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 include:

  • a title search of the property to show who is the owner of the property
  • 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 certificate.

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.