The right to “cool off”
This right to “cool off” is set out in Section 5 of the Land and Business (Sale and Conveyancing) Act (“the Act”).
Under this section, you can simply walk away from the contract and there will be no legal obligation on you to settle. As we explained in a previous blog, this right to “cool off” can be given for any or no reason and certainly should be exercised if you have any concerns about the contract.
The right to “cool off” does not apply if you’re the successful bidder at an auction. The law states that if you sign a contract immediately after an auction you’re legally bound to settle pursuant to the contract and automatically lose your right to have two clear business days to re-think your position.
This makes sense because an auction is a very open and transparent marketing process when every prospective purchaser comes together on the day and whoever is the successful bidder at the end of the auction is presumed to have done their due diligence to commit to buying the property.
“Waving goodbye” to your rights
The right to “cool off” also does not apply if you legally “waive” your cooling off rights before or at the time of signing the contract.
A legal “waiver” is when you agree to give away your rights: consider it like “waving goodbye” to something you would otherwise be entitled to legally.
Real estate agents, who act for vendors and not for you as a purchaser, often refer to waiver of “cooling off” rights as purchasing a property “under auction conditions”.
Perhaps a property is listed for auction in only a couple of weeks’ time and you’ve come along and made an appealing offer that the vendor wants to accept and therefore avoid the uncertainty of an auction.
Perhaps an auction isn’t lined up at all but the real estate agent acting on behalf of the vendor is cagey about the market or the property and simply wants to see whether you’re serious about your offer.
Whatever the reason, it is a very serious decision on your part if you want to “wave goodbye” to your “cooling off” rights, so serious that the law requires that you obtain independent legal advice about your rights before you sign what we property lawyers call a “Form 3 Waiver”.
Form 3 Waiver: Independent Legal Advice Required
It is important to understand that lawyers usually have no expertise in giving advice about the price or suitability of the property. This is what financial advisers or buyer’s agents do.
The legal advice we give usually covers any relevant matters under Section 5(7)(b) of the Act which could be any number of the following issues to ensure that you are fully aware that you are making a big yet truly informed decision to waive your rights under Section 5.
The position of the real estate agent
The first thing we make sure of is that the real estate agent is not present in our meeting with you.
Remember that the agent only acts for the vendor and has a vested interest in having the contract signed.
Your rights under the Act
We explain your rights in detail under Section 5 of the Act.
Have you done your due diligence?
We ask a number of other questions to determine that you have done your due diligence:
· Have you inspected the property sufficiently?
· Have you obtained a professional’s inspection (eg; builder, architect, or surveyor)?
· Is the proposed settlement date okay? Does it give enough time for money to be ready and for settlement to be effected?
· Is there a tenant now in occupation who is to vacate by settlement (note requirements Residential Tenancies Act requirements)?
· The contract will almost invariably be unconditional. If so are you really comfortable in doing this? Is finance absolutely locked in?
We then go through the contract in minute detail:
· Is your name as the purchaser correctly identified?
· Are there any inclusions and exclusions in the contract to be concerned about?
· What items can you consider as fixtures?
· Are there any items of equipment you will need included that are not fixtures (for example, a dishwasher, wall mounted TV panel)?
· What items can you require or expect to be removed from the property?
· We check land description by reference to the address, the Certificate of Title, and so on.
· We run through the default clauses in the contract (both vendor’s and purchaser’s) to ensure that your contractual rights but for your waiver of your cooling off rights are preserved.
· Do you have insurance in place on the property? Remember that when you sign a contract you’re immediately taken to have assumed liability for any risk.
· Otherwise ensure that there are no issues with the contract.
The Form 1 and Government Searches
Our next step with you is to scrutinize the Form 1 Vendor’s Statement and the Government searches a copy of which we insist on having at or before we sit down with you to give you our advice:
· Are there any potential defects in the Form 1?
· Are there any zoning conditions or restrictions on the property which apply to you (for example, Council consents or approvals)?
· Are there any rights to which the land is subject?
· Are there any registered encumbrances?
· Are there are any other matters stated in the Form 1 or the Council searches which concern you (for example, it could be a caveat or order on the property or a heritage issue).
Signing the Form 3
It is only after we have gone through the exhaustive process referred to above that we sign the Form 3 certificate and have you confirm the same by also signing the certificate stating that we have indeed given you independent legal advice with respect to the contract and in particular your “cooling off” rights which you have waived.
For many people, purchasing a property will be the most important commercial decision they will ever have to make. Purchasing a property at an auction requires a lot of forethought and planning.
The same applies when the vendor’s real estate agent requires you to waive your cooling off rights.
Are you doing the right thing for you and your family?
We will give you informed, level-headed advice and help you come to the correct decision, whatever it might be.
This blog is published by Di Rosa Lawyers for informational purposes only and is not considered legal advice on any subject matter. By reading and re-publishing the blog, you acknowledge that there is no solicitor-client relationship between you and Di Rosa Lawyers. The blog should not be used as a substitute for legal advice from a legal practitioner who specialises in the area and you are urged to consult us or seek your own independent legal advice on any specific issue or matter.