13 February 2012 - Cooling-off changes Q&A

Hot off the Press 168 - From the REIV Since issue No. 167 Cooling-off: an era draws to a close appeared, HOTP has been receiving calls asking how do we get around this?. HOTPs answer is simple: you dont, you work with it. The callers assume the world as we know it is going to end on 1 March because, beginning on that date, if a buyer of residential real estate is an individual and seeks and receives independent legal advice from a lawyer before signing a contract, theyll keep their right to cool off. HOTPs advice on the end-of-the-world scenario is also simple: get a grip, the world isnt going to end. In fact cooling off in residential sales has been a shandy ever since conveyancers appeared on the scene. Gentle reminder one: its always been the case that if an individual buyer seeks and receives independent advice from a conveyancer before they sign a contract to buy a residence, they keep their cooling-off right. That isnt going to change. Gentle reminder two: numerous individual buyers seek and receive advice from conveyancers before they sign a contract. Gentle reminder three: once someone has signed a contract to buy a place where they want to live, they rarely cool off. Q: Ive been told that beginning 1 March 2012 if residential buyer, who is an individual, gets independent advice from a lawyer before they sign their contract, theyll keep their right to cool off and cancel the sale. Is that right? A: Yes. Q: Can we add a special condition in our residential contracts saying a buyer waives their right to cool off? A: No. Thats an offence under the Sale of Land Act. The Act also says your special condition will be completely ineffective. A buyer cannot contract out of their cooling-off rights. Q: Is a company an individual? A: No. An individual is a human being. If a company buys a residence, it cannot cool off. Q: From 1 March, will an individual who buys a residence before, at or after a public auction be able to cool off? A: That depends on when the buyer signs: before or after the auction. A buyer cannot cool off if they sign a contract within three clear business days before the day on which a publicly advertised auction is to be held, or if they sign on the day of the auction, or if they sign within three clear business days after the day on which the auction was held. If a buyer signs a contract outside of those time limits, cooling off will apply. Q: Which days are business days and how to you calculate three clear business days? A: Business days are the days of the working week: Monday to Friday inclusive. Saturdays and Sundays are not business days. Neither is a public holiday, if it applies in the locality where some act or thing is to be done. In calculating three clear business days you do not count the day on which the contract was signed by the buyer. Example: a buyer signs a contract on a Tuesday. You calculate the three clear business days beginning the next day, Wednesday. The buyers right to cool off ends at midnight on the third business day. Q: Do you calculate the three clear business days in which a buyer may cool off from the day on which the buyer signs the contract or from the day on which both the buyer and seller have signed it? A: You calculate them from the day on which the buyer signs. Q: Our agency conducts sales by expression of interest. When weve got enough interested buyers we invite them to a boardroom auction. We tell them that if they want to attend they must bring a letter from their lawyer stating theyve sought and received independent legal advice before signing the contract. How will the cooling off change affect our expression of interest sales? Ans: Your expression of interest sale is a private sale, notwithstanding it culminates in an auction in your boardroom. Beginning on 1 March 2012, a successful bidder will be able to cool off within three clear business days of signing a contract at the conclusion of your boardroom auction. Thats the case even if they bring along a letter from their lawyer stating theyve sought and received independent legal advice before signing the contract. They cannot contract out of their right to cool off. Qu 8: In view of the change to cooling off on 1 March, were thinking we can get around it by conducting our expression of interest sales so they appear to be public auctions. Nothing will really change and well still have our usual boardroom auction but within three clear business days of the advertised auction date or, when we get enough interested buyers, well simply bring the auction date forward to suit, conduct our boardroom auction and keep the cooling off free period. Will this work? Ans: No. If you carry out this subterfuge you are deliberately engaging in misleading and deceptive conduct, contrary to prohibitions in the Commonwealths Competition and Consumer Act and the Victorian Fair Trading Act, by causing the public and, in all likelihood, your vendor to believe you will be conducting a public auction when you have no intention of doing so. Your proposal does not accord with good estate agency practice and runs contrary to your Estate Agents (Professional Conduct) Regulations obligation to refrain from engaging in conduct that is unprofessional or detrimental to the reputation or interests of the estate agency industry. You may also create a conflict of interest by having your vendor incur unnecessary and costly auction advertising for the benefit of your agency. This, in turn, may raise the unpleasant issue of obtaining a financial advantage by deception. Apart from quickly leaving your agencys reputation in tatters, you will also help create a climate in which the public will question the legitimacy of public auctions. Q: How do you see the expression of interest private sale campaign with boardroom auction, and other types of private sales that exploited the legal advice exception to cooling off, evolving after 1 March, 2012? A: Its difficult to predict what may happen. Months may go by before a trend emerges. Its possible that expression of interest sale campaigns, and others that relied on the legal advice cooling-off exception, will become things of the past. Perhaps the change to cooling off may see the emergence of the traditional sale by tender in residential sales? While cooling off will apply, the tender has distinct advantages: it is a recognised form of private sale; the process and documentation is well understood, unlike expressions of interest where Raffertys Rules apply; vendors can consider multiple offers on buyer signed contracts while cooling off time runs; and the vendor has the final say as to which, if any, tender will be accepted.

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