What Is a Cooling Off Period When Buying a House?

What Is the Cooling Off Period in Victoria?

In Victoria, different cooling-off rules may apply to a contract for the sale of land and a domestic building contract. The applicable period, costs and exceptions depend on the type of contract.

For a standard property purchase, the cooling off period is three business days. It begins from the day the buyer signs the contract of sale, not the vendor. During this window, a buyer can withdraw from the contract without being required to proceed with the purchase.

This cooling off period exists under the Sale of Land Act 1962 (Victoria) and applies to private sales of residential property, including the land contract within a house and land package.

If you are buying a house and land package, it is worth knowing early that you may have two separate cooling off periods: one on the land contract and one on the building contract. They sit under different laws and work differently. Both are covered below.

What Happens If You Pull Out During the Cooling Off Period?

Withdrawing during the cooling off period does not mean walking away without cost. If a buyer pulls out within the three business day window on a contract of sale, they forfeit 0.2 percent of the purchase price. On a $300,000 land purchase, that is $600.

To withdraw, the buyer or their conveyancer must notify the vendor or the vendor’s agent in writing before the cooling off period expires. Verbal notification is not sufficient.

When Does the Cooling Off Period Apply?

The three business day cooling off period applies to private sales of residential property in Victoria, including:

• The purchase of vacant land

• The land contract within a house and land package

• Established homes purchased through private sale

For a house and land package, this three business day period applies to the land contract. The building contract carries its own separate cooling off period, explained below.

When Does the Cooling Off Period Not Apply?

There are specific situations where the three business day cooling off period on a contract of sale does not apply, and buyers should be aware of these before signing anything.

It does not apply to:

• Properties purchased at auction

• Contracts signed on the same day as an auction, even if the property passed in

• Commercial property purchases

• Property purchased by a company rather than an individual

• Contracts where the buyer and vendor have previously signed a contract for the same property

If you are buying at auction or signing on auction day, you do not have this right of withdrawal. This is why understanding the contract thoroughly before bidding is essential.

Does the Cooling Off Period Apply to a Building Contract?

This is one of the most common points of confusion for buyers entering into a house and land package, and it is worth being clear on.

A house and land package involves two separate contracts. The first is the land contract, which is the agreement to purchase the land. The second is the building contract, which is the agreement with your builder to construct the home. Each has its own cooling off period.

The building contract has a cooling off period of five business days. Under the Domestic Building Contracts Act 1995 (Victoria), this period starts from the day the buyer receives a signed copy of the building contract, regardless of when they signed it. If the contract did not include the cooling off notices required by law, the buyer has seven days from realising this to withdraw.

To cool off on a building contract, the buyer must put their decision in writing and deliver it to the builder in the way set out in the contract. If they withdraw in time, the builder may keep $100 plus any out-of-pocket expenses the buyer approved before withdrawing, and must refund the rest. The buyer is not otherwise liable for withdrawing.

A building contract does not carry this cooling off period if the buyer engaged a lawyer to check the contract before signing, or if they had previously signed a major domestic building contract with the same builder on the same terms for the same home or land.