Drafting Up a Conveyancing Agreement: 3 Things to Know About the Cooling-Off Period
To protect the buyers when buying a property, most conveyancing agreements have a cooling-off period, which is essentially several business days when the buyers have a right to terminate the sale with little penalty. The terms and conditions of the cooling-off period can be customized, as long as both parties agree When consulting with a conveyancer about the terms and conditions of the cooling-off period, here are 3 things that need to be clearly defined.
Define the Length of the Cooling-Off Period
Most states have a recommended length for the cooling-off period. If the length of the cooling-off period has not been properly defined, the standard length will apply. For example, in the Australian Capital Territory (ACT), the cooling-off period is usually 5 business days. If the sale is terminated within those days, the buyer is responsible for paying 0.25% of the sale price as a penalty. Determine whether you would like to modify the length of the cooling-off period and be careful when outlining whether any holidays or special days are exempt.
Date of When the Contract Was Received Should Be Logged
Both the seller and the buyer should be careful in keeping evidence that can prove when the cooling-off period starts. In most cases, the cooling-off period starts when the buyer receives the legal contract of the sale. If the date when the legal contract was received is a holiday or a weekend, the cooling-off period will begin on the next business day. It's a good idea for the sellers to deliver the legal contract themselves or have their conveyancer do the job for them. To prove that the legal contract was delivered, ask the buyer for a notice of receipt.
The Terms of Termination Should Be Clearly Written
In the event that the buyer decides to terminate the sale during the cooling-off period, the contract should also specify how the termination will proceed. For example, it should outline the legal channels and the procedures that the buyer will have to go through in order to terminate the sale. It should also outline when the seller will have to return the deposit and whether the seller can subtract the penalty from the deposit when returning it.
Regardless of whether you're the buyer or the seller, it's important to fully understand how the cooling-off period works. The cooling-off period is a good time for the buyer to reconsider the purchase, and the seller should be prepared in the event that the buyer decides to terminate the sale.