Cooling off vs 66W certificate
In NSW when purchasing a residential property the contract is not binding, and the property is not normally taken off the market until each party signs a copy of the contract, both contracts are dated and a deposit is paid. The two copies of the contract are then reviewed to ensure that they are both identical and then contracts are “exchanged”. This means that the Vendor will retain the contract signed by the Purchaser and the Purchaser will retain the contract signed by the Vendor.
Exchange with a Cooling Off
The cooling off provisions under Section 66ZB of the Conveyancing Act 1919 were introduced to put a stop to the previous popular ‘sport’ of gazumping.
If a Purchaser chooses to exchange with a 5 day cooling off period he/she will be required to pay 0.25% of the purchase price as a preliminary deposit, which is non-refundable should he/she decide not to proceed with the purchase.
During this period Pest/Building Reports and a Strata Report, should the property be part of a strata scheme, can be carried out. At this stage, the Purchaser should have a loan pre-approval and should ensure that a written, formal loan approval if provided prior to the expiration of the cooling off period. Once the cooling off period expires the contract becomes unconditionally binding on both parties.
Should the Purchaser decide to proceed with the purchase he/she will be required to pay the balance of the deposit, normally 10% of the purchase price, prior to 5 pm on the day on which the cooling off expires. Failure to do so constitutes a breach under Clauses 2.5 and Clause 9 of the NSW standard conditions of the contract which entitles the Vendor to terminate the contract, retain the full deposit and make a claim for damages.
Should the Purchaser choose to rescind the contract, a Notice of Rescission must be served on the Vendor prior to 5 pm on the day on which the cooling off expires and the 0.25% deposit will be forfeited to the Vendor.
The right of a 5 day cooling off period is automatically afforded to any Purchaser of eligible residential property in NSW under the legislation, unless a Section 66W Certificate is provided.
Exchange with a Section 66W Certificate
If the Purchaser chooses to exchange without a cooling off he/she will be required to provide the Vendor with a Section 66W Certificate. This certificate states that the Purchaser has been advised of their cooling off rights and understands that by providing the Vendor with a Section 66W Certificate he/she are waiving those rights.
The Purchaser’s legal representative will need to discuss this with the Purchaser and sign the Section 66W Certificate.
When exchanging with a Section 66W Certificate the full deposit, normally 10% of the purchase price, will have to be paid at the time of exchange.