When buying or selling property in New South Wales (NSW), after the exchange of contracts, there is a five day cooling off period before the contract becomes binding, unless a section 66W certificate (or s66W certificate) is provided by the purchaser’s solicitor of conveyancer, waiving the cooling off period and 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.
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 the exchange. 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 s66W certificate allows you to lock down the property while you finalise the above.
A cooling off period only applies to purchase by private treaty and does not apply to auctions. A contract is binding immediately after the hammer falls at auction, or if a sale is negotiated on auction terms immediately after the auction.
Can 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.
For example, if you were buying a property for $2 million, but backed out and the vendor later sold for $1 million to another purchaser, you may also be sued for the difference in the reduced price.
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.
Contents of a s66W 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 66W certificate; and
- the effect of no cooling off period.
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 have any questions about 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.
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