cooling-off periods vary by state and territory, with specific exceptions and conditions. Therefore, seeking professional advice tailored to your jurisdiction and transaction circumstances is recommended.

Why Have a Cooling-Off Period?

The primary rationale behind cooling-off periods is to afford buyers an opportunity to:

• Conduct further due diligence.
• Seek legal or financial advice.
• Address any concerns that may arise after the signing/exchange of contracts.

By providing buyers with a brief reprieve from the pressures of a rapidly evolving property market, cooling-off rights promote informed decision making and help mitigate the risks associated with impulsive or ill-considered purchases.

How Does a Cooling-Off Period Work?

During the cooling-off period, buyers have the option to rescind (cancel) the contract by providing written notice to the seller or their representative. This notice terminates the contract, and the buyer may be required to pay a nominal penalty fee, which is typically calculated as a percentage of the purchase price.

It’s important to note that:

• Conditions and limitations apply in every jurisdiction.
• The timeframe within which the notice must be given can vary.
• Specific requirements may be stipulated in the contract of sale.

Buyers should be aware of these factors to ensure they comply with the terms of the contract and avoid any issues.

When Does a Cooling-Off Period Apply?

Cooling-off periods are generally only available for private treaty sales, not for properties bought at auction. However, there are exceptions where cooling-off rights do not apply. It is crucial to check these exceptions with your lawyer or conveyancer before entering a contract.

Key points to note:

• The cooling-off period is typically for the benefit of buyers, not for sellers who change their minds after signing the contract.
• The specific application of cooling-off periods depends on the circumstances of the transaction and state or territory legislation.

Additionally, in some cases, a buyer and seller may agree to waive, shorten, or lengthen the cooling-off period by including a term in the contract.

Cooling-Off Rights Across Australia

Cooling-off periods differ across Australia, with each state and territory establishing its own rules on the duration, conditions, and applicability. The list below outlines how cooling-off periods apply in each state and territory:

Queensland:

In Queensland, a cooling-off period of five business days applies to contacts for the sale of residential property. This period starts the day the buyer (or their representative) receives a copy of the fully signed contact. The cooling-off period ends at 5 pm on the final day of the cooling-off period.

Victoria

In Victoria, a cooling-off period of three clear business days applies. This period begins from the date the buyer signs the contract. The consequence of cancelling the purchase during the cooling-off period is that a penalty of $100 or 0.2% of the purchase price (whichever is greater) will apply.

New South Wales

In New South Wales, buyers of residential property have a cooling-off period of five working days following the exchange of contracts. If the buyer exercises their cooling-off rights, they will forfeit 0.25% of the purchase price.

Australian Capital Territory

Likewise, in the Australian Capital Territory, a buyer is entitled to a cooling-off period of five business days. If the buyer rescinds the contract, they forfeit 0.25% of the purchase price to the seller.

South Australia

In South Australia, buyers have a cooling-off period that starts from when the seller provides the buyer with a Form 1 that sets out important information about the property, including any encumbrances, easements, or other certain legal issues that may affect the sale. The cooling-off period expires at the end of the second clear business day after the form is provided.

Northern Territory

In the Northern Territory, a buyer is entitled to a cooling-off period of four business days which commences on the day that contracts are signed and duly exchanged.

Tasmania

The Real Estate Institute of Tasmania and Law Society of Tasmania standard form contract includes an option for buyers to choose a cooling-off period. Buyers must select this option for the cooling-off period to apply. In such cases, they will have three business days from when the contract is made to terminate the contract without penalty. Any deposit paid is refundable.

Western Australia

In Western Australia, cooling-off periods for residential property sales are not an automatic inclusion in contracts. In most cases therefore, buyers cannot change their minds once the contract has been entered. However, they may still negotiate the inclusion of a cooling-off clause in the contract of sale as a condition of their offer. This contractual provision affords buyers similar protections to those provided by statutory cooling-off periods, albeit subject to the terms negotiated between the parties.

Breakdown of Cooling-Off Periods by State

 

State/Territory	Cooling-Off Period	Start Time	End Date	Penalty
Queensland	5 business days	When buyer receives signed contract	End of the 5th business day	0.25% of purchase price
Victoria	3 clear business days	Date buyer signs contract	End of the 3rd clear business day	$100 or 0.2% of purchase price (whichever is greater)
New South Wales	5 working days	After exchange of contracts	End of the 5th working day	0.25% of purchase price
South Australia	2 business days	After receiving Form 1 (vendor disclosure)	End of the 2nd business day	Full deposit refunded
Australian Capital Territory	5 business days	After exchange of contracts	End of the 5th business day	0.25% of purchase price
Northern Territory	4 business days	After buyer signs contract	End of the 4th business day	$100 or 0.2% of purchase price (whichever is greater)
Tasmania	No statutory cooling-off period	N/A	N/A	N/A
Western Australia	No statutory cooling-off period	N/A	N/A	N/A

 

Need Expert Conveyancing Advice?

Cooling-off periods represent a fundamental aspect of residential property transactions, offering buyers a valuable opportunity to pause, reflect, and reassess their commitment before finalising the purchase. While the specifics of cooling-off periods vary between states and territories, their underlying purpose remains consistent: to empower buyers with the information and flexibility needed to make informed decisions in a rapidly evolving real estate landscape.

By understanding the intricacies of cooling-off periods and their operation, buyers can navigate the property market with confidence, knowing that they have the necessary safeguards in place to protect their interests and secure their dream home.

If you or someone you know wants more information or needs help or advice, please call  02 9623 2777 or email co****@***********om.au.