Cooling-off periods, what are they and how do they work?
Purchasing a property, particularly your first property, can be an extremely confusing and emotional process. As such, it is common for a buyer to purchase a property which they are later unwilling or unable to proceed with. If the buyer is unable or unwilling to complete the contract, they may be entitled to terminate the contract pursuant to a cooling-off provision.
When can a Buyer terminate a contract?
A buyer may seek to terminate their contract for any number of reasons. Some common reasons that a buyer may wish to terminate the contract include:
- The buyer made the wrong decision in the heat of the moment and has changed their mind;
- The buyer has entered into a contract and later realised that due to some characteristic of the property, the property is not suitable for their intended use. For example, perhaps the buyer is seeking a home as their residence, but the property is tenanted for the foreseeable future.
- The buyer has entered into a contract and later realised that the property is burdened by some form of encumbrance, such as an easement or registered covenant; or
- The buyer’s personal circumstances may have changed, and they are unable to proceed with the purchase.
In any of the above circumstances (and subject to the conditions of sale), the buyer may simply decide that it is in their best interests to terminate the contract pursuant to any cooling-off periods.
What is a cooling-off period?
The first point that should be noted, is that the cooling-off period is solely for the benefit of the buyer and cannot be exercised by the seller of a property. The period allows the buyer time to think things over, without being trapped into a rushed decision.
In Queensland, there is a cooling-off period of five business days from the date upon which the purchaser receives a fully executed contract. Importantly, the day upon which the contract is received is included in the five-day period, provided that the contract is received before 5pm on that day.
During this time, the purchaser can elect to terminate the contract at any time, and without need for any legal reasoning.
However, if the contract is terminated pursuant to the cooling-off provision, the buyer will be liable to pay the seller a cooling-off termination fee equivalent to 0.25% of the purchase price.
It is also important to note that cooling-off periods will not typically apply to a contract entered into at auction.
In the event that the contract is properly terminated pursuant to a cooling-off period, the matter will then be at an end.
Is there another other way to terminate the contract?
Depending on the terms of the contract, there may be additional ways in which the contract of sale can be terminated. For example, the contract may be subject to satisfactory building and pest inspections, or the purchaser’s ability to obtain satisfactory finance approval.
Buyer’s should always ensure that they obtain legal advice with respect to their rights and obligations prior to entering into a contract or deciding to terminate an existing contract.
At CSD Law, our experienced property lawyers can assist you in ensuring that your rights and interest are fully protected under the law. If you have any questions, please contact CSD Law today on 1300 883 282 or email us at email@example.com.