A RECENT CASE in the Queensland Civil Administrative Tribunal (QCAT) has brought the laws governing cooling-off periods into sharp focus. And the ability of vendors to retain termination fees where contracts are terminated was challenged.
While the laws relating to cooling off periods differ in each state, this article will discuss the general principles of cooling off periods … and what you need to be aware of when seeking to exercise your rights.
In broad terms, a ‘cooling off period’ refers to a purchaser’s statutory right to terminate a contract to purchase real estate within a certain period of time, after a contract of sale has been executed.
The period of time in which the right can be exercised varies from state-to-state. The type of properties which the right attaches to (such as residential, commercial, industrial or retail) also varies from state-to-state.
Cost of Exercising a Cooling Off Period
Where the purchaser signs a sale contract, pays a deposit but subsequently exercises their cooling off right to bring the contract to an end, generally speaking, the purchaser is entitled to a refund of their deposit.
However, in most jurisdictions, if the purchaser exercises a cooling off right, the purchaser must pay a certain percentage of the purchase price to the vendor.
For example, in NSW this amount is 0.25% of the purchase price.
As you can appreciate, the amount forfeited to the vendor is significant for high value properties.
But what happens when the purchaser has paid the deposit, but exercises a cooling off right, before the deposit is banked?
The Case: Lucy Cole Prestige Properties Broadbeach Pty Ltd ATF Gaindri FT Trust t/as Lucy Cole Prestige Properties Broadbeach Pty Ltd & Anor v Kastrissios [2013] QCAT 653
The Facts of the Case
Essentially, when the purchaser signed the sale contract, it provided the selling agent with a cheque for the deposit.
Before the selling agent deposited the cheque, the purchaser exercised its?statutory cooling off right.
The purchaser argued it was not required to pay 0.25% of the purchase price as a cooling off fee, as the cheque for the deposit had not been banked.
The Decision
The QCAT held that in such circumstances, the purchaser is still liable to pay the statutory fee for exercising its cooling off right.
What this Means For You as a Purchaser
If you are in similar circumstances and you exercise your cooling off right before the deposit is banked — you will not avoid paying a cooling off fee.
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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