What is a Cooling Off Period? (NSW)

What is a cooling off period?

Governed by the Conveyancing Act 1919 (NSW), 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.

If a purchaser exercises their right to rescind the contract during the cooling off period, the contract is terminated and the purchaser will forfeit to the vendor 0.25% of the purchase price of the property.

Which contracts have a cooling off period?

Cooling off periods apply only to sales of residential property. The Conveyancing Act defines residential property as:

land on which are situated (or being built) up to two places of residence, and no other improvements; or
Vacant land on which the construction of one place of residence is permitted; or
a lot(s)/proposed lot(s) under the Strata Schemes Development Act 2015 (NSW), comprising one residence or ancillary structure (built or being built).

Which contracts do not have a cooling off period?

Contracts for the sale of land that do not meet the above definition of residential property (such as contracts for the sale of rural, industrial or commercial property) do not have a cooling off period.

There is also no cooling off period where:

a residential property is sold via a public auction;
the land being sold is more than 2.5 hectares in area;
a contract contains a section 66w certificate;
a residential property is sold on the same day that the property was offered for sale by public auction but was passed in; and
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:

for an off the plan’ contract – the tenth business day after the day on which the 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. Purchasers often use it to obtain unconditional finance approval, to obtain pest inspection and building reports and strata reports, to conduct various property enquiries, or to protect against buyer’s remorse.

A purchaser can use a cooling off period to ‘lock in’ a vendor, whilst the purchaser retains the ability to rescind from the contract.

How can a purchaser rescind a contract during the cooling off period?

To get rescind from a contract during the cooling off period, a purchaser must serve on the vendor during the cooling off period a notice signed by the purchaser or their solicitor.

Can the duration of a cooling off period be changed?

The vendor can lengthen a cooling off period in writing or in the contract, but it can only be shortened if the purchaser provides the vendor with a section 66W certificate.

What is a section 66W certificate?

A section 66W certificate issued pursuant to section 66W of the Conveyancing Act 1919 waives the statutory cooling off period.

Vendors often request a section 66W certificate where there is competition for the property or where an auction has been planned but the property is being sold before the auction.

A sec 66W certificate must be signed by a solicitor or barrister, and must confirm that the solicitor explained to the purchaser the effect of:

the property contract, and
providing the section 66W certificate.

To obtain a section 66W certificate and waive their cooling off rights, the purchaser’s lawyer must first advise them about the contract.