If you are unsure what a Section 66W Certificate is or whether you should give one, this guide explains when a Section 66W Certificate is required and what both purchasers and vendors should know about them
Why Does A Section 66W certificate Matter When Buying Property in NSW?
If you are a first home buyer or new to the Sydney property market, you can be forgiven for asking: What is a Section 66W Certificate? The expression is often encountered when you are considering making an offer for a property and a real estate agent informs you it is needed.
There is no legal requirement to give a vendor a Section 66W Certificate. However, it has become commonplace in a competitive Sydney property market for vendors to require that purchasers give a Section 66W Certificate before exchanging contracts.
Vendors often insist on a Section 66W Certificate because, without it, a purchaser has the benefit of a cooling off period provided by section 66S of the Conveyancing Act 1919 (NSW), unless an exception in Section 66Q applies. This is why it can sometimes colloquially known as a “cooling off certificate”.
During a cooling off period, a purchaser can rescind a contract by giving notice to the vendor. The effect of recission is that the contract is cancelled and 0.25% (one fourth of one percent) of the purchase price is forfeited to the vendor.
By providing a signed Section 66W certificate, a purchaser waives their rights to any cooling-off period. This locks the purchaser into the contract unconditionally from the moment contracts are exchanged, giving certainty to the vendor.
When Is There No Cooling-Off Period in NSW Property Contracts?
It is important to note that not all purchasers of property in NSW will have the benefit of a cooling off period under the Conveyancing Act. This includes when:
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- The purchase does not relate to residential property (as defined in section 66Q of the Act); or
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- The property is sold at public auction; or
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- A contract is made on the same day as the property passed in at auction; or
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- 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.
Why Buyers May Want a Cooling Off Period
A purchaser may wish to have a cooling off period to have more time to confirm that a loan to purchase the property has been unconditionally approved, or to make further enquiries and due diligence in respect of the property. You may also negotiate amendments to the contract during this period. The cooling off period affords some extra time to make these enquiries while running a relatively minor risk of forfeiting 0.25% of the purchase price if the purchaser rescinds contract during the cooling off period.
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.
Risks to Vendors When Allowing a Cooling Off Period
A vendor who agrees to provide a cooling off period (that is, not require a Section 66W Certificate) runs a risk that the purchaser might exercise its right to rescind the contract during the cooling off period. The vendor has no guarantee that 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.
Can You Extend the Cooling-Off Period in NSW?
Yes, a cooling off period can be extended. If a purchaser is certain that they need a longer cooling off period than provided in the Conveyancing Act, they can request that an extended cooling off period be a term of the Contract before it is exchanged.
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.
Does a Vendor Have to Extend the Cooling-Off Period?
No, a vendor has no legal obligation to agree to extend a cooling off period. However, a vendor should carefully weigh up their options including the availability of any other interested parties and potential issues with their agency agreement as outlined earlier in this article.
How to Rescind a Property Contract During the Cooling-Off Period
If a purchaser wishes to rescind a contract during a cooling off period, he or she must ensure that a notice of rescission is served on the vendor in accordance with the contract prior to the expiry of the cooling off period.
If a valid notice of rescission is served on time and as required by the terms of the contract, then the contract will be at an end once the notice is given and the purchaser will forfeit 0.25% of the purchase price.
Can You Exit a Property Contract After Giving a Section 66W Certificate?
The short answer is usually not — it is difficult to exit a property contract without penalty after giving a Section 66W Certificate or after the expiry of the cooling off period, unless limited exceptions apply. These may include (but are not limited to):
- The vendor’s failure to include in the contract a document prescribed by section 52A of the Conveyancing Act, in which case the purchaser has a right to rescind the contract within 14 days, provided that settlement has not occurred.
- The vendor’s breach of warranty implied by section 52A(2)(b) of the Conveyancing Act, in which case the purchaser may have a right to rescind the contract before settlement. However, the purchaser must prove that they were unaware of the breach before entering into the contract, and that they would not have entered into the contract had they known of the breach.
Assessing whether a purchaser is entitled to rescind a contract often requires careful review of the contract and the circumstances of the sale.
For assistance with Section 66W certificates or any aspect of property contracts or conveyancing, please contact our office on (02) 9698 9160. Gattuso Legal is a legal practice in the Inner West of Sydney with experience in property law and conveyancing. Read more about Gattuso Legal’s conveyancing services.
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