Buying or selling a property can be fraught with a lot of lingo
that can be confusing and can leave a buyer or seller feeling like
they have no control. One such term that can be confusing is
Exchange of Contracts . Exchanging contracts is a term that is
particular to buying and selling property in New South Wales. It
refers to a contract signed by the vendor being swapped by an
identical contract signed by the purchaser and dated.
Exchange of contracts is not valid if there is no consideration
paid, which essentially means that unless a purchaser / buyer has
provided the vendor / seller with a deposit the exchange of
contracts will not be binding.
In New South Wales a contract for the sale of residential
property needs to have certain documents attached to it. If those
documents are not attached to it a buyer may be able to get out of
the contract. Those documents are called prescribed documents, and
a title search of the property to show who is the owner of the
a copy of the plan showing the property
a copy of any dealings referred to on the title search
a Council zoning certificate
a search showing the location of the water mains
There may also be other documents that are prescribed depending
on the particular property.
In New South Wales a residential buyer is entitled to a five
business day cooling off period after exchange of contracts to
reconsider. If they do reconsider they will forfeit 0.25% of the
purchase price to the seller but can otherwise walk away from the
purchase with no further liability.
Sellers will often require a purchaser to obtain a Section 66W
certificate from a solicitor or conveyancer, which is also known as
a cooling off certificate. Such a certificate either waives the
purchasers right to a cooling off period or shortens the cooling
off period, depending on the terminology of the requested
If a cooling off period applies to the purchase then the vendor
is immediately bound to sell to the purchaser once exchange has
occurred but the purchaser has a right to cool off until 5.00pm on
the day five business days after the date of the contract. If the
purchaser does not cool off they will be bound to the purchase from
the expiry of the cooling off period.
If a cooling off period does not apply (because the purchase is
commercial or if residential then the purchaser has provided a
Section 66w certificate) then both parties are bound to sell and
buy respectively from the date of exchange, which is also the date
on the front of the contract.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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