Cooling off Period
- The cooling off period is a 3-business day window, starting from the day you sign the contract as the purchaser, to change your mind about your purchase for any particular reason.
- For a residential property, the period is three clear business days after signing to cool off. This period cannot be extended.
- You must exercise the right by giving notice to the vendor or the vendor’s agent.
- If you do decide to withdraw from the contract, you are entitled to your deposit minus 0.2% of the purchase price.
- A clear business day begins on the day that you as the purchaser signs the contract not the day the vendor signs it.
Builing & Pest Inspections
- Subject to Building and Pest Inspection clauses ensure that the property you are looking to purchase is in a satisfactory condition.
- It provides you with a written report from qualified building and pest inspectors on the property. This should help you recognise any issues with the property ranging from minor problems to major concerns.
- This clause can often be found on the 3rd or 4th page of the contract after the particulars section. It provides you with 10 days to obtain building and pest reports. Although you can seek an extension to the building and pest inspection due date, the decision to grant an extension lies solely with the Vendor.
- Building inspections should identify any structural issues or damage and pest inspections should identify any pest or termite infestations.
- If the report is not satisfactory, this clause may allow you to withdraw from the purchase.
- However, it is important to note that not all issues with the property will give you the right to end the contract. Often, you can only terminate for major structural defects.
- Although there is no definitive distinction between a major and a minor structural defect, a major structural defect has been interpreted by the courts to be ‘a shortcoming, imperfection or lack of something that pertained to the structure and was important, serious or significant’.
A subject to finance condition involves you as the purchaser agreeing to purchase the property only if you receive formal approval for a loan from your bank.
You as the purchaser should ensure written, formal confirmation from your lender of the loan approval before unconditionally signing your contract.
You are entitled to your deposit if the contract does end due to failure of the finance clause.
This is crucial because if you sign an unconditional contract, the vendor is able to force you to proceed with the contract regardless of your finances or they may retain your deposit and sue for damages.
You cannot end the contract based on this clause for fear of loan approval rejection. You must show that you have applied for finance which was then not approved.
For instance, it is important that you do not enter an unconditional contract based on ‘pre-approval’ as this is not real or final approval of a loan.
This clause is typically found on the 3rd or 4th page in your contract after the particulars section. It typically provides you with 14 days to obtain loan approval. This timeline may be extended through negotiations with the real estate agent or vendor at the time of signing.
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After signing, you must ensure that you have consistent communication with your broker or bank to ascertain whether you will receive finance approval before the subject to finance due date.
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If it is unlikely that your loan will be approved before the due date, you should inform your conveyancer at least two days prior so that they can negotiate with the vendor solicitors to extend the date.
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If your loan application is refused, a subject to finance clause can allow you to end the contract. However, this is only possible if:
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You immediately applied for the loan; and
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You did everything reasonably required to obtain approval of the loan; and
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You served written notice ending the Contract on the vendor within 2 clear business days after the approval date or any later date allowed by the vendor.
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