Cooling Off Period – What Purchasers Need to Know

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In Victoria, purchasers are given a short statutory period in which they may terminate a contract after signing. This right is commonly referred to as the “cooling-off period”.

The cooling-off period is contained in section 31 of the Sale of Land Act 1962 (Vic) (the Act). It allows a purchaser, in eligible circumstances, to end a contract for the sale of land within a limited timeframe. There are some exceptions to this “cooling off period”

What Is the Cooling-Off Period?

Section 31 of the Act provides that a purchaser may end a contract within three (3) clear business days of the day that the contract is signed as long as none of the exceptions applies to you.

What are the Exceptions?

Section 31 of the Act states that if any of the following apply to your purchase then the cooling off period does not apply:

-        You bought the property at an auction;

-        You bought the property within three (3) clear business days before or after an auction was to be held;

-        The property is primarily used for industrial or commercial purposes;

-        The property is more than 20 hectares in size and is used primarily for farming;

-        You and the vendor have previously signed a contract for the same land in substantially the same terms; or

-        You are purchasing the property and are an estate agent or body corporate.

If none of these exceptions apply to you and you wish to end the contract, you can do so in accordance with the cooling off period.

How do you end a contract in accordance with the cooling off period?

To exercise this right, the purchaser must give written notice within three clear business days after signing the contract to any one of the following that is specified in the contract:

-        The vendor;

-        An agent of the vendor; or

-        An estate agent engaged or appointed by the vendor to sell the land.

The notice must be left at any one of the following addresses:

-        the vendor’s address for service specified in the contract;

-        the address of the vendor’s agent; or

-        the address of the estate agent engaged or appointed by the vendor to sell the land.

You do not need a reason to cool off however a notice is not valid if it is not according to these terms.

What Happens if the Purchaser Terminates the Contract in accordance with the Cooling Off Period?

An often missed part of cooling off is that if the purchaser validly terminates the contract under section 31, the purchaser is entitled to a refund of all the money paid except for $100 or 0.2% of the purchase price, whichever is greater.

For example, if the purchase price if $500,000, then 0.2% if the purchase price is $1,000. In that case the vendor may retain $1,000 from the amount paid by the purchaser.

If you would like more information regarding a Contract of Sale and its cooling off period, please contact our office on (03) 9707 1155.

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