The Law of Cooling Off
Contracts for Sale of property are entered into subject to
What does cooling off mean?
Cooling off is a consumer protection measure which applies
by law when a Contract for Sale is entered into, and is
- to give a buyer time to reconsider whether or not to go
ahead with the Contract to purchase a home that they might
have signed under pressure of losing the home from a seller
/ real estate agent, usually at the real estate agent’s
- to give a buyer time to obtain pest and building
inspection reports on the home, and particularly finance
approval, without risking the seller selling the home to
someone else, behind their back, often for a higher price –
this practice is known as gazumping; and
- to give a buyer an opportunity to obtain independent legal
advice on the Contract.
The five keys to cooling off -
1. Cooling off applies by law – to all Contracts which are
entered into for the sale of residential property in all
States and Territories except WA.
A cooling off period of between 2 to 5 days applies, the
period depending on the law of the State or Territory - NSW,
Qld & ACT – 5 days; NT – 4 days; Vic - 3 days; SA & Tas - 2
days; WA – no cooling off period at all.
The cooling off days are business days (Monday to Friday),
so weekends and public holidays are not counted. The cooling
off period starts at midnight the day the Contract is
signed, and ends at 5:00 pm on the last day. In some States
& Territories, the ‘Contract is signed’ means the date the
Contract is signed by the buyer only, in others, it means
when the Contract is signed by both seller and buyer, and is
entered into or exchanged.
A ‘cooling off deposit’ is a small deposit – in NSW & Qld
0.25% of the price, in Vic 0.2%, in SA $100, which is paid
when the Contract is signed. The rest of the standard 10%
deposit is payable when the cooling off period ends.
2. Cooling off can be removed – the law allows for a cooling
off to be removed (the technical term is waived) in two main
The first situation to remove a cooling off is when the
buyer obtains independent legal advice – the procedure is
that a solicitor or conveyancer signs a Certificate of
Waiver, which in NSW is called a Section 66W Certificate
(named after the section of the Conveyancing Act that
permits this), and sends this to the seller’s solicitor /
conveyancer / real estate agent. Other States and
Territories call the Certificate a Waiver Certificate or
after the section in their law.
It is standard conveyancing practice where a Contract for
Sale is a private treaty, and is entered into or exchanged
by solicitors / conveyancers, for the seller’s solicitor to
require a Certificate of Waiver to be handed over, along
with the full deposit, so that no cooling off applies.
Another way to remove a cooling off is where the buyer has
had an opportunity to obtain independent legal advice on the
Contract before signing. A common example is where a
property is to be sold at auction. If a property is sold at
auction ‘under the hammer’ or after a property is ‘passed
in’ on the day of auction (or in Tas, within 2 days before
the auction), no cooling off period applies.
In some States & Territories, the law has other removal /
waiver provisions, such as if the property is sold by
tender, or if the purchaser is a corporation.
3. Cooling off periods can be extended – A cooling off
period can be extended to be a longer period than the one
laid down by the law, if the vendor agrees. There is no
upper limit on how long a cooling off period can be
As a matter of conveyancing practice, a 10 day cooling off
period is often able to be negotiated before the Contract is
signed. The cooling off extension should be written into the
Contract, for example – The parties agree that the cooling
off period for this contract will be extended to 10 days -
Often, a buyer finds that their lender has not given
unconditional loan approval in writing before the cooling
off period is due to end. In this situation, the buyer’s
solicitor / conveyancer will ask the seller’s solicitor /
conveyancer for an agreed extension to the cooling off
period. If the seller’s solicitor / conveyancer does not
agree, then the Contract must be terminated because the
buyer could risk being in breach of contract if the finance
to complete the purchase does not come through.
Extended cooling off periods are valuable to a buyer because
they give enough time for the purchaser to obtain pest and
building inspection reports, and finance approval, and
searches such as survey reports and council building
compliances, knowing that they cannot be gazumpted.
The period the cooling off continues will not extend the
completion period under the Contract.
4. Cancelling the Contract - If the buyer does not want to
go ahead with the Contract that they have signed with a
cooling off, they can opt-out before the cooling off period
ends. The ‘opt-out’ is a cancellation of the Contract, which
lawyers call termination or rescission. This is a ‘no
grounds’ opt-out, which means that no reason needs be given
to cancel the Contract.
The ‘opt-out’ must be in writing and be delivered to the
seller’s solicitor’s / conveyancer’s office by 5:00 pm on
the day the cooling off period ends – it is called a notice
of termination/ rescission and is usually sent by fax, with
a time stamp.
If a buyer cancels a Contract within the cooling off period,
they will lose their ‘cooling off deposit’, but be liable
for nothing more.
5. 48 hour clauses - In WA and Tas, by law, they have 48
hour clauses which the WA and Tas governments believe are
equivalent to a cooling off period in terms of protecting a
buyer, but which are nothing like with cooling off periods.
This is how a 48 hour clause works –
- the buyer offers to purchase a property subject to
entering into a contract for the sale of their existing
- the seller accepts the offer and a Contract is entered
into with a 48 hour clause along these lines –
The Buyer acknowledges that the Seller intends to continue
to offer the Property for sale, even though the Seller has
entered into this Contract.
Should the Seller receive an offer to enter into a Contract
which is not conditional upon the sale of any other
property, at a purchase price less than or in excess of the
Contract Price, then the Seller shall immediately notify the
Buyer in writing of such offer and furnish the Buyer with
copy of the same, and give the Buyer 48 hours to remove the
condition in the Contract that makes the Contract
conditional upon the sale of another property.
- if a second buyer then comes along with a cash offer (i.e.
is not subject to a sale and is not subject to finance), the
seller can give the first buyer 48 hours to drop the subject
to sale condition, and the contract becomes unconditional;
- if the first buyer does not do so, then the seller is
released from their obligation to sell to the first buyer,
and may sell to the second buyer.
Other than in WA and Tas, there is no law requiring 48 hour
clauses to apply to Contracts for the sale of residential
property. In those other States and Territories, it is
possible to negotiate a 48 hour clause be inserted into a
Contract, but it is highly unusual for a seller to agree to
a 48 hour clause, because they would rather wait for the
buyer to sell their own property, and enter into an
unconditional contract with them.
Cooling off allows buyers who do not buy at auction the time
to investigate the property, knowing that the property
cannot be sold behind their back or the price increased. It
works like an option to purchase, in that the buyer can
opt-out within the cooling off period and lose only a small
amount of money.