When a property sale in NSW reaches exchange of contracts, the deal becomes legally binding and a strict timetable begins. First comes the cooling-off period (for most residential purchases), then the run-up to settlement, usually six weeks later. Understanding how those timeframes work — and what can go wrong — is essential for both buyers and sellers.
This guide explains the legal rules, common pitfalls, and how a property lawyer keeps your transaction on track.
What is the cooling-off period?
For most residential purchases in NSW, the buyer has a statutory five-business-day cooling-off period starting from exchange of contracts. During this time the buyer may rescind the contract for any reason, but will forfeit 0.25% of the purchase price to the seller.
When there is no cooling-off period
There is no cooling-off if any of the following applies:
The buyer gives a valid section 66W certificate at or before the time the contract is made (often required in competitive negotiations).
The property is sold at public auction.
The contract is made on the same day the property was offered at auction but passed in, and contracts are then exchanged later that day (i.e., still auction day).
The contract is made by exercising an option to purchase (with limited exceptions).
Off-the-plan exception: for off-the-plan residential contracts, the cooling-off period is 10 business days (unless properly waived).
Why the cooling-off period exists
Cooling-off is designed to protect buyers who need a short window to finalise finance, complete inspections, and obtain legal advice after securing a property. Typical tasks within the period include:
Completing or confirming building, pest and/or strata reports
Obtaining formal loan approval and valuation
Having a lawyer review the contract and, where needed, negotiate amendments or seek a short extension
Sellers do not receive a corresponding right to rescind once contracts are exchanged (unless another contractual or statutory right applies).
After cooling-off: between exchange and settlement
Once the cooling-off period expires, the contract becomes unconditional and both parties must perform their obligations to reach settlement. The standard period to completion in NSW is 42 days (approximately six weeks) unless the contract specifies otherwise. The Law Society/REINSW standard contract sets the “date for completion” as the 42nd day after the contract date (clause 15).
During this six-week window, your lawyers will:
Buyer’s side: finalise loan documents with the lender; prepare and verify transfer and identity documents; order searches; calculate adjustments; and carry out final title checks close to settlement.
Seller’s side: arrange discharge of mortgage with the outgoing lender; prepare settlement figures; and coordinate completion deliverables (keys, vacant possession, tenancy notices if applicable).
Most NSW settlements now occur electronically via PEXA, but the same legal requirements and deadlines apply.
Risk and insurance during the settlement period
In NSW, the risk of damage to the property stays with the seller until settlement (or until the buyer takes possession, if earlier). This is set by section 66K of the Conveyancing Act 1919 (NSW). Practically, sellers should maintain insurance until completion. Buyers’ lenders may still require an early policy, but that is a finance condition rather than a transfer of legal risk.
If the property is substantially damaged between exchange and settlement, buyers may have statutory rights to rescind (or seek an abatement of price) under related provisions. Timelines and thresholds are technical, so urgent legal advice is essential in any damage scenario.
Extensions, delays and penalties
Completion dates can be varied by agreement, but otherwise timeframes are strictly enforceable. If one party cannot settle on the agreed date, the other may be able to issue a Notice to Complete, typically giving at least 14 days to complete the contract. If settlement still doesn’t occur, the non-defaulting party may be able to terminate and pursue contract remedies (including deposit forfeiture in the seller’s case).
Most contracts also provide for default interest on the unpaid balance of the purchase price if the buyer is late to settlement.
Because delays often cascade from lender timing, all requests for extensions should be handled formally through the lawyers (not informally via the agent) to avoid misunderstandings about rights preserved or waived.
Common trouble spots (and how to avoid them)
Assuming a cooling-off right exists when it doesn’t (auctions, same-day post-auction exchanges, options, or a signed 66W). Solution: take advice before exchange.
Cut-through deadlines: missing the 5pm expiry on the last day of cooling-off, or failing to serve rescission correctly. Solution: diarise important dates, seek advice from your lawyer early if you are thinking of getting out of the contract.
Finance not ready: relying on indicative approval and then facing valuation issues late in the six-week period. Solution: front-load lender requirements by getting a pre approval; your lawyer can coordinate the bank’s settlement team in anticipation of settlement.
Title or disclosure issues discovered late (e.g., easements, unapproved structures). Solution: thorough pre-exchange review and searches; escalate promptly if something emerges post-exchange.
Why legal oversight matters
Cooling-off and settlement periods are legal timeframes with financial consequences. A property lawyer:
Confirms whether a cooling-off right exists (and whether a 66W is appropriate in your circumstances).
Manages notices, waivers and extensions so rights aren’t accidentally lost.
Oversees performance of your contractual obligations.
Coordinates lenders, searches and PEXA to meet the completion date.
Advises on risk and insurance under section 66K and related remedies if damage occurs pre-settlement.
Given the dollars at stake — and the fact that missed steps can trigger default interest, deposit loss or termination — specialist oversight is rarely optional.
Conclusion
The stretch from exchange to settlement is deadline-driven and unforgiving. Knowing when you can walk away, what can change, and how to keep settlement on track is exactly what your lawyer manages for you.
Speak to a specialist property lawyer
Our property team at Thornton + King includes multiple Accredited Specialists in Property Law who act for buyers and sellers across Sydney and NSW. If you’re buying or selling property, give us a call or submit an enquiry now to speak with one of our specialist conveyancing lawyers.
