"COOLING OFF" RIGHTS

Purchasers of residential property in New South Wales have the benefit of a 5 business day "cooling off" period following exchange of contracts, except where:

· the property was purchased at auction;
OR
· the purchasers have had an opportunity to receive advice from a solicitor (or licensed conveyancer) on the contract and that solicitor (or licensed conveyancer) provides a certificate confirming the buyers have agreed to waive the "cooling off" rights.

Purchasers may find the 5 day "cooling off" period beneficial where they have not had an opportunity to obtain legal advice or are still waiting for building inspections or loan approvals. Of course, because the purchasers can cancel the contract within the 5 day period, vendors can be reluctant to exchange a contract to include the "cooling off" period. This occurs particularly where there is more than one party interested in purchasing the property. The insistence by a purchaser of retention of the "cooling off" rights can be the deciding factor as to who is the successful purchaser.

However, if a contract is exchanged and with the "cooling off" rights intact, the purchasers may choose to cancel the contract within 5 business days following exchange of contracts. On cancellation, the minimum deposit of 0.25% of the price paid by the purchasers will be forfeited to the vendors and any other amount of money paid on account of the deposit will refunded to the purchasers.

If by the end of the 5 day "cooling off" period the purchasers wish to proceed with the purchase, the balance deposit (usually to make the deposit total 10% of the price) will be payable. It is not until the balance deposit is paid that the sale will be confirmed.

The above is a general statement only of the application of "cooling off" rights in New South Wales and is not meant to be a substitute for specific legal advice in relation to any particular transaction. Fiona Sephton, Donna Lloyd and Carol Baker are legal property specialists at Lane & Lane, Solicitors located in the Sydney CBD (tel: 9391-3800)