Buying a property is a major financial decision. Sometimes, after signing a Contract of Sale, a buyer may have second thoughts or decide that the property is no longer suitable for their circumstances.
For eligible private sales of residential and small rural properties in Victoria, a buyer generally has a three clear business day cooling-off period after signing the Contract of Sale.
However, the cooling-off right does not apply to every property transaction. Buyers should understand the rules and exceptions before relying on a cooling-off period.
What Is a Cooling-Off Period?
A cooling-off period gives an eligible buyer a short period of time to reconsider a property purchase after signing a Contract of Sale.
In Victoria, the cooling-off period for an eligible private sale of residential or small rural property is generally three clear business days.
The cooling-off period begins from the date the buyer signs the contract, not from the date the seller signs it.
If a buyer decides to cool off, they must give the required written notice to the seller, the seller’s estate agent or other agent.
How Much Does It Cost to Cool Off?
If a buyer validly exercises their cooling-off right, they are generally entitled to a refund of money paid under the contract, subject to the statutory deduction.
The seller may retain the greater of:
- $100; or
- 0.2% of the purchase price.
For example, on a property purchased for $700,000, 0.2% of the purchase price is $1,400. The amount deducted would therefore be $1,400 rather than $100.
When Does the Cooling-Off Period Start?
The cooling-off period generally starts from the date the buyer signs the Contract of Sale.
The period is calculated as three clear business days, meaning the relevant timing must be carefully considered.
If you are considering cooling off, it is important to obtain advice and ensure the written notice is given within the applicable period.
Do not wait until the last minute if you are unsure whether you want to proceed with the purchase.
When Does the Cooling-Off Period Not Apply?
The cooling-off right does not apply in certain circumstances.
For example, a buyer generally cannot cool off if:
- The property was purchased at a public auction
- The property was purchased within three clear business days before or after a public auction
- The property is used mainly for industrial or commercial purposes
- The property is more than 20 hectares and used mainly for farming
- The buyer is an estate agent or corporate body
- The buyer has previously entered into a contract for the same property with the same terms
The specific circumstances of each transaction should be considered before relying on a cooling-off right.
Does the Cooling-Off Period Apply to Commercial Property?
The residential property cooling-off right does not generally apply to property used mainly for industrial or commercial purposes.
Commercial property transactions can also involve different contract terms and risks. Buyers should obtain appropriate advice before signing a commercial property contract.
How Does a Buyer Exercise the Cooling-Off Right?
If an eligible buyer decides not to proceed with the purchase, they must give written notice of their decision to the seller, the seller’s estate agent or other agent within the applicable cooling-off period.
Simply telling someone verbally that you no longer want to buy the property may not be sufficient.
If you are considering cooling off, it is important to act promptly and ensure that the notice is properly given before the cooling-off period expires.
What Happens If the Cooling-Off Period Has Expired?
Once the cooling-off period has expired, a buyer generally cannot simply cancel the contract because they have changed their mind.
The buyer’s rights will depend on the terms of the Contract of Sale and the specific circumstances of the transaction.
For example, a contract may contain conditions relating to:
- Finance
- Building inspections
- Pest inspections
- Other special conditions
A buyer should obtain professional advice before taking any action to terminate a contract.
Common Mistakes Buyers Should Avoid
Assuming Every Property Has a Cooling-Off Period
Not every property transaction is covered by the cooling-off rules. The type of property, the method of sale and the identity of the buyer can affect whether the cooling-off right applies.
Confusing Three Clear Business Days With Three Calendar Days
The cooling-off period is calculated using clear business days. Weekends and public holidays can affect the calculation.
Waiting Until the Last Minute
If you believe you may want to cool off, do not wait until the last day without obtaining advice.
The written notice must be given within the applicable cooling-off period.
Assuming Cooling-Off Is a Substitute for Contract Review
A cooling-off period should not be treated as a substitute for reviewing the Contract of Sale before signing.
Before signing, buyers should understand:
- The purchase price
- The settlement date
- Any special conditions
- Finance or inspection conditions
- Any other important obligations under the contract
Frequently Asked Questions
How long is the cooling-off period for a property purchase in Victoria?
For an eligible private sale of residential or small rural property, the cooling-off period is generally three clear business days from the date the buyer signs the Contract of Sale. Exceptions apply.
How much money can a seller keep if a buyer cools off?
The seller may generally retain the greater of $100 or 0.2% of the purchase price, with the balance of money paid refunded to the buyer.
Does cooling-off apply to property bought at auction?
Generally, no. The cooling-off right does not apply to property purchased at a public auction or within three clear business days before or after a public auction.
Can I cancel a property contract after the cooling-off period?
You may not be able to simply cancel the contract after the cooling-off period has expired. Your rights will depend on the contract and the specific circumstances.
Should I get advice before signing a property contract?
Yes. Understanding the Contract of Sale before signing can help you make an informed decision and identify potential issues early.
Need Help Reviewing a Contract of Sale?
Buying property is a significant decision. Understanding your rights and obligations before signing a Contract of Sale can help you avoid unexpected problems.
Prox Conveyancing provides professional conveyancing services and contract review assistance for property transactions in Victoria.
Contact us today if you need help with your Victorian property purchase.
This article provides general information only and is not legal advice. Property transactions can involve different circumstances and exceptions. If you are unsure about your rights or obligations, obtain advice about your specific situation.