Cooling-Off Traps

Last week we had some anxious moments for buyers for whom we were acting under a cooling off contract.

Our clients negotiated to buy a unit. They needed finance to be approved and even though they were borrowing very little their lender was being peculiarly careful and were quite slow in checking past tax records. It is unwise to exchange contracts without unconditional loan approval and at worst and, exchange under a cooling off is an alternative but recognising they had to pay the agent 0.25% of the purchase price and, if they did not proceed they would lose that. Our clients were persuaded by the seller’s agent and, in this case they had a buyer’s agent, that they should be confident all will be alright. They decided to proceed with a cooling off contract since we managed to arrange 10 business days cooling off so as to give them a better chance with more than usual time to get the approval.

As it turned out the 10 days passed and there was no approval. We were told that 1 more day would do it and we were able to get a 24 hour extension. Fortunately approval came through near the end of the extra day. We have prepared the relevant notice to terminate the contract in case of having little time to take action.

Cooling off has some traps:

•        Usually contracts allow 42 days to complete from the date of the contract and so often preparations to do the usual work on a purchase does not begin until the buyer decides to proceed. That often means 5 days later than normal. Sellers usually refuse to allow 5 extra days to complete.
•        In recent years lenders take the best part of 42 days to be ready to advance the money.
•        As contracts normally provide that the buyer must pay interest, usually 10% per annum, there is the risk that the time lost will end up causing extra expense as a result of this interest.

Planning ahead is important as well as having lawyers who have the foresight and experience to know the traps. For the little extra it costs to have an experienced lawyer, is it not good insurance against extra expense and anxiety that is usually associated with less trained and experienced practitioners to say nothing of the value of that lawyers reputation among his colleagues.

Call us on (02) 9264 3877 and let us tell you what we can do to provide you with worry free experience of one of the most important transactions in you life.