Cooling off period and Section 66w certificate

Posted on 16 August 2019

The cooling off period

When you are purchasing a property in New South Wales, you have a right to a 5 business day cooling off period after contracts have been exchanged. The cooling off period allows you more time to consider whether you really want to purchase the property, such as conducting building, pest or strata inspections, making enquiries about the property, organising your finances and obtaining the formal loan approval.

The cooling off period ends at 5pm on the 5^th business day after you have signed the contract. For example, if contracts are exchanged on Monday, 1 July, then cooling off period will expire at 5pm on Monday, 8 July. You may rescind the contract (cancel the contract) any time before the end of the cooling off period.

There are certain circumstances where there will not be a cooling off period, such as, by giving the vendor (or the vendor’s solicitor or agent) a Section 66w certificate. Another situation where cooling off period does not apply would be when the property is sold by public auction (we will not go into details in this article).

Rescinding contract during the cooling off period

During the cooling off period, if you realise that you do not really like the property that much after all, you can rescind the contract. However, you will forfeit 0.25% of the purchase price. For example, if the property price is $500,000.00, you will forfeit $1,250.00. The vendor is entitled to keep this 0.25% amount paid by you as the initial deposit but they will need to refund you the remaining balance of the deposit (if you paid more than 0.25% to the agent as the deposit).

Section 66w certificate

By providing a Section 66w certificate, you are waiving your right to the 5 business day cooling off period. Some vendors will insist on having a Section 66w certificate as a condition when exchanging contracts. In circumstances like these, you will need to be sure that you are satisfied with the property, that contracts have been thoroughly checked by an experienced conveyancer or solicitor and that you have your loan approved for the purchase.

The Section 66w certificate is not signed by you. It is signed by a solicitor (or a conveyancer) acting on your behalf. Before signing the certificate, the solicitor or conveyancer is required to explain to you the effect of the contract for the purchase of the property, ensuring that you understand the nature of the certificate and the effect of giving this certificate to the vendor, i.e. that there is no cooling off period in relation to the contract. Once the Section 66w certificate is provided to the vendor, you will not be able to cancel the contract or pull out of the purchase anymore. Instead of forfeiting 0.25% of the purchase price, you will forfeit 10% of the contract price (unless special conditions in the contract provide otherwise) if you decide not to proceed with the purchase. You may also be liable for any damages suffered by the vendor as a result of your rescission of the contract after the cooling off period has expired.

If you have any queries or would like to find out more, please give us a call on (02) 9299 9931.

This blog is for general information purposes only and is not intended to be legal advice. Every case has its own unique circumstances which may result in different outcomes. If you are unsure about your situation, we suggest you seek professional legal advice.