When purchasing property in New South Wales, terms such as ‘cooling off period’ and ‘Section 66w certificate’ often get thrown around. This article explains the meaning of these terms, and the law surrounding them.
What is a cooling off period?
A cooling off period is a period of time after entering into a contract for the sale of land, during which a purchaser can rescind the contract. Statutory cooling off periods in New South Wales property contracts are governed by the Conveyancing Act 1919 (NSW).
If a purchaser correctly exercises their right to rescind the contract during the cooling off period, the contract will be at an end and the purchaser will forfeit 0.25% of the purchase price of the property to the vendor.
What contracts have a cooling off period?
According to section 66S of the Conveyancing Act 1919 (NSW), cooling off periods only apply to the sales of residential property. Residential property is defined in the Conveyancing Act as:
“Land on which are situated (or in the course of construction) not more than two places of residence, and no other improvements; or
Vacant land on which the construction of a single place of residence alone is not prohibited by law; or
A lot or lots (including a proposed lot or lots) under the Strata Schemes Development Act 2015, comprising not more than one place of residence alone, whether constructed or in the course of construction, and including any place used or designed for use for a purpose ancillary to the place of residence.”
What contracts do not have a cooling off period?
Contracts for the sale of land that do not meet the above definition of residential property, including contracts for the sale of rural, commercial, or industrial property will not have a statutory cooling off period.
In addition to these exclusions, there is no cooling off period:
When the land being sold is more than 2.5 hectares in area.
Where a residential property is sold via a public auction.
Where a residential property is sold on the same day that the property was offered for sale by public auction but was passed in.
Where a contract contains a section 66w certificate.
Where a contract is made due to the exercise of an option to purchase the property.
How long is the cooling off period?
The cooling off period starts when the contract is made, and ends at 5pm on:
The tenth business day after the day on which an ‘off the plan’ contract was made; or
In any other case, the fifth business day after the day on which the contract was made.
Who does the cooling off period benefit?
The cooling off period is solely for the benefit of the purchaser. It is often used by purchasers to obtain unconditional finance approval, to conduct additional due diligence on the property such as obtaining building and pest inspection reports, strata reports, or various property enquiries, or to protect against buyer’s remorse.
A vendor cannot use a cooling off period to get out of a property contract, and so it allows a purchaser to ‘lock in’ the vendor, while still giving them the ability to get out of the contract.
How can a purchaser get out of a property contract during the cooling off period?
In order to get out of a contract for the sale of residential land during the cooling off period, a purchaser must serve on the vendor a notice in the correct form, that rescinds the contract.
The notice must be signed by the purchaser or their solicitor, and can only be served during the cooling off period in order for it to be effective.
Can the length of a cooling off period be changed?
A cooling off period can be lengthened in the contract or in writing by the vendor, but it cannot be shortened unless a section 66w certificate is also provided by the purchaser to the vendor.
What is a section 66w certificate?
A section 66w certificate is a certificate issued pursuant to section 66W of the Conveyancing Act 1919 (NSW). A section 66w certificate has the effect of waiving the statutory cooling off period that is implied into a residential property contract.
Section 66w certificates are often requested by vendors where an auction has been planned but the property is being sold before the auction, or in circumstances where there is competition for the property.
In order for a section 66w certificate to be valid, it must be signed by a solicitor or barrister, and among other things, must contain a statement confirming that the solicitor explained to the purchaser the effect of the property contract, and the effect of providing the section 66w certificate.
This means that in order to obtain a section 66w certificate and waive their cooling off rights, a purchaser must first receive advice on the contract from a lawyer.
At Thornton + King our lawyers have decades of experience dealing with property contracts and cooling off periods in New South Wales. If you’d like to understand your cooling off rights, or would like to get out of a contract while under a cooling off period, or would like assistance with your property sale or purchase, submit an enquiry now.
