What about the reflection period when buying a home? You have managed to get your hands on a property. The ink on the purchase agreement is not yet dry, or you regret it. What if the technical condition of the house is not what you expected? Or what if, on second thoughts, you think you made too high an offer that has since been accepted by the seller? Can you still get out of your purchase?
Legal reflection period
After a private purchaser has signed the contract, he or she has three days to withdraw from the purchase free of charge. The right to this ‘cooling-off period’ is laid down by law in Article 7:2 of the Civil Code. The parties may not deviate from this to the detriment of the buyer. Making arrangements that are more advantageous to the buyer, such as a longer cooling-off period, is permitted. When using the cooling-off period, the buyer can only dissolve the purchase agreement in its entirety. A partial dissolution of the purchase agreement is not possible.
The right to a three-day cooling-off period is not unlimited. For example, the cooling-off period is intended only for the private purchase of real estate that has residential zoning at the time the purchase agreement is concluded. This may therefore include the purchase of (second) homes or vacation homes, but not the purchase of a plot of land (currently unsuitable for habitation), caravans or houseboats (not immovable property). The three-day cooling-off period also does not apply to installment plan or auction purchase.
What deadlines apply?
The cooling-off period has strict time limits. The cooling-off period starts as soon as the buyer receives a signed copy of the purchase agreement, and ends no later than 11:59 p.m. on the last day included in the cooling-off period. According to the General Terms Act, the cooling-off period may not end on Saturdays, Sundays and public holidays in this regard. In that case, the period is extended to the next working day. Also, the three-day cooling-off period must include at least two days that are not Saturdays, Sundays or recognized holidays.
Cooling off period
The legislature introduced the statutory cooling-off period at the time with the intention of protecting private buyers from a “hasty purchase decision. Especially in the case of the current overstrained housing market, this is an important safeguard for buyers. Because there is often a lot of interest in a property, interested parties are required to tie the knot quickly. For example, there are cases where a final offer must be submitted to the sales agent as early as the first viewing. The cooling-off period can also be used to make a technical inspection of the house after purchase. This possibility is not always available to a sufficient extent prior to the conclusion of the contract. Because the legal cooling-off period allows buyers to reconsider a hasty decision, the cooling-off period is also referred to as the “cooling-off period.
How do you dissolve the purchase agreement within the cooling-off period?
If the buyer wishes to rescind the purchase agreement by invoking the cooling-off period, the buyer must ensure that the declaration of rescission reaches the seller (or his broker) before the end of the cooling-off period. The declaration of dissolution is in principle free of form. Therefore, although the buyer can also issue this declaration verbally or by telephone, it is wise to do this declaration by letter or by e-mail (or even better: both). In this way, the buyer can later easily prove that the declaration of dissolution reached the seller in time.
Case Law
Invoking the cooling-off period may not go down well with the seller. After all, the seller sees the earlier deal slip through his fingers, and will have to reach agreement with another buyer again. Since the introduction of the statutory cooling-off period (2003), there have been several lawsuits in which the seller has argued that the buyer abused his power by invoking the cooling-off period. So far, the sellers almost always drew the short straw. Although the purpose of the cooling-off period (i.e.: protection against impulsive purchasing decisions) follows from the legislative history, it is not laid down by law. Moreover, a buyer is also not required to give reasons for invoking the cooling-off period. Although the court sometimes ruled that invoking the statutory cooling-off period was admittedly indecent under the circumstances, from a legal perspective the buyer was free to make use of it.
Nevertheless, it seems that the legislator’s intention with the cooling-off period is gaining more ground. For example, in its judgment of March 3, 2020, the Arnhem-Leeuwarden Court of Appeal attached great importance to the “intention” of the party making use of the cooling-off period. Indeed, in that case, the buyer and seller had agreed that the cooling-off period provision also applied to the seller. The seller had expressly requested this in this case. After all, “what’s sauce for the goose is sauce for the gander,” according to the seller. The seller subsequently dissolved the purchase agreement within his cooling-off period and sold the house (probably at a higher price) to a third party. In the proceedings that followed, the court emphasized that the statutory cooling-off period is intended solely to prevent impulsive, ill-considered decisions, and thus not for making a “final choice” (i.e., by a buyer from among several homes for sale or by a seller from among several candidates for his home). The court found that the seller in this case had acted in violation of this limited purpose of the statutory cooling-off period, which constituted an abuse of discretion by the seller.
What does this mean?
It follows from the foregoing that the door of the cooling-off period is not always open. For example, with regard to the cooling-off period, there are strict deadlines that must be observed by the buyer. Also, the cooling-off period is exclusively intended to protect the buyer from impulsive, ill-considered (purchase) decisions. This principle is once again underlined in recent case law. The buyer must keep in mind that the cooling-off period is not a mere ‘escape’. Evidently improper use of the cooling-off period (i.e., for a clearly different purpose than that for which it is intended), can give a disappointed seller reason to take legal action against the buyer. In that case, the “quitting” buyer is even further from home.
This article was written by the Real Estate Practice Group.