Saturday 10 Mar 2018
When buying or selling a property, you will hear about Section 66W Certificates.
In New South Wales, the practice of entering in to a contract to buy a property is called “exchange”. As a general rule, when the vendor and purchaser have agreed on the price and various conditions, they exchange contracts. The agreement then becomes binding upon the parties.
The purchaser, caught up in the exuberance of the transaction might be keen to exchange contracts and exclude other interested buyers, without being fully informed as to the condition of the property. The law recognises this, and allows the purchaser a standard cooling off period from the date of exchange to 5:00pm on the fifth business day after exchange.
In lieu of the above, some Vendors may ask the Purchaser to provide a 66W certificate. A 66W certificate waives the standard cooling off period and makes the contract binding upon the parties (rather than 5 days after exchange). A 66W is generally asked for by Real Estate agents to ensure a rapid sale, and to ensure that the purchaser cannot back out of the purchase if they discover something that would make them rescind on the contract, for example the house is full of termites. In a rising real estate market (like the current market in Sydney and some regional centres), Vendors can ask for these conditions because they are in a “Sellers Market”, and they are generally accepted by potential purchasers.
If the Purchaser does rescind the contract after exchange and a 66W has been provided, then the cooling off period does not take effect and the penalty as per the contract will apply (generally 10% of the purchase price). Alternatively, if the purchaser rescinds the contract during the cooling off period, they will forfeit 0.25% of the total purchase price, a considerable difference.
Why would I provide a 66W?
The dangers of providing a 66W are obvious from the above, and we would generally recommend that a Purchaser does not provide the certificate, however, in some instances it may be necessary. Where numerous bidders are vying for a property, your decision to waive the cooling off period will be attractive to the vendor and may give you an additional bargaining tool, if negotiating to purchase ahead of other potential buyers. When purchasing at an auction, you should be aware that there is no cooling off period, and you will be bound to the contract as soon as the hammer falls. In these circumstances, we would recommend undertaking all relevant research and having finance approval in place prior to providing a 66W to the Vendor with your offer.
Property purchases are generally the most exciting, stressful and momentous occasions of many peoples lives. They are also generally the largest commercial transactions they will take part in. During this time, you want high quality, valued service from an experienced legal professional that can provide advice throughout the process, from pre-purchase through to settlement. We recommend potential purchasers have their legal team sorted prior to any offer or purchase so they can make sure any offer they make, or contract they enter into is exactly what they intend.