Three Day Cooling Off Periods – What Are The Pitfalls

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As we are reaching the close of 2011 the market is giving one last lurch towards the final curtain. With only one auction weekend to go for the year, it is fairly safe to say total turnover of residential property will be lower than last year and probably lower than 2008 when we had GFC Mark I.

As we move towards the summer break from weekly auctions, we enter a far more difficult season of private sale negations. Many vendors will decide very soon that they have had enough and just want to get a sale happening. Many vendors will instruct their selling agents to re-canvass interested parties, especially those that showed interest but price became a factor. You may find that a property you were interested in but was too expensive for you suddenly has a massive price drop or the agent calls you and says the vendor needs to sell!

There are a few things to remember about putting further offers down on the same property over the Christmas hiatus. The main one is to remember what your cooling off period is. Everyone who places an offer on property in the state of Victoria gets a 3 day cooling off period with some notable exceptions. Neither land that is used primarily for industrial or commercial purposes nor land that is more than 20 hectares and is used primarily for farming have any cooling off.

There are 4 other exceptions that you must understand regarding cooling off. You do not get a cooling off period if the property is sold by publicly advertised auction. This includes three business days prior and three business days after. This is not as much of a worry over summer break as there are rarely auctions, except on the peninsulas. You also do not get a cooling off period if you are an Estate Agent.

The main two exceptions you have to think about are as follows. Firstly, if you receive independent advice from a legal practitioner before signing the contract you do not have a cooling off period. Secondly, if you have previously entered into a contract for the same land with substantially the same terms, you do not have a cooling off period. This means that if you had previously made an offer and it was turned down and now they are going to consider the same offer, if more than three business days have passed since your first written offer, then YOU DO NOT HAVE A COOLING OFF PERIOD. You may have made the offer in November and it was turned down straight away. If you didn’t bother to get the documents checked and then made the same offer on the same property sometime in January, it would be an offer without cooling off.

The other thing to remember about legal advice in January is it is sometimes difficult to get. Solicitors have holidays as well.

Finally, you need to understand when the cooling off period begins. The law is very clear; you must rescind the contract within three clear business days after the PURCHASER has signed the contract. In other words, when the offer is made not accepted. Many times during negotiations the initial offer and subsequent negotiations have taken well over three days. Once you have formally put forward a written offer, GET THE CONTRACT CHECKED BY A LEGAL PRACTITIONER.

If you are considering a purchase in January our office will be manned or the phones monitored tight through the Christmas break. If you require assistance, please call the office 03 9523 1054 and we will try to assist.

The above article was correct at time of writing but since this time the laws have changed.
Since 1st March 2012, the receiving of legal advice prior to placing an offer does not end your right for a three day cooling off.

Ian James
Director JPP Buyer Advocates

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About the author

Ian has been operating his own businesses for more than 25 years. During this time the self taught lessons of building the business, dealing with staff, suppliers, clients and economic woes have been invaluable. Ian is a fully licensed Real estate Agent, a member of the REIV and registered with the Business Licensing Authority.

Buying property is not just sticking up your hand and outbidding your rival. It is an emotional, fiscal and psychological decision that needs to be planned and well executed. Ian is usually involved in over three hundred property negotiations per year; ranging from the $250,000 first unit purchase for a young couple to multiple million dollar residential developments. Ian's business background and endless numbers of negotiations make him one of the industry's leading negotiators.

Ian is married with two adult children, living in Patterson Lakes. He is a keen fisherman when weather and business allows the time.