Do You Fully Understand “Cooling Off” Periods?

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COMMERCIAL PROPERTY INVESTORS will generally live in a residential property. So, here is something to consider when you come to buy your next home.

A recent decision in the Supreme Court of Victoria (Tan v Russell [2016] VSC 93) has made it clear that real estate agents do not have authority to receive notices of termination when purchasers seek to exercise their cooling off rights, unless otherwise authorised to receive such notices.

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The Facts

The case concerned the purchase of a residential property in Melbourne for $4,480,000. The Vendor had signed an exclusive auction authority, appointing Marshall White Real Estate as estate agents to sell the property.

The contract for the sale of land was signed by both the Vendor and the Purchasers with the Purchasers partially paying the deposit moneys as required under the Contract.

The Purchasers, however, after partially paying the deposit, attempted to exercise their cooling off rights by providing written notice to the Vendor's real estate agent via email.

The Dispute

A dispute arose as to whether the contract had been validly terminated, with the Purchaser seeking the return of the deposit money and relevant damages. On the other hand, the Vendor sought the residue of the deposit and damages in relation to the resale of the Property.

The Court had to determine whether sending an email to the real estate agent validly terminated the Contract.

Therefore, the Court considered whether real estate agents are authorised to receive notices of termination in relation to purchasers exercising their cooling off rights.

The Decision

Justice Cameron held that the real estate agent was unauthorised to receive a notice of termination with respect to the Purchasers exercising their cooling off rights.

His Honour held that s 31 of the Sale of Land Act 1962 (Vic) (the Act) did not allow the Purchaser to terminate the contract by providing notice to the Vendor's real estate agent.

His Honour drew a distinction between an 'agent' at law as referred to in s 31 of the Act and a real estate agent, stating that this section does not authorise real estate agents to affect the legal rights of their vendors by receiving notices of termination.

Furthermore, His Honour also held that there was no implied authority to receive a notice of termination, as the real estate agent's conduct did not go beyond that of attempting to market or sell the Property.

The conduct to which His Honour referred included:

  • exchanging text messages with the purchasers relating to purchase and settlement; 
  • procuring the signatures of purchasers; 
  • receiving the deposit; holding the deposit; and 
  • the fact that the real estate agent's details were in the contract of sale.

This conclusion resulted in the Vendor's counterclaim for damages succeeding.

Implication for Purchasers

Purchasers wanting to exercise their cooling off rights should only serve notices to directly only on the Vendor or Vendor's solicitor.

It is also important to note that on 13 April 2016, the REIV advised Victorian real estate agents, when selling residential real estate, to add the following clause to their exclusive sale authorities:

"The Vendor authorises the Agent to receive a cooling-off notice given under section 31 of the Sale of Land Act 1962".

Bottom Line: If this clause is present in your contract for the sale of land, it is likely that the Court will find that a real estate agent has the authority to receive notice of termination flowing from purchasers wanting to exercise their cooling off rights.

Disclaimer: If you think a similar situation may apply to you, then you should contact us for detailed legal advice relating to the particular facts and circumstances of your property or lease agreement. This article is not intended to provide such detailed and specific advice. And, you should not act on the basis of any matter contained in this article without first obtaining more comprehensive professional advice.

 

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