http://reic.com.au/blogs/australian_real_estate_blog/archive/2008/05/07/barry-plant-real-estate-gazumping-clause.aspx

Dear Peter, I am a real estate trainer in NSW. In actual fact , it's been proven here for a very longtime now, making the cooling off period binding on the vendor is actually illegal under contract law. Just to give you an idea, see below for what real estate agents here are learning about at the moment. ALERT TO ALL SALES AGENTS What many Solicitors are not doing !!!! Many sellers on exchange will insist that the buyer waive their right to a “cooling off”period as the removal of initial interest may significantly damage the seller's chances of finding other buyer’s, which may lead to significant financial loss. There must be a clause in the contract that allows the seller to rescind on the contract, that is, ‘opt out' of the deal. This is a complex area of the law, but simply put any recision must be made on the basis of ‘reasonable grounds' and not be an arbitrary or capricious act. The complex area of the law refers to section 9 of the Contracts Review Act 1980. This act covers matters considered by the courts of NSW in respect to common contract law, a tricky area of the law. If a practising solicitor hasn’t prepared a contract with a seller’s opt out clause, the contract can be null and void due to non-disclosure or could lead to a contract renegotiation on the original offer made. This indicates that if the solicitor acting for the seller did not protect their interest whilst the deal is in waiting, acts of litigation can be imposed for professional misconduct. It would be unlikely that a buyer’s solicitor, informed their client about this area before entering into the agreement. Therefore, a buyer may have legal grounds to take either the solicitor or agent to task, for being misinformed prior to signing a contract. WARNING TO ALL SALES AGENTS Under the PSBA Act 2002 the agent must, unless the principal has instructed to the contrary in writing, inform the principal of all offers of purchase as soon as practicable after receiving the offer up until exchange of contracts has taken place, however, if the agent received a counter offer pre exchange (When deposit is taken) or even post exchange (Whilst in the cooling off period) in writing or this has been disclosed to the agent verbally, it is advised that such information be passed onto the vendor’s solicitor, rather than choosing to ignore it. Remaining silent, can lead to major legal implications to both the agent and solicitor unexpectedly, under federal and state legislation. Any party to the contract that suffers a pecuniary loss, due to professional misconduct, can seek up to $25,000.00 in compensation costs through the Office Of Legal Services Commissioner or depending on the circumstances arising from the conduct, a claim for compensation could be made through either an agent or solicitor’s insurer. Rule of thumb- Beware of the backdoor counter offer & placing “SOLD STICKERS” ON SIGNS ON EXCHANGE, this is seen as contrary to section 51 of the PSBA Act 2002. Play it safe with the words “UNDER CONTRACT”. If a deal has closed after the cooling off period, it is then called a “SALE PENDING” OR SOLD PENDING SETTLEMENT. Further to this, below was an email sent to the Office Of Fair Trading in NSW which you will also find interesting. Dear Sir, ( Name not mentioned) Attached is a statutory declaration on legal gazumping. This is where it's all heading in the future and something which should have been done decades ago. In respect to this, we are advising agents that once an offer of acceptance is made, prior to proceeding any further,the buyer and agent sign a stat dec. ( see attachment) Once this has been signed by both parties, a copy of the document is sent to the vendor's solicitor. It is important that the solicitor act as witness to this, given they are responsible for preparing the contract for sale. If correctly executed, there is no reason why a buyer and vendor cannot exchange contracts within 24 to 48hrs after the offer has been accepted. A vendor will often insist that a buyer waive their cooling off rights, however the vendor cannot be bound by the cooling off period as it removes any initial interest on the property. I would like to think in most cases, if a counter offer is made whilst the contract remains conditional, nine times out of ten the first buyer who has signed a contract will be given an option to increase their offer, prior to any consideration made by the vendor to rescind the contract.

Hi George,

I think that the best solution is to ensure that the estate agent has absolutely nothing to do with the contract.  The estate agent should simply refer any intending purchaser to the vendor's solicitor, so that negotiations can be conducted by a professional who is trained in the preparation of contracts and the drafting of terms and conditions.