NSW and Victoria: cooling-off, deposits and settlement timelines

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Kooky

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Between the moment a price is agreed and the moment the keys change hands, a home sale passes through a set of fixed stages: a contract that becomes binding, a deposit, a short window in which the buyer may still walk away, and a settlement day on which the money and the title move. Every Australian state runs those stages under its own rules. A buyer who has bought before in Sydney and is now looking in Melbourne, or an agent who has moved across the border, cannot assume that anything carries over.

This guide follows the two largest states, New South Wales and Victoria, from the contract to the keys. It rests on the consumer pages of each state's own regulator: NSW Fair Trading and Revenue NSW on one side, Consumer Affairs Victoria on the other. Each rule below is given for the state whose regulator publishes it and for that state only. Where the pages are silent, the guide says so rather than filling the gap.

NSW Fair Trading for New South Wales; Consumer Affairs Victoria for Victoria. Residential property sold by private sale.

NSW: nothing binds before exchange

In New South Wales the decisive moment is the exchange of contracts. NSW Fair Trading describes it simply: there are two copies of the contract, the seller signs one, the buyer signs the other, and the signed copies are swapped. Only then are both sides bound. Before exchange, the regulator says, the agreement is usually not binding and either the buyer or the vendor can change their mind.

That has a practical consequence for the days between an accepted offer and exchange. Fair Trading's page on making an offer defines gazumping as the case where an agent or seller accepts an offer at an agreed price and the property is then sold to someone else, usually for more. The page is direct about what follows: nobody has to compensate the buyer who missed out for the legal, inspection or finance costs already spent. The agreed price was not yet a contract.

Buyers are sometimes asked for an expression of interest deposit at this stage. Fair Trading states that such a payment does not reserve the property and is refundable. If another person enters a contract for the home, it must be refunded in full, and within 14 days. It is a sign of good faith, and no more than that.

Exchange itself is usually arranged by the solicitor, the conveyancer or the agent. The seller-side page says the two copies are now usually signed and exchanged electronically. When the agent is the one who arranges the exchange, the page for property agents sets a deadline: the agent must give signed copies to each party, or to their solicitor or conveyancer, within 2 business days. The contract can only be altered by the lawyers or conveyancers of the two sides; Fair Trading says a real estate agent cannot change any part of it.

The NSW deposit, in two payments

A deposit is payable at exchange. According to NSW Fair Trading, the standard deposit is 10% of the purchase price, unless a lesser sum is agreed, and it gives 5% as an example of a lesser sum. The percentage is therefore a term of the contract, open to negotiation between the parties before they exchange.

Because most private sales in the state are exchanged with a cooling-off period, the regulator describes a deposit paid in two parts. The buyer can pay 0.25% of the price at exchange. The balance of the deposit, usually 9.75%, is then payable before the cooling-off period ends.

A worked example shows the size of each payment. Assume a purchase price of A$900,000, a deposit of 10% and a cooling-off period that applies; the figures are illustrative.

• The full deposit is 10% of A$900,000, which is A$90,000.
• The payment at exchange is 0.25% of A$900,000, which is A$2,250.
• The balance of the deposit is 9.75% of A$900,000, which is A$87,750, payable before the cooling-off period ends.
• The two payments together make A$90,000, and A$810,000 remains to be paid at settlement.

If the same parties had agreed a 5% deposit instead, the deposit would be A$45,000. On the same arithmetic the first payment would still be A$2,250, leaving A$42,750 of the deposit to follow and A$855,000 for settlement day.

The sale-by-auction case is different. The seller-side page says the successful bidder pays the deposit on the spot, usually 10%, unless a lesser sum or a deposit bond was agreed before the auction. The pages read for this guide do not say who holds a New South Wales deposit between exchange and settlement; that is a question for the contract and the parties' representatives.

Five business days to cool off in NSW

For residential property, NSW Fair Trading gives the buyer a cooling-off period of 5 business days after exchange. It starts as soon as contracts are exchanged and ends at 5pm on the fifth business day after the day of exchange.

