Terminating A Contract During The Cooling-Off Period
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With the Cairns property market becoming more in demand, many home buyers are feeling the pressure to secure a home sooner rather than later. So, what happens if you commit to buying too quickly and then change your mind or need to cancel the transaction for another reason?
Here’s what you should know about terminating a contract during the cooling-off period.
The cooling-off period
In Queensland, the cooling-off period is the time that comes after a transaction is entered into by exchanging contracts. During this period, the purchaser is able to cancel the transaction for any valid reason. Cooling-off periods exist to protect purchasers who agree to buy a property and then later discover that there are serious issues with it, such as structural flaws, pest and/or termite infestations or problems with the soil that can make building or landscaping difficult or even impossible. Even if a vendor genuinely did not know about the issues associated with the property, the potential purchaser may cancel the transaction based on the new information.
The cooling-off period commences as soon as the purchaser receives the contract signed by the vendor and ends at 5:00pm on the fifth business day that follows.
It is important to note that cooling-off periods do not apply to properties that have been purchased at auction.
Cooling off periods also do not apply for:
- sales that took place after an unsuccessful auction in cases where the ultimate buyer was a registered bidder in the unsuccessful auction;
- an ‘option contract’ or a sale contract that was formed as the result of an option contract;
- sales where the purchaser is buying three or more lots simultaneously; or
- sales where the purchaser is a publicly listed corporation or its subsidiary, the State or a statutory body.
Occasionally, contracts will include a clause that waives the cooling-off period. This is a rare occurrence so your solicitor or conveyancer should alert you to this clause if it is in the contract.
Can the cooling-off period be waived?
Yes, it can. A purchaser is within their rights to waive the cooling-off period (either by shortening it down from five business days or by waiving it entirely), as long all parties to the transaction have agreed to it in writing.
How can the cooling-off period be cancelled or terminated?
If a purchaser wishes to cancel or terminate the contract during the cooling-off period they must provide the vendor with written notice by 5:00 pm on the 5th business day of the cooling-off period.
Which party keeps the deposit if a contract is terminated?
When a purchaser agrees to buy a property, the deposit they pay is held in trust either by the vendor’s solicitor or the agent that is selling the property. The deposit is only released after settlement has taken place.
If a purchaser chooses to cancel the transaction during the cooling-off period, then a penalty of up to 0.25% of the purchase price of the property may be deducted from the deposit for the vendor to keep, with the remainder of the deposit being returned to the purchaser within 14 days.
If you are in the market to buy or sell a property and are seeking a conveyancer or property lawyer to assist, we can help you with all aspects of the conveyancing process, from contract preparation and review, right through the settlement.
Call Cairns Conveyancing Solicitors today for a fixed-fee conveyancing quote today.