Cooling off periods

What is a cooling off period?

A cooling off period is a grace period allowing the buyer to consider all contract obligations. If the buyer decides to pull out of the contract during the cooling off period, the buyer has the right to terminate the contract without providing a reason for the decision.

How long is the cooling off period?

The cooling off period commences from the day the contracts are signed and dated and the buyer has until 5.00pm on the 5th business day to pull out of the contract. If you do not pull out of the contract by 5.00pm on the 5th business day, you are legally bound by the contract.

Why do I need a cooling off period?

During the cooling off period, you can use this time to have your solicitor review the contract and negotiate the terms, obtain pre-purchase enquiries such as building and pest inspections, strata inspection report and other property enquiries.

You can also use this period to obtain your unconditional loan approval if you are borrowing funds to assist with the purchase.

If you find there are issues with the inspections or your financial position changes, you have the right to terminate the contract during cooling off period.

Are there fees for terminating the contract under the cooling off period?

There are fees associated with terminating the contract during the cooling off period. This could be forfeiting up to 0.25% of the purchase price to the seller and legal fees for the cost of reviewing and exchanging contracts.

Do cooling off periods apply to all property?

Cooling off periods do not apply to when purchasing certain properties such as:

  • Properties at or under auction conditions;

  • Properties larger than 2.5 hectares in area; and

  • Commercial buildings or commercial vacant land.

Once the contract is signed and date, both buyer and seller are legally bound by the contract.

Do cooling off periods apply to all parties?

Cooling off periods only apply to buyers and not sellers. 

Sellers need to be absolutely certain they wish to sell the property before signing contracts as they cannot pull out of the contract after the contracts are signed and dated.

For more information on cooling off periods, contact our property team.

Article by Gayna Borg