If you are considering buying a property, it’s important to be aware of the correct procedures for cancelling the contract if that should become necessary. A new Supreme Court ruling that saw a purchaser forfeit their deposit and pay damages sets a new precedent that all agents and buyers should follow.
Real estate agents and purchasers should be aware of how cooling off rights can be exercised, following a recent case1 in the Victorian Supreme Court.
In this case, the purchaser bought a property for $4.48 million and paid a part deposit of $350,000. The purchaser then attempted to cancel the contract by providing written notice to the real estate agent that it was exercising its cooling off rights.
The vendor disputed that the notice had been properly served as the real estate agent did not have the authority to receive the notice on behalf of the vendor.
The vendor then served a default notice on the purchaser requiring the purchaser to complete the contract. The purchaser refused to comply. The vendor exercised its right to terminate the contract. The property was eventually resold for $4.07 million.
The purchaser issued proceedings against the vendor seeking a return of the deposit, while the vendor counterclaimed seeking the balance of the deposit and compensation for the loss it suffered on the resale of the property.
The Supreme Court found in favour of the vendor, holding that the real estate agent did not have the authority to receive the cooling off notice on behalf of the vendor. As a result, the purchaser forfeited the partial deposit it had paid and was liable for the balance of the deposit and the loss suffered on the purchase price, being a total loss of $858,000.
It is important that purchasers ensure that any cooling off termination notice is sent to the appropriate party to avoid being locked into a contract they are trying to cancel.
(1) Eng Tan and Chen Lo v Thomas Russell  VSC 93
|Disclaimer: This publication contains comments of a general nature only and is provided as an information service. It is not intended to be relied upon as, nor is it a substitute for specific professional advice. No responsibility can be accepted by Rigby Cooke Lawyers or the authors for loss occasioned to any person doing anything as a result of any material in this publication.
Liability limited by a scheme approved under Professional Standards Legislation.
©2016 Rigby Cooke Lawyers