The NSW Parliament recently passed the Conveyancing and Real Property Amendment Bill 2025 (NSW) (Bill) to address legal uncertainty regarding the treatment of put options of residential property following the Supreme Court's judgment in BP7 Pty Ltd v Gavancorp Pty Ltd [2021] NSWSC 265 (Gavancorp).
As a result of the Gavancorp judgment in 2021, put options of residential property were excluded from the vendor disclosure regime and associated purchaser cooling-off right under the Conveyancing Act 1919 (NSW)(Conveyancing Act). The unexpected effect was that purchasers under put options were granted a cooling-off period and right of rescission following the exercise of a put option by the vendor. The Bill amends the Conveyancing Act to remove the statutory cooling-off period upon the exercise of put options.
What were the implications of the Gavancorp judgment?
The vendor disclosure regime under the Conveyancing Act requires contracts for the sale of residential property to include prescribed information, implies certain terms, and grants purchasers a cooling-off period to rescind the contract.
Prior to the passing of the Bill, the Conveyancing Act also provided for these same purchaser protections to apply in respect to "options to purchase" residential property, but on the basis that those rights (including the cooling-off period) were not repeated on the exercise of the option to purchase.
Prior to the Gavancorp judgment, it was generally understood that "option to purchase" referred to both put and call options.
However, the Gavancorp judgment held that "option to purchase" applied only to call options, not put options. As a consequence, where a put option is exercised, purchasers were entitled to a cooling-off period, thus putting the vendor's sale of the property at risk.
What has changed?
The Bill amends the Conveyancing Act to introduce a new definition of "option" that explicitly includes both put and call options to purchase residential property and provides equal treatment for both forms of options.
As a result of these amendments, it is now clarified that purchasers are not entitled to a cooling-off period following the exercise of a put option by the vendor, but only on the initial entry into the option agreement. This is consistent with the treatment of call options.
Cooling-off period statement
Under the Conveyancing Act, contracts for the sale of residential property and options to purchase residential property must include the prescribed statement (as provided in Schedule 5 of the Conveyancing (Sale of Land) Regulation 2022 (NSW) (Regulations)) specifying the rules for the cooling-off period.
While the Bill amends the cooling-off period statement in the Regulations, it allows for a transitional period (from 15 August 2025 to 31 May 2026) where contracts and options providing the outdated statement will not be invalidated solely for this error.
What does this mean for you?
If you are involved in residential property transactions, as a property owner, developer, or conveyancer, these reforms have important implications:
- No legal distinction for options: The Bill clarifies that both put and call options are treated as exceptions to the vendor disclosure and cooling-off rights regime. This ensures that contracts formed by exercise of either a call or put option are subject to the same rules and exceptions.
- Enforceability: Residential property vendors can now rely on the enforceability of contracts formed through put options, without the unexpected risk of purchasers exercising cooling-off rights.
- Cooling-off period statement: Vendors should check that their sale of land contracts and options use the updated statement provided in the Regulations. While there is some leeway provided for using the outdated statement, this exemption expires at the end of the transitional period on 31 May 2026.
Key dates
- The Bill received Royal Assent and came into force as of 15 August 2025.
- The transitional period for the cooling-off statement will apply from 15 August 2025 until 31 May 2026.
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.
