An integral part of selling a property, whether by private treaty or auction, is the statutory provision of a document called a Form 1 by the vendor to the purchaser. A Form 1 is a disclosure statement which contains certain details relating to the property being sold and must take the form set out in the Land and Business (Sale and Conveyancing) Act, 1994 (the Act) including:
- the purchaser’s “cooling-off” rights (as described under section 5 of the Act); and
- the particulars required by regulation of –
- all mortgages, charges and prescribed encumbrances affecting the land subject to the sale;
- if the vendor acquired a relevant interest in the land within 12 months before the date of the contract of sale – all transactions relating to the acquisition of the interest occurring within that period; and
- any prescribed matters.
This information is based on responses received from statutory authorities, council searches and the vendor’s knowledge of the property.
When a vendor engages the services of a real estate agent it is the agent’s responsibility to prepare the Form 1. A vendor must ensure the information provided to the agent is accurate and complete.
The time at which a Form 1 is served on a purchaser will determine their “cooling-off” rights. If the Form 1 is served before the contract is signed, then the “cooling-off” period commences on the date the contract is signed. If it is presented after the contract is signed then the “cooling-off” period does not start until the Form 1 is served on the purchaser.
The method of “cooling-off” must comply with the requirements of the Act for giving written notice to the vendor or the agent acting on behalf of the vendor.
Where a purchaser exercises its “cooling-off” right and withdraws from the contract, it is entitled to the return of money paid (deposit) under the contract, except that if the deposit does not exceed $100.00 then the vendor is entitled to retain that money.
Not all purchasers of land have the right to “cool-off”. For example, the “cooling-off” period does not apply if:
- the purchaser, before signing the contract, received independent advice from a legal practitioner concerning the contract and the practitioner signed a regulation approved certificate that the practitioner gave the purchaser that advice; or
- the property is being purchased by auction; under a contract for the sale of land (other than residential land) by a company; or under an option to purchase and that option is exercised.
If the Form 1 is found to contain inaccuracies, it is deemed to be defective. If this is the case, it will not trigger a “cooling-off” period. An inaccurate Form 1 gives the purchaser the right to rescind the contract at any time up until settlement. The vendor can alter the Form 1 to correct any inaccuracies by way of a Notice of Amendment, and a new cooling off period will apply from the date the corrections are made.
The relationship between the Form 1 and the “cooling-off” period is important because the Form 1 will disclose particulars about the property which may impact on the purchaser’s decision to purchase the property.
If the purchaser has already settled on the property and either a Form 1 was not provided or the Form 1 is later found to be inaccurate, there are remedies available to the purchaser. The purchaser may apply to the Court to have the contract set aside (or not). Either way, the purchaser can be awarded damages for any loss which they incurred as a result of the inaccurate Form 1.
It is an offence under the Act not to provide a Form 1 disclosure statement to the purchaser at least 10 days prior to settlement. It is also an offence to serve and incomplete or incorrect Form 1. Fines of up to $10,000 apply for such offences.
Given the importance of an accurate