cooling off

In a recent Supreme Court of Victoria case, the Purchaser attempted to terminate the contract by sending an email to the agent within the 3 day cooling off period. The Court found that the contract was not terminated as the notice was not served on the Vendor, and the estate agent was held not to be an agent of the Vendor for the purposes of notices under the contract.

A recent Supreme Court of Victoria decision has held that a real estate agent does not have authority to receive a termination notice given under the cooling off provisions of Section 31 of the Sale of Land Act 1962, to terminate a Contract before the end of three (3) clear business days after the Purchasers signed the Contract unless the agent has actual authority or ostensible authority to receive the notice.

In the case, the Purchaser emailed to the agent a notice at 5.56pm on the third day after the purchase Contract was signed, seeking to end the Contract and seek return of the deposit paid. The primary issue was whether the Purchasers’ email to the agent validly terminated the Contract under the cooling off provisions.

The Supreme Court, following earlier High Court authority, held that the mere employment of an estate agent does not, apart from the general rule that the employer will be responsible for misrepresentations made by him, necessarily create any authority to do anything which will affect the legal position of his employer. A real estate agent has authority to find a purchaser, not to bind the Vendor to terms with the Purchaser.

The Court found that the email was invalid because the agent was not an “agent” of the Vendor with the necessary authority, to receive the notice of termination. The Purchasers failed to show that the agent had any authority beyond the “usual authority granted to an estate agent by the Vendor”. In seeking to exercise their cooling off rights the Purchasers mistakenly assumed that communicating with the Vendor’s real estate agent was sufficient. It was not.

Lessons learned:

• While a real estate agent has an extensive involvement in the marketing and sale of a property, a real estate agent does not usually have authority to receive notices once the Contract is executed. Service of a notice must be on a person or entity who is the agent of the Vendor for the relevant purpose.
• For Purchasers wanting to exercise cooling off rights they must serve a notice on the Vendor directly or an agent of the Vendor (that is, the Vendor’s lawyer or conveyancer) with express authority to accept such notices.
• For Vendors, they should not accept that a Purchaser has validly ended a Contract of Sale pursuant to Section 31 of the Sale of Land Act and refund the deposit paid without first obtaining legal advice.

It is important to obtain legal advice from a specialist in the area before taking any action in respect to a contract (or conceding a position put by the other party).

Tisher Liner FC Law are accredited Property Law Specialists and can assist Vendors and Purchasers in all property law matters.