Cooling off period

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For agreements for the sale of residential property or rural land

The Property, Stock and Business Agents Act 2002 and the Property, Stock and Business Agents Regulation 2014 contain a number of measures to address difficulties that homeowners come across when understanding their rights and obligations under agency agreements. Under the law:

  • certain terms, warnings and disclosures must be included in agency agreements,
  • the agent must give a copy of the consumer guide Agency agreements for the sale of residential property to sellers of residential property before they sign the agency agreement, and
  • the seller has a cooling-off period of one business day (including Saturday) in which they can cancel (‘rescind’) the agency agreement after having signed it.

How the cooling-off period works

The cooling-off period begins when the agreement has been signed by or for each of the client/s and ends at 5pm on the next business day or Saturday. Public holidays, bank holidays and Sundays are not included in the cooling-off period.

The length of the cooling-off period can be extended if the agent and client both agree. This can be done in two ways:

  • a term can be included in the agency agreement stating the agreed longer cooling-off period, or
  • before the usual cooling-off period ends, the agent can sign a written statement extending the cooling-off period.

How does the client rescind the agency agreement?

If the client decides not to proceed with the agreement, they need to give the agent a written ‘notice of rescission’ within the cooling-off period. The notice of rescission is simply a letter addressed to the agent stating that the client rescinds or cancels the agreement.

The notice must be signed by the client or their solicitor. If there is more than one client, the notice must be signed by each client or their respective solicitors.

The notice can be:

  • given to the agent personally, or
  • delivered to or left it at the agent's place of business or at any other address specified in the agency agreement as a place where a notice of rescission may be given, or
  • faxed to the agent.

What is the effect of rescission?

When a notice of rescission is served during the cooling-off period, is is taken from the day the client signed the notice. Neither the agent or the client is liable to pay any commission, damages, costs or expenses in connection with the agency agreement or its rescission. If the client has already paid any money to the agent, it must be refunded in full.

How does the client waive the cooling-off period?

The client can choose to give up, or ‘waive’, their right to a cooling-off period.

The cooling-off period can only be waived under the following conditions:

  • at least one business day before the agency agreement is signed, the agent must the client a copy of the unsigned agreement, and
  • if the agreement is for the sale of residential property, at least one business day before the agency agreement is signed, the agent must give the client a copy of the consumer guide Agency agreements for the sale of residential property at least one business day before the agency agreement is signed, and
  • the client must sign the NSW Fair Trading approved waiver form before signing the agency agreement.

In relation to giving the client a copy of the unsigned agreement and consumer guide, a Saturday is not recognised as a business day.

Is the agent still required to serve the client with a copy of the fully signed agreement within 48 hours?

Yes. Section 55 of the Act requires that a copy of the agency agreement signed by the licensee must be given to the client within 48 hours of signing it, or the agent’s right to receive payment for commission and expenses may be lost.

To summarise:

  • as soon as all the clients have signed the agreement, the cooling-off period commences (unless it has been waived), and
  • a copy of the agreement needs to be given to the client, whether or not the licensee has signed it, to enable the client to read the agreement during the cooling-off period (unless it has been waived), and
  • whether or not the cooling-off period has been waived, the licensee must sign the agreement and serve a copy on the client within 48 hours, in one of the ways permitted by the Act.
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