As many of you would know, there is a 5 business day cooling off period which applies to the sale and purchase of residential real estate.
The intent of the legislation which created the cooling off period was to encourage potential purchasers to exchange quickly to avoid being gazumped whilst retaining the ability to pull out of the sale at minimal cost if anything untoward was discovered.
There are a number of situations in which the cooling off period does not apply. One of those situations is where the property is sold at auction or is sold on the same day after a failed auction.
A recent Supreme Court case demonstrated that it is not always easy to say whether an auction has in fact taken place.
The case involved the sale of valuable Sydney house. On the day of auction, many people attended but there was only one registered bidder. The auctioneer and the vendor’s real estate agent negotiated with that registered bidder without actually proceeding to auction the property. Announcements were made to the crowd thanking them for their patience and indicating that negotiations were taking place with the registered bidder.
The negotiations with the registered bidder were successful and a contract was entered into and a 10% deposit paid on the day of the proposed auction. A few days later however the purchaser pulled out of the deal and relied upon the cooling off period provisions. The vendor said the cooling off period didn’t apply because of the auction.
The Supreme Court held that the cooling off period did apply as the auction never commenced. Merely the advertisement of the proposed sale by auction and the gathering of people to attend did not constitute offering the sale by auction. The auction process required the auctioneer to open the auction and request bids.
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