Cooling Off Period – Sale of Land
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In most cases, when you “exchange” Contracts to purchase residential land in New South Wales, you have a period of five (5) business days in which to “cool off”. This means that you can get out of the Contract and each party’s obligations under the Contract cease. It is as if there never was a Contract to begin with. However, you will forfeit 0.25% of the purchase price to the vendor.
Exceptions to the cooling off period rule include if you purchase the land at auction or if contracts exchange after the auction (on the same day as the auction) after the property is passed in.
You must validly rescind the Contract. It is insufficient to simply advise the vendor’s agent verbally that you have decided not to proceed with the purchase.
An effective notice of rescission must be in writing and must be served on the vendor during the cooling off period. If you serve it after 5pm on the fifth business day after the Contract has “exchanged” or made, then you are out of time and the notice is invalid.
The notice of rescission must be signed by you or your solicitor or if there is more than one purchaser, by each purchaser or their respective solicitors.
The notice of rescission must be served on the vendor, the vendor’s solicitor or the vendor’s agent.
It is important to note that the right of rescission under section 66U of the Conveyancing Act 1919 (NSW) is a right afforded to the purchaser and not the vendor. The vendor has no right of rescission during the cooling off period. This means if the vendor receives a higher offer for the land from another purchaser, the vendor can’t ‘rescind’ one contract and enter into another contract with a purchaser who submits a higher offer.
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