What Is A Cooling Off Period & How Does It Affect Me?

Something that we have found can be a little confusing in this busy property market is the
concept of cooling off periods. Every state has drastically different guidelines for their
standard contracts, so they vary from state to state.

So how do they work? And what is the point of them?

What is a cooling off period?

In Queensland, property purchasers are entitled to a ‘cooling off period’ with standard-issue
contracts. This is a period of 5 business days in which you have the right to terminate the
purchase for any reason whether it be an issue with the property or a simple change of mind.
This period of time is a great chance to seek advice if you have any concerns about your
purchase at all and to really think about the pros and cons if you are having any doubts
about your decision.

If you do choose to terminate during the cooling-off period, formal notice must be given to
the seller’s solicitor prior to 5 pm on the fifth business day after the date that you (or our
office) receives a fully executed contract.

It is important to know that terminating during the cooling off period does not guarantee the
return of your full deposit. In Queensland, the seller is entitled to deduct a termination
penalty equal to 0.25% of the purchase price from your deposit at their discretion. This can
quickly become an expensive exercise, even more so if the property is especially expensive.

With all of this being said, not every contract will be subject to a cooling off period.

Auction contracts specifically do not give the purchaser any rights to a cooling off period, as
they are unconditional from the time they become fully executed. This means that once you
enter into this contract, there are no conditions applicable to it that would give you the right to
terminate the purchase at all.

It is also not uncommon in this competitive market to see sellers requesting that the contract
of sale be conditional on the buyer waiving their right to a cooling off period. This can put
buyers in a bit of a tricky position when they are eager to secure a property.
If you are presented with a contract that has a cooling off period waiver, it is absolutely
crucial that you take time to really think about whether that is the right thing to do for your
situation and to consider what other conditions the contract is subject to that may protect you
if anything goes wrong.

Through our experience in property law, we have found that there are times when the
cooling off period just is not long enough for purchasers to put any extensive thought and
research into whether the property they have signed for is the right property for them. Sure,
a Building and Pest condition can cover any physical issues with the home itself, but what if
the property has other issues that don’t give you a reason to terminate under this condition?

This is where a Due Diligence condition can be extremely handy. Due Diligence conditions
exist to ensure that purchasers can do thorough research into the property and feel confident
that there is nothing about the property that could affect its usage or otherwise be an issue
after settlement is complete. Whether it’s looking into easements on title, unregistered
easements or concerns about flood zones, Due Diligence will have you covered for anything
that screams ‘red flag’ that you aren’t willing to risk.

Everyone writes their Due Diligence clause a little bit differently, however, this clause should
generally, ensure that satisfying it is to your sole discretion and that if you terminate under
this condition you will be entitled to a refund of your full deposit with no penalties or
deductions.

We do need to be aware that this condition always has a due date like any other special
condition and cannot cover you indefinitely. This condition is often due around the same time
as the Finance condition and usually requires you to give notice of your final decision by
5 pm, on the noted due date.

So, whilst your right to a cooling off period can be affected by a few different factors, it is a
a crucial part of most contracts and we would always recommend a due diligence clause is
added into your contract if you aren’t sure you’ll be exercising your rights under the cooling
off period.

As always, you are more than welcome to contact our wonderful staff if you would like more
information about any of the matters discussed in this article. Every decision you make
throughout your purchasing journey should be fully informed.

Remember, if you have any doubt to always seek legal advice!