Victorian property legislation has quite a few interesting quirks including the Cooling Off Period.
The Coooling Off Period offers buyers the chance to change their mind for any particular reason for three days from the date of signing. There are two things about this benefit that are often surprising for buyers. The first is that the period begins from the date that the buyer puts pen to paper on the contract, regardless of how long it takes for the vendor to accept and sign. The Cooling Off Period does not commence from the date of contract execution. The second surprise is that there is an enforceable financial penalty that applies if the Cooling Off is exercised. The purchaser is liable to pay 0.2% of the purchase price (or $100; whichever is greater) and while not every agent and vendor pursue this, it certainly should be provisioned for if a buyer is considering backing out of a contract they’ve signed and executed.
Often misunderstood and sometimes wrongly assumed, the Cooling Off Period doesn’t always apply for every contract. And unlike some other states, it can’t be voluntarily waived to strengthen an offer. Our legislation used the provision for buyers to waive their rights to a Cooling Off Period by having a solicitor review the contract but since the changes earlier this decade, the rights remain in place regardless of the buyer’s legal representation.
So who IS eligible for a Cooling Off Period, and what are the exemptions?
Any buyer who is NOT a company, NOT a licensed real estate agent, a buyer who is NOT signing a contract for a property to be used for commercial or industrial purposes, a buyer NOT purchasing farming land of 200 hectares or greater, or a buyer who isn’t signing the same contract as previously entered into is eligible for a Cooling Off Period….
….provided that the property isn’t being sold at public auction or in the period within three business days either side of the auction.
Sounding tricky? When you throw in a public holiday it gets even more interesting.
For example, if a metro Melbourne property is scheduled for auction for Saturday 29th September and a buyer wishes to make an offer to purchase the property prior to the auction, they must understand that from Tuesday 25th September they will no longer be eligible for the Cooling Off Period. The AFL public holiday on offer to Melburnians on Friday 28th means that the three business days (that would ordinarily start from Wednesday) are wound back an extra day to Tuesday due to the holiday. Should the auction proceed and the property pass in, the Cooling Off Period will not apply until midnight Wednesday clicks over.
Cooling Off Periods are relied on in several different ways; some better thought-out than others.
Purchasers who rely on the Cooling Off Period to conduct their due diligence (ie. get their legal review conducted, speak to council, etc) are taking a risk if they haven’t checked their eligibility for being entitled to the Cooling Off Period. A contact of mine didn’t realise that signing a contract for a Commercial property eliminated their eligibility.
Purchasers who assume that they can arrange finance pre-approval within this three day timeframe often get themselves into sticky situations. Requesting an extension on an already existing finance clause is far easier than cooling off and trying to re-sign a fresh contract with a new finance clause. Vendors would be reluctant to accept this chain of events.
Purchasers who enter an unconditional contract and then surprise the agent with a subsequent request for a building inspection can meet an unfriendly decline for access if the vendor thought that the original offer was devoid of conditions. It would be far wiser in this situation to request a three day building and pest inspection clause at the time of signing to avoid access being blocked.
Purchasers who just have a change of heart about their purchase decision are the contingent who can feel the most stress. Deciphering between nerves, post-purchase dissonance and a genuine mistake can be a really hard task.
Buyers can make this burden a far easier one when they have a firm strategy with clear criteria, a set budget limit, and a support person to lean on who knows and respects their strategy.
The most valuable step any buyer can take though is getting a thorough contract review arranged prior to signing by a licensed professional.
When armed with a clear strategy and a contract legal review, far less doubt will plague what should be one of the most valuable financial decisions we face in life.
Cooling Off Periods are meant to offer protection in certain circumstances but if the buyer is hung up on the Cooling Off Period at the time of signing, they do need to question their motivation to sign the contract in the first place.
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