Beware of cooling off rights

Eales & Mackenzie Lawyers Melbourne

If you are considering purchasing a residential property in Victoria, you should be aware of the correct procedure for exercising your cooling-off rights to ensure that the contract is validly terminated.

Cooling-off Period

Section 31 of the Sale of Land Act 1982 (Vic) provides a statutory cooling-off period to a purchaser who enters into a specified class of contract for the sale of land.

The purchaser may, at any time before end expiration of three (3) business days after he/she has signed the contract, give notice to the vendor that he/she wishes to terminate the contract.

In this context, “business day” means any day except a Saturday or Sunday, or any other day the whole or any part of which is observed as a public holiday throughout Victoria.

The three (3) clear business days begin to run from the date upon which the purchaser affixes his/her signature to a contract document, whether or not the contract later becomes a binding contract: Lebdeh v Smith [1985] VR 807. This means the purchaser must not wait for the vendor to sign the contract before exercising his/her rights under section 31.

Form and Service of Notice

The notice must be in writing and signed by the purchaser, and given to the vendor or the vendor’s agent, or left at the address for service of the vendor specified in the contract or the address of the vendor’s agent, within three (3) clear business days after the purchaser has signed the contract.

“Agent” is not defined in the Act but in a recent case heard in the Supreme Court of Victoria, it was held that a notice given to the vendor’s real estate agent did not constitute a valid notice: Tan v Russell [2016] VSC 93. In that case, the vendor was entitled to retain the deposit paid by the purchaser ($350,000) and to claim the unpaid balance of the deposit ($98,000) and further losses incurred on resale of the property (around $410,000) together with interest and costs.

Accordingly, the notice must be validly served on the vendor directly or the vendor’s lawyer or conveyancer with express authority to accept such notices.

Consequence of Exercising Cooling-off Rights

If the purchaser gives a notice to the vendor in accordance with section 31, the contract is terminated and the purchaser is entitled to a refund of all moneys paid by him/her under the contract subject to the vendor retaining the sum of $100 or 0.2% of the purchase price, whichever is greater.

Notice of Cooling-off Rights

A contract to which section 31 applies must contain a conspicuous notice advising the purchaser that he/she may, before the expiration of three (3) clear business days after he/she signs the contract, give notice that he/she wishes to terminate the contract.

If the contract does not contain such a notice, the purchaser may end the contract at any time before he/she becomes entitled to possession (usually at settlement) or to the receipt of rents and profits.

Any attempt to exclude, modify or restrict the rights given by section 31 will be void and of no effect.

Excluded Contracts

There is no statutory right to cooling-off under a contract for the sale of land where:
(a) the land is used primarily for industrial or commercial purposes; or
(b) the land is more than 20 hectares and is used primarily for farming; or
(c) the sale is by publicly advertised auction; or
(d) the land is sold within three clear business days before, on or after a publicly advertised auction; or
(e) the vendor and purchaser have previously entered into a contract of sale of the same land in substantially the same terms; or
(f) the purchaser is an estate agent within the meaning of the Estate Agents Act 1980 (Vic); or
(g) the purchaser is a corporate body.

For the above contracts, an express cooling-off right would need to be added as a special condition.

For more information, please contact experienced contract lawyer at Eales & Mackenzie Corporate and Legal Advisors on (03) 8621 1000 or email

The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.

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