Not all purchasers of property in NSW will have the benefit of a cooling off period under the Conveyancing Act.  This includes when:
 
– The purchase does not relate to residential property (as defined in section 66Q of the Act); or

– The property is sold at public auction; or

– A contract is made on the same day as the property passed in at auction; or

– The contract arises from the exercise of an option to purchase the property.  Note however that there may be a cooling off period at the point of entry into an option agreement, unless waived.
 
A Section 66W does not need to be given in the above circumstances as there is no cooling off period to waive.

A cooling off period allows a purchaser more time to conduct enquiries in respect of the property and to confirm unconditional approval of a loan. It can also present an opportunity to negotiate amendments to the contract. These enquiries can be made during the cooling off period while running a relatively minor risk of forfeiting 0.25% of the purchase price if their cooling off rights are exercised.

It is important to note that a cooling off period is for the benefit of a purchaser and not the vendor. While it affords flexibility to the purchaser, the vendor is locked into the contract with the purchaser immediately on the initial exchange of contracts. Therefore, a purchaser may be prepared to risk 0.25% of a purchase price to secure their dream property prior to having conducted all enquiries to prevent missing out on the property.

A vendor who agrees to provide a cooling off period (that is, not require a Section 66W Certificate) runs a risk that if the purchaser cancels the contract, any other prospective purchasers who were previously interested in the property may have since moved on.

Vendors should also be mindful of the terms of their agreement with their real estate agent as to whether commission may still be payable even if a sale does not proceed to completion.

A cooling off period can also be extended while it is on foot, if the vendor agrees in writing. Any request should not be left to the last minute as the purchaser’s hand may be forced to rescind the contract (or risk being locked into the contract without having completed its due diligence) if it does not receive a response from the vendor to the extension request and the strict 5PM deadline approaches on the last day of the cooling off period.

It is also possible to at the outset negotiate an extended cooling off period before signing the Contract.

If a purchaser wants to cancel a contract he or she must serve the vendor with a valid notice of recission before the cooling off period expires. It is important that the notice is validly drafted and that the method of service of the notice complies with the contract. Once the notice of recission is served, the contract comes to an end and 0.25% of the purchase price is forfeited to the vendor. If you have paid a deposit greater than 0.25% of the contract, you are entitled to be refunded the difference.

You cannot cancel a contract without penalty after giving a Section 66W Certificate except in some limited circumstances. These circumstances may include (but are not limited to):

– Whether the vendor failed to attach a document required to be in the contract under section 52A of the Conveyancing Act. If so, the purchaser has a right to rescind the contract within 14 days of the contract, provided that settlement has not yet occurred.
 
– Whether the vendor has breached a warranty implied by section 52A (2)(b) of the Conveyancing Act. If so, the Purchaser must have been unaware of the breach before entering into the contract. The Purchaser must also demonstrate they would not have entered into the contract if they had known about the breach.
 
Assessing whether a purchaser is entitled to rescind a contract is often requires careful review of the contract and the circumstances of the sale.