When you are selling a house, a private buyer is given a three-day cooling-off period under the law. It is increasingly common for sellers to stipulate a cooling-off period. Is this allowed? In this blog we look at the rules surrounding the cooling-off period and discuss a recent judgment of the District Court of Overijssel regarding the cooling-off period for the seller. Finally, we look at the consequences of this ruling.
Three days cooling-off period for private buyers
With the housing market under constant tension, there is usually a lot of pressure on potential buyers to quickly decide whether to buy or not. This can of course lead to hasty decisions. Fortunately, private buyers are somewhat protected by law. For example, private buyers are given a three-day cooling-off period after they have agreed to buy a house (Article 7:2 paragraph 2 of the Dutch Civil Code). Even when the papers have been signed, the private buyer still has three days to dissolve the purchase agreement without giving reasons.
Reflection period for sellers?
This statutory cooling-off period only applies to private buyers. As long as the sales contract has not been signed, the (private) seller has the possibility to renounce the sale, but as soon as it has been signed he is in principle bound by the sale. However, a seller does have the possibility to include a clause in the sales contract that says that the seller also gets a cooling-off period. An obvious reason for the seller to include such a clause is that in the current housing market the seller regularly receives a higher bid later. As long as the buyer agrees to such a clause, it is allowed.
Earlier this year, the District Court of Overijssel ruled on a case in which the seller had stipulated a three-day cooling-off period equal to the protection for buyers. In the end, the seller used this period to go into business with a third party and thus dissolved the purchase agreement with the first buyer. The buyer claimed that the seller had abused the clause. According to the buyer, this clause only served to protect the seller against a hasty decision, and not as an instrument to obtain a higher bid from a third party. However, the court ruled that the parties had agreed that the seller could renounce the sale just like the buyer without giving reasons. Although the court questions whether negotiating with a third party after the conclusion of a sales contract is decent, it does not see sufficient reason to hold the seller to the sales contract in this case. This would have been different if the seller had used the offer of a new potential buyer to make the first buyer pay a higher purchase price.
The outcome of the ruling is that selling parties can certainly try to negotiate a cooling-off period for themselves now that this will increase the chance of obtaining the highest possible price. For buyers, on the other hand, this possibility obviously entails the risk that the house can be sold to someone else at the last minute, so that the cooling-off period can mean a number of nerve-wracking days. A buyer is usually wise not to agree to such a clause. Nevertheless, the housing market in some regions in the Netherlands is still so tense that buyers may feel compelled to agree to such a clause. In that case, it may be wise to try to draw up additional dissolution conditions in order to limit the risks to some extent.
Do you have questions about the cooling-off period or are you looking for advice on drawing up a sales contract or additional conditions? If so, please feel free to contact M2 Advocaten.
Lawyer Marius Rijntjes (email@example.com)