Understanding cooling off is critical!
A recent matter has prompted us to write an article warning of the dangers of entering into a contract for the purchase of a property without being absolutely sure that you are ready to do so.
We recently received a call from a client who told us that they had signed an unconditional contract for the purchase of a property the previous day, but after a night of contemplation, the client had decided that the contract made them nervous, as they were waiting on their current property to sell. The client called to ask for our advice on whether they could terminate the contract.
We have found that although many clients are aware that the standard contract for residential purchases in Queensland (the Real Estate Institute of Queensland Contract) contains a statutory clause enabling them to terminate under a five-day cooling off period, they are not aware of the fact that a 0.25% termination penalty applies. On the face of it, 0.25% does not sound like much, but in this instance, when the purchase price was $900,000.00, the termination penalty was $2,250.00.
The client chose to terminate that same day and the seller issued the penalty as anticipated. The issue of the penalty was not changed by the fact that the property sold the following day to another purchaser. The fact that this scenario seems unfair does not change the rights of the seller to impose this penalty.
The worst part of this situation was that it would have been easy for the client to have inserted one special condition into their contract making the contract conditional upon the sale of their current property if they had first sought legal advice (in this instance, there would have been no penalty in the event of termination and the client could have purchased their ideal home without the stress encountered in our client’s situation).
If you need assistance in drafting special conditions into your Contract, please feel free to contact Sharon Hogan on 07 5574 3560 or email firstname.lastname@example.org.