Residential land buyers in NSW increasingly forced to waive cooling off period
In NSW, purchasers of residential land are entitled to a five day cooling off period under the standard form Law Society contract for sale of land.
What is a cooling off period?
A cooling off period is a period of time after you have already entered the contract, when you can pull out of the contract with little or no consequences.
For instance, if you entered into a contract to buy land in haste, or without seeing the pest and building report or council records, perhaps because there were competing buyers, you could rely on your five day cooling off period to pull out of the contract if you were not satisfied with the pest and building report or something was not quite right with council records.
In NSW, the cooling off period is a protection for the purchaser. It is a purchaser’s right to have that cooling off period.
Vendors demand waiver of cooling off period as a condition of exchange of contracts
Unfortunately, in recent times it has become a trend for vendors or sellers of residential land to abuse those rights of the purchaser.
Vendors are demanding that purchasers waive the cooling off period or else the contract won’t go ahead. In fact, vendors are using the purchaser’s rights to protect themselves.
For instance, if a purchaser makes an offer to purchase land and the vendor accepts, a contract is then forwarded to the purchaser’s solicitors for review. As a matter of process, vendors are sending a section 66w certificate waiving the cooling off period along with the contract and requesting the purchaser sign the contract and the waiver before exchange of contracts will occur.
Seller of residential land can retract acceptance of offer if buyer does not comply
If the purchaser decides that they wish to retain their rights to the cooling off period, vendors often retract the acceptance of the offer from the purchaser and continue marketing the property until they find someone who will waive the cooling off period.
Potential financial benefit for vendor if purchaser waives cooling off period
The benefit for the vendor in this scenario is that if the purchaser pulls out of the contract after they waive the cooling off period, under the NSW standard contract for sale of land, the vendor is entitled to keep the whole deposit paid by the purchaser, usually 10% of the purchase price. But if the purchaser pulls out during the cooling off period, the vendor is only entitled to .025% of the purchase price.
Is it a money making scheme for the vendor? It could be argued that vendors are unfairly demanding that purchasers waive their rights in order to provide the vendor with the opportunity to gain an undeserved windfall if the purchaser decides to pull out.
Power imbalance in favour of vendors under current NSW laws
A purchaser who has their heart set on a parcel of land, who has not yet received critical information about the property, is forced to waive their rights to the cooling off period, otherwise they don’t get the property they want… it seems like there is an imbalance of power in this scenario.
In NSW at this stage, there are no rules prohibiting vendors from demanding the waiver of the cooling off period, and it is occurring on a daily basis.
If you want to buy or sell your property, always talk to your solicitor about your rights first, before signing any documents.