FIND OUT THE CONSEQUENCES BEFORE YOU TERMINATE

Entering into a Contract to buy or sell a house is not a step that should be taken lightly. Each party who signs the contract is bound by very specific terms and if either party does not fulfil their contractual obligations, there can be serious consequences.

The Cooling-Off Period

In Queensland, all contracts for the purchase of house and land contain a short period of time whereby the Buyer may withdraw from the Contract if they change their mind (a “Cooling-Off period”). The duration of the Cooling-Off period extends from the moment the Buyer has received the fully signed Contract, and ends at 5.00pm five (5) business days after this date. The Buyer may elect to waive or shorten the Cooling-Off period by providing notice to the Seller in writing.

While terminating a contract under the Cooling-Off period allows the Buyer to opt-out of the Contract if they have changed their mind, it is not without consequence, as a termination penalty applies. The seller may elect to retain 0.25% of the purchase price if the Buyer terminates during the statutory cooling-off period.

Finance and Building & Pest Conditions

Contracts commonly contain clauses such as Finance and Building & Pest Inspections which allow the buyer time to apply (and be approved for) a loan to purchase the property, and allow the buyer the opportunity to have a qualified Building & Pest Inspector inspect the property to ensure there are no major structural issues with the property, prior to the Buyer being committed to completing the purchase.

If the Buyer has elected to include a Finance and Building & Pest condition, they buyer may elect to terminate the Contract on the basis that either one, or both of these conditions was not satisfied. In this instance, the Buyer is entitled to the return of their deposit in full. 

What if the Seller has changed their mind or received a better-offer?

Generally speaking, it is very difficult for a Seller to back out of Contract without the Buyer imposing heavy consequences. If the Seller terminates without a legal reason to do so, the Buyer may affirm the contract and elect to seek specific performance of the contract (ie force the seller to complete the contract) and/or sue the Seller for damages. Alternatively, the Buyer may terminate the contract and sue the Seller for any loss suffered as a result of the Seller’s default.

In some circumstances, there may be a “Better Offer Clause” or “Sunset Clause” included in the Contract, which would allow the Seller to terminate the Contract if a more favourable offer is presented to them.  The inclusion of a Better Offer Clause or Sunset Clause is usually included in the Contract prior to it being signed by all parties, but in some instances, it may be possible to negotiate the inclusion of the clause once the Contract is underway.

It is important to always seek legal advice prior to signing a contract, particularly if you have any doubts. If you are considering backing out of the sale or purchase of a property, we strongly recommend you seek legal advice prior to taking action to avoid a costly legal fight. Give the experts at Millwater Tyrrell Law a call and see how we can help you navigate this tricky area, and ensure your rights and interests are protected.