by Tim O’Dwyer Solicitor*
When is a contract not a contract? Answer: when the law gives the buyer a right to “cool off” and cancel the contract. Time was, when only companies selling door-to-door would not know whether they actually had a sale until after their Mum-and-Dad customers’ statutory “cooling off” period passed.
Nowadays in most parts of Australia residential property buyers may validly terminate “signed-sealed-and-delivered” contracts for any reason whatever during the “cooling off” period allowed by law. Governments and their Fair Trading offices would say this is an excellent consumer protection mechanism, but excellent or not, they fail to appreciate that Mum-and-Dad sellers can also be protection-worthy consumers. So why no seller’s “cooling off” right? What’s good for buyer geese should be good for seller ganders! (Funnily enough a Queensland Fair Trading Minister once did remark that buyers and sellers were “in essence, ordinary consumers deserving of protection.”)
Perhaps the current official thinking is that buyers are more vulnerable consumers because of possible pressure from pushy sellers or crafty agents. But if buyers alone need an escape hatch after contracting under pressure or in haste, why no “cooling off” for those who buy at auction? When auctions are promoted on the basis they create “a sense of urgency … a competitive environment”, surely auction buyers (if not also Mum-and-Dad auction sellers) should be the real estate consumers most eligible for “cooling off” rights – especially when the fall of the hammer irrevocably commits both parties to a “cash unconditional” contract.
Frankly, the notion of a buyer’s “cooling off” right is less than equitable when its exercise can impact inconveniently not only on innocent sellers but also on their agents (innocent or otherwise), solicitors or conveyancers for both parties, insurers, finance brokers, building and pest inspectors, valuers, sellers’ mortgagees and buyers’ financiers. “cooling off” periods are, to my mind, a poorly-conceived, after-the-event approach to consumer protection. A far better way to protect buyers and sellers alike, it seems to me, would be to keep agents – if they are as much as over-keen buyers the problem – out of the contract-making or exchange process and to provide that only those legally qualified be legally allowed to prepare legally binding contracts.
To best protect real estate consumers Governments should oblige buyers and sellers to obtain independent legal advice before contracts are signed – just as many financiers require their borrowers to be legally advised before signing mortgage documents. If you do your own conveyancing afterwards, so be it.
Meanwhile across the nation conveyancers and conveyancing solicitors complain that they frequently don’t receive buyers’ contracts from sellers’ agents until after “cooling off” periods have expired. Wonder why?
The notion of buyers who “cooling off” having to pay penalties to sellers also seems less than fair. If the “cooling off” penalty is calculated as a percentage of the contract price, it may turn out to be a substantial sum. Why not a fixed amount? Why should the seller of a more expensive property be entitled to a larger penalty than some hapless down-market seller?
No matter that in Queensland, for instance, the REIQ standard listing terms permit the agent to keep half the “cooling off” penalty for his or her troubles. In Queensland also, any penalty is payable only from the buyer’s deposit. So if a property is sold on a token “deposit” (Queensland agents often accept $100.00 or less), the penalty is limited to that paltry sum. So much for compensating sellers for their loss of a sale, which is presumably the rationale for penalties payable by “cooled off” buyers.
Once again you have to wonder about the integrity of a consumer protection mechanism which has a price attached, and which can involve a prohibitive penalty for merely exercising your rights.
While no Australian Government seems prepared to give sellers the right to “cool off” from legally enforceable contracts, what about regarding sellers as consumers at least when they put their properties on the market through estate agents? To my knowledge, only the Jenman Group’s APPROVED agents give clients an opportunity to “cooling off” from their exclusive 49-day listing agreements. No other agents or franchise groups appear to offer this owners’ opt-out.
“cooling off” rights for buyers meantime have become in some parts of Australia an agents’ selling tool. The spiel directed at cautious buyers who want to hold off pending legal advice is essentially this: “Don’t waste your money seeing a solicitor first. There’s a cooling-off period. You can still get out. It’s safe to sign now and, anyhow, it’s only an offer.”
*Tim O’Dwyer is a Queensland solicitor and consumer advocate. Email: firstname.lastname@example.org
by Tim O’Dwyer Solicitor*