WHAT IS A FORM 1?
The Form 1 (Vendors Disclosure Statement) is the formal statement that must be served on the Purchaser and provides the cooling off rights and certain details relating to the property being sold. It is required under Section 7 of the Land and Business (Sale and Conveyancing) Act 1994.
A Form 1 is normally done by the real estate agent but your conveyancer can also complete the Form 1 for you if they have suitable insurance. It is important that the Form 1 is accurate and complies with relevant legislation as there is a risk that it will be considered defective if it is not completed correctly which puts the contract at risk. This is a potential problem for the vendor who may lose the sale and/or have default charges claimed due to the inaccurate information. By requesting your conveyancer to do the Form 1 they will carefully read through/conduct searches to ensure that all information is provided and the Form 1 is completed correctly.
The purpose of the Form 1 is to make the purchaser aware of any particulars with the land that could affect their purchase. It is in the purchaser’s best interest to read through it so they understand all the particulars concerned
“put you on notice of certain particulars concerning the land to be acquired”
Particulars noted in Form 1 include but not all:
• Cooling off rights (see FAQ’s What are cooling off rights?)
• Inquiries of the land eg mortgages, encumbrances, easements, lease agreements, tenancy agreements,
• Rights to lien a right to keep possession of property belonging to another person until a debt owed by that person is discharged.
• Development plans
• Emergency service funding
• Public and environmental health
If you intend to carry out building work on the land, change the land or divide the land you should make further inquiries to determine whether this will be permitted. For example, building work may not be permitted on land not connected to a sewerage system or common drainage scheme if the land is near a watercourse, dam, bore or the River Murray and Lakes.
It is always in the purchaser’s best interest to speak to a conveyancer either BEFORE they sign the contract or at least in the cooling off period to ensure that they understand what both the Contract and Form 1 mean and how the all the disclosed information affect them.
WHAT ARE MY COOLING OFF RIGHTS?
Most purchasers have a statutory right to terminate a contract (cool off). A purchaser exercising that right must give written notice of the cooling off to the vendor within two clear business days after the later of both:
• receiving a complete and accurate Form 1
• entering into the contract.
In South Australia, settlement cannot occur within 10 days of service of the cooling off papers. Not all buyers of property have the right to cool off. The right does not exist if:
• you have waived your right by getting independent legal advice and have a certificate from the legal practitioner to that effect
• you bid at auction and were successful or purchased later that day
• if you are purchasing as a company and you are buying commercial property
• Other situations could also affect whether you have the right to cool off so it is wise to talk to your conveyancer prior to signing the Contract.
You would be requested to waive your cooling off rights if the property you are purchasing is going to auction. This ensures that the vendor has an unconditional contract and that you will not be able to just change your mind. You will be required to sign a waiver of cooling off rights certificate in front of a legal practitioner who will certify that you are fully aware that you are waiving your rights to cool off and that you understand all the documents that have been provided to you.
If the property is being auctioned, then the Form 1 must be available for inspection at the agent’s office at least three business days prior to the auction and at the place of auction at least 30 minutes before the auction commences. You will be bound by the contract from the time that your offer is accepted.
WHEN DOES MY COOLING OFF START?
Most purchasers are entitled to a cooling off period and this starts upon the service of the Form 1 document on you as the Purchaser.
Service is that date you receive the Form 1 or if served by fax or email to a fax number or email address provided by you for the purpose of service then the date of service is taken to be the time of transmission of the fax or email.
If the Contract is fully signed after the Form 1 has been served then cooling off will start at the time of signing the contract.
The Land and Business (Sale and Conveyancing) Act 1994 also refers to the Form 1 document which may be served as follows;
Section 33—Service by post
(1) Where any Act passed after the passing of this Act authorises or requires any document to be served by post (whether the expression serve, give, deliver or send, or any other expression is used), then, unless the contrary intention appears, the Act will be taken to provide –
1. that the service is effected by properly addressing, prepaying and posting a letter or packet containing the document; and
2. that, unless the contrary is proved, service will be taken to have been effected at the time at which the letter or packet would be delivered in the ordinary course of post.
(2) Where any Act authorises, or requires any document to be served by certified mail then, unless the contrary intention appears, the Act will be taken to provide that service may be effected by registered post.
If it is deemed that the mail takes two days to arrive then that is the ordinary course of post, so the cooling off period would commence two days from day it was posted. If served by registered post and delivery is effected earlier and proven by a delivery confirmation receipt, then that would be the day the cooling off period commences.
By choosing to consult a Conveyancer about the contents of the statement during the cooling off period will ensure that you are aware of various details affecting the property. Once served you have two clear business days to either cool off if you change your mind or find out information about the property which does not suit you.
Whilst some contracts may be conditional upon the satisfaction of a pre-condition it is unusual for a contract to contain a cooling-off right by agreement. An example of an agreed cooling-off right is where one party has a right to terminate the contract before a certain date if they are not satisfied with the outcome of their due diligence enquiries. (often found in commercial contracts but not usual in a residential contract)
Unless you legally cool off, you are obliged to try to fulfil the special conditions and ultimately finalise the settlement. If for any reason, you choose not to proceed with the purchase after the cooling off period has expired then they may be various financial consequences including the loss of any deposit you have paid, payment of default interest and even payment of the difference in price on resale.
Your cooling off period expires at the end of the second clear business day after the Form 1 has been served. If you were served the Form 1 on a Tuesday then your cooling off finishes at the end of Thursday. If you were served the Form 1 on a Friday then your cooling off does not finish until the end of Tuesday. The weekend days are not counted as business days.
HOW DO I COOL OFF?
During your cooling off period you can cool off at any time and if you choose to do this then it must be done correctly.
You will need to issue a cooling off notice in writing to the vendor or the vendor’s agent before the period expires. This must be done in person, by registered mail or by email if the Form 1 allows for this and also by fax.
Clear details of how to cool off are outlined in the Form 1. It would also be a good idea to talk to your conveyancer as to do this correctly and in accordance to what the Form 1 says.
COOLING OFF PERIOD
The cooling off period can be used by you as the purchaser to conduct a building and/or pest inspection to ensure that you are happy with your decision and so that you are aware of any maintenance issues that you may have to deal with once you own the property.
It is always advisable to talk to your conveyancer either before you sign a contract or as soon as you have been served the Form 1 so that they can assist you by checking the Contract and Form 1 and advising you as to your rights and obligations in relation to the Contract.
see also- Private Contracts
The team at McKay Business Services are all members of the AICSA and are proud Adelaide conveyancers