The regulator's own example fixes the counting. Contracts exchanged at 10am on a Tuesday give a cooling-off period that ends at 5pm on the Tuesday of the following week. The day of exchange is not one of the five: the count runs Wednesday, Thursday, Friday, Monday, Tuesday. The weekend is skipped because the period is measured in business days.

During that window the buyer may withdraw by written notice. The price of doing so is fixed: the buyer must pay the vendor 0.25% of the purchase price, which Fair Trading expresses as A$250 for every A$100,000. The amount is taken from the deposit, and if the deposit already paid is not enough to cover it, the buyer must make up the difference.

In the worked example above, a buyer who withdrew during cooling-off would pay A$2,250. That is exactly the first payment made at exchange, which is why the two-part deposit and the cooling-off right fit together: the sum at risk during the window is the sum already handed over.

The right belongs to the buyer alone. Fair Trading's page for sellers is explicit that sellers have no cooling-off period: once contracts are exchanged, the seller is legally bound to complete the sale. For a vendor, then, exchange is the point of no return, while for the buyer it comes five business days later.

Where NSW cooling-off is longer, shorter or absent

The five-day period is a default, and Fair Trading lists the cases that depart from it.

Off-the-plan contracts. A buyer of a home that is not yet built has a longer period of 10 business days. Applying the regulator's counting to that length, and assuming no public holiday falls in the period, a contract exchanged on a Tuesday would reach its tenth business day on the Tuesday a fortnight later.

Agreement between the parties. The period can be reduced or extended by written agreement with the vendor. A buyer waiting on a building report, for instance, may ask for more days; whether they are granted is the vendor's decision.

Waiver. The buyer can give up the cooling-off period altogether by giving the vendor what Fair Trading calls a 66W certificate. The seller-side page explains what the document is: a certificate signed by the buyer's lawyer or conveyancer, confirming that they have explained to the buyer the effect of waiving the right. The same page notes that a vendor may accept an offer only if the cooling-off period is waived. A buyer who exchanges with a waiver is bound from exchange, as the seller is. The consumer pages name the certificate but do not cite the Act behind it.

There is also a separate right that is easy to confuse with cooling-off. A New South Wales contract for sale must have certain disclosure documents attached; the seller-side page lists, among others, the title search, the registered plan, a drainage diagram, a current zoning certificate from the local council and a statement of the buyer's cooling-off rights in the prescribed form. If required documents are missing, Fair Trading says the purchaser may be entitled to rescind the contract within 14 days of exchange, unless settlement has already taken place. This right turns on what the vendor's contract contains, not on a change of mind, and the regulator's wording ("may be entitled") signals that it depends on the case.

Victoria: the signature makes the sale

Victoria does not use the language of exchange. Consumer Affairs Victoria says a property is sold when both parties have signed the contract of sale, and that each party who signs must receive a copy. Verbal offers cannot create a binding contract; only a written one can.

Where an agent is handling the sale, the regulator says offers must be made through the agent, usually by signing the contract of sale itself, which the agent then takes to the seller. In practice the buyer's signature often comes first and the seller's later. Consumer Affairs Victoria suggests writing into the contract a date by which the offer lapses, so the buyer knows where they stand if the seller has not signed by then. If the seller does not accept the offer, the deposit is returned.

The Victorian page gives more room than its New South Wales counterpart to conditions written into the contract. Buyers can negotiate a sale that is subject to finance, to the sale of their existing property, or to a satisfactory building or pest inspection. If the offer is subject to finance, the regulator says the lender should be named in the contract. These conditions are contract terms agreed with the seller. They are distinct from the cooling-off period, which the law gives without negotiation.

According to Consumer Affairs Victoria, the contract of sale should state, among other things, the price, the deposit required, the balance owing at settlement, the agreed settlement period, any conditions and the items included. The regulator warns that an item not listed in the contract may be hard to claim at settlement.

Three clear business days in Victoria

Buyers of residential property in Victoria, and of rural property under 20 hectares, have a cooling-off period of three clear business days. The detail that matters most is the starting point. Consumer Affairs Victoria states that the period begins on the day the buyer signs the contract, not on the day the seller signs.

