When buying or selling property in New South Wales (NSW), after the exchange of contracts, there is generally a five day cooling off period before the contract becomes binding. However, the cooling off period can be waived if the purchaser’s solicitor issues a section 66W certificate (s66W certificate), making the contract immediately binding. The cooling off period and waiving of the cooling off period is regulated by the Conveyancing Act 1919 (NSW) (the Act). This article explains the purpose of a s66W certificate and unpacks the benefits and risks for you, as a purchaser, instructing your representative to provide a s66W certificate.
What Is the Process for Exchanging a Contract?
When you buy or sell property, the property will not be taken off the market until after the contracts have been exchanged. This entails both parties signing and dating the contract and reviewing both contracts. Then the seller and the buyer must complete an exchange of the contract. After this exchange takes place and the buyer pays the deposit for the property, the contract is then binding.
Why Do I Need a Section 66W Certificate?
In New South Wales (NSW), a standard cooling off period lasts from the date of contract exchange to 5pm on the fifth business day after you exchange contracts. This period ensures you have time to:
- consider your purchase;
- undertake any searches such as pest and building inspections; and
- finalise your finance arrangements.
A cooling off period only applies to the purchase of the real estate by private treaty and does not apply to auctions. A contract is binding immediately after the hammer falls at auction. Or alternatively, if you negotiate a sale on auction terms, immediately after the auction.
However, a s66W certificate allows you to lock down the property while you finalise the above. It has the effect of waiving your right to the cooling off period. A s66W certificate is often attractive to a seller who wishes to complete the sale process quickly. Further, it may work in the buyer’s favour to help secure a property in a competitive market.
Continue reading this article below the formCan I Still Back Out of the Property Sale?
As a purchaser, if you decide to back out of the contract during the cooling off period (without providing a 66W certificate) you still have to pay a penalty, 0.25% of the purchase price. This is not an insignificant amount, but is at least capped.
However, if you decide to back out after providing a s66W certificate, there is no cooling off period. Therefore, you will be penalised as per the original contract. The penalty is generally 10% of the purchase price, plus the difference between your offer and the subsequent sale of the property.
The difference in the penalty based on whether or not you provide a s66W certificate is very different and another risk to consider. Consequently, it is important for you, as a purchaser, to be confident when using a s66W certificate. Further, you should undertake due diligence and obtain unconditional finance approval in writing before providing a s66W certificate.
Before buying a business, it is important to undertake due diligence, to verify the information supplied by the seller. This guide will walk you through the due diligence process.
Contents of a Section 66W Certificate
Under the Act, a s66W certificate must set out the following:
- the name of the legal practitioner (solicitor or barrister) and where they are admitted to practice (or the name or a licensed conveyancer);
- a statement that the legal practitioner provides the certificate in line with section 66W of the Act;
- reference to the name of the property, the vendors and the purchasers;
- confirmation that there is no cooling off period for the contract;
- a statement that the legal practitioner does not act for the vendors; and
- a statement that the legal practitioner has explained to the purchasers:
- the effect of the contract for the purchase of the property;
- the nature of a s66W certificate; and
- the effect of no cooling off period.
Key Takeaways
Purchasing a property can be a complex and stressful event. It is often one of the biggest purchasing decisions in your life. If you are buying property in NSW, note that a five day cooling off period applies after the contract exchanges. If you wish to waive your right to a cooling off period, you can use a s66W certificate. When doing so you should consider the condition of the property, your finances and the penalty if you decide not to proceed. If you would like legal advice about issuing a s66W certificate or need assistance in purchasing property, get in touch with LegalVision’s property lawyers on 1300 544 755 or fill out the form on this page.
Frequently Asked Questions
A section 66W certificate waives the cooling off period, making a contract to purchase property immediately binding.
As there is no cooling-off period, you will be penalised as per the original contract. This penalty is usually 10% of the purchase price, plus the difference between your offer and the subsequent sale of the property.
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