Last week, I wrote about how the pest and building inspection clauses can be used to renegotiate or exit a contract, provided that they were worded correctly.

I’d like to briefly touch on another way of doing this, and that’s via the cooling off period. Please note that this information is specific to Victoria so you should probably run such things by your legal team if you are buying  in another state.

Here, the rules governing the cooling off provisions are outlined in Section 31 of the Sale of Land Act. In short, it means that if you change your mind about a purchase, for any reason, you may be able to escape the contract within three business days of signing it. That’s your signature, not the vendors, and the clock starts ticking as soon as you put ink to paper (regardless of when the contract might be signed by the other party).

When cooling off, you’ll lose 0.2% of the purchase price (which is $1,000 on a $500k purchase) or a flat $100, whichever is higher.

However, you can only use these provisions if you can answer ‘no’ to all of the following questions;

  • Did you buy the property at a publicly advertised auction?
  • Did you buy the property within three business days either side of such an auction?
  • Have you previously entered on contract for the same property on similar terms with the same vendor?
  • Are you a licensed estate agent?
  • Are you buying the property through a corporate entity?
  • Did you receive independent legal advice on the contract prior to signing?

Just to touch on the corporate entity point. This means that if you are buying through a company or trust, as I know many of you do, then you are not able to use the cooling off rules if you need to back out of the deal for any reason. However, buying as an individual ‘and/or nominee’ will still enable you to cool off, if you have not yet nominated a corporate entity as the eventual purchaser.

Hopefully, you would ever need to use the cooling off provisions as you will have done the right amount of due diligence first. But, it always helps to know the rules so that you’ve got something up your sleeve if ever you really need it…