Set beside the New South Wales rule, the difference is one of timing as much as of length. In New South Wales the clock starts when both sides are bound. In Victoria it starts with the buyer's own signature, so where the seller takes a day or two to sign, part of the period, or conceivably all of it, has run before the sale exists. The Victorian page read for this guide, last updated in September 2022, does not give a worked example of how the three clear days are counted, and this guide does not supply one.

To cool off, the buyer gives written notice to the seller or to the seller's agent. The buyer is then refunded all the money paid, less the greater of A$100 or 0.2% of the purchase price.

Consumer Affairs Victoria lists the cases in which there is no cooling-off period at all:

• the property was bought at a public auction, or within three clear business days before or after one;
• the property is used mainly for industrial or commercial purposes;
• the property is over 20 hectares and used mainly for farming;
• the buyer previously signed a contract for the same property on the same terms;
• the buyer is an estate agent or a corporate body.

The first item is wider than the New South Wales auction rule. In New South Wales the exclusion covers the auction and a same-day exchange after a pass-in. In Victoria it reaches a private sale signed in the three clear business days on either side of a public auction. The fourth and fifth items have no stated equivalent on the New South Wales pages. The Victorian pages describe no waiver certificate of the New South Wales kind, and they cite no Act for the cooling-off right.

What withdrawing costs in each state

Both states let a buyer cool off for a small fraction of the price, and both set that fraction by percentage: 0.25% in New South Wales, and the greater of A$100 or 0.2% in Victoria. The table applies each state's rate to three illustrative prices.

At the A$900,000 price of the earlier example, the Victorian figure would be 0.2% of A$900,000, or A$1,800. A Victorian buyer who had paid A$90,000 by the time they cooled off (an assumption, since the Victorian page sets no standard deposit) would receive A$88,200 back.

The A$100 floor in Victoria matters only at very low prices. Since 0.2% of A$50,000 is A$100, the percentage is the larger of the two for any price above A$50,000.

Who holds a Victorian deposit

On the size of the deposit, the Victorian page is less prescriptive than the New South Wales one. It names no standard percentage. It says the deposit may be paid in full or in part, with the remainder due by a date written into the contract. The amount and the timetable are therefore contract terms.

On where the money sits, Consumer Affairs Victoria is precise. Where an agent manages the sale, the deposit is held in the agent's trust account until settlement, or is transferred to the trust account of the seller's legal practitioner or conveyancer. Where there is no agent, it is paid to the seller's legal practitioner or conveyancer, or to the seller. A seller who receives it personally must either pass it to their legal practitioner or conveyancer or place it in a special purpose account, at an authorised deposit-taking institution in Victoria, in the names of both seller and buyer.

A deposit can reach the seller before settlement. The Victorian regulator allows an early release only when three things are true: the buyer agrees, the contract is unconditional, and the buyer is satisfied with the seller's proof of debts information, meaning the details of what is owed against the property.

Settlement in NSW: six weeks and a Workspace

NSW Fair Trading says settlement usually takes place about 6 weeks after contracts are exchanged. The seller-side page gives the same figure and adds that the parties may negotiate a different timeframe. At settlement the buyer pays the balance of the price and becomes the legal owner.

In New South Wales the event is entirely electronic. The regulator states that all property settlements in the state are completed through the eConveyancing platform, and that both parties must be represented by solicitors or conveyancers who subscribe to it. Cheques and paper documents are no longer required. Fair Trading sets out the buyer's path as follows.

1. The buyer engages a lawyer or licensed conveyancer who subscribes to an Electronic Lodgment Network.
2. The buyer gives that subscriber a written Client Authorisation, photo identification and evidence of land ownership, so that identity can be verified.
3. The subscriber prepares the documents and the financial information, including EFT or BPAY details, in an electronic Workspace.
4. Before settlement day, the representative checks all the documents and the financial figures.
5. On settlement day, the representative signs the documents and the settlement schedule electronically on the buyer's behalf.
6. At the scheduled time, if all documents and finances are ready, settlement occurs automatically: funds are disbursed electronically and the documents are lodged electronically with NSW Land Registry Services.
7. The representative confirms that settlement has occurred and that title has transferred.

The automatic step is conditional: settlement happens at the scheduled time only if every document and every figure is ready, which is why the regulator advises buyers to keep in regular touch with their representative as the date approaches.

The buyer does have one task in person. Fair Trading says that on the morning of settlement day the buyer should carry out a final inspection, to confirm the property is in the same condition as when contracts were exchanged.

On the vendor's side, the same page says the solicitor or conveyancer completes settlement electronically on the seller's behalf. It adds a point about land tax: any outstanding land tax must be cleared before the sale, because unpaid land tax can affect settlement.

Settlement in Victoria: 30 to 90 days

Consumer Affairs Victoria says the seller sets the settlement date in the contract of sale, and that the settlement period is usually 30 to 90 days. The period is one of the terms a buyer can negotiate when making an offer; the regulator notes that a seller may turn down an offer for reasons other than price, the settlement period among them.

Three things happen at a Victorian settlement, according to the regulator. The buyer pays the balance of the purchase price to the seller. The buyer receives the title and becomes the registered owner. And the buyer takes possession, unless something else has been arranged. Settlement is usually conducted between the legal practitioners or conveyancers of the two sides and the lenders. Once it is complete, the buyer collects the keys from the agent.

The transfer of land, the document that moves ownership from seller to buyer, is usually lodged with Land Use Victoria by the buyer's legal practitioner, conveyancer or lender. It also records whether co-buyers hold the property jointly or as tenants in common.

Before the day, the Victorian pages give the buyer three things to attend to. The legal practitioner or conveyancer sends a plan of the land, so the buyer can check that the measurements and boundaries match the title. The lender will recommend building insurance from the date the seller signs the contract, although the seller's own policy may cover the property up to settlement. And the buyer may inspect the property at any reasonable time during the week before settlement, by arrangement with the agent. The contract requires the seller to hand the property over in the same condition as when it was sold; if something is damaged or no longer works as it did on the day of sale, the buyer can ask for a repair.

The Victorian pages read for this guide do not describe how settlement is carried out electronically. That is a gap in the sources, not a statement about Victorian practice.

Duty, adjustments and what the pages leave open

The last two rows of the table deserve a closer look, because they decide how much money must be ready on the day.

In New South Wales, Revenue NSW says transfer duty must be paid within 3 months of signing the contract. It adds that settlement cannot take place until the duty has been paid. For a sale that settles about 6 weeks after exchange, the earlier of the two limits is settlement, so the duty is in practice due on or before settlement day. Revenue NSW notes one exception of timing: buyers of off-the-plan property who intend to live in it may be able to defer transfer duty for up to 12 months.

In Victoria, Consumer Affairs Victoria says land transfer duty is calculated on the purchase price or the market value, whichever is higher, and on the GST-inclusive price for a new property. It is usually paid at settlement. The buyer has up to three months after settlement to pay, but the title cannot be transferred until the duty is paid. The clock therefore starts at a different event in each state: the signing of the contract in New South Wales, settlement in Victoria. The rates of duty themselves are outside the scope of this guide.

Adjustments are the other sum settled on the day. In New South Wales, Fair Trading says unpaid expenses such as rates and utility fees are pro-rated at settlement, the seller paying up to settlement and the buyer afterwards. In Victoria, the regulator puts the line a little more exactly: the seller is responsible for rates up to and including settlement day, and the buyer from the day after.

Several questions that buyers and sellers commonly ask are not answered by any of the pages behind this guide, and are left open here. None of them describes what happens when one side cannot settle on the agreed date, including any interest or notice procedure. The cooling-off rules are given without their Act and section numbers, apart from the name of the 66W certificate in New South Wales. And the general rules above bend to the contract in most places: the deposit percentage, the length of the cooling-off period in New South Wales, the conditions in Victoria and the settlement date in both states are all terms the parties can agree differently. How a rule applies to one sale depends on the contract actually signed.

Exchange in one state and a signature in the other start clocks of different lengths, and what is routine on one side of the border may not exist on the other.

Kooky, from Shaka

Kooky edits Agents Estate and builds Shaka, the payment router he made for real estate professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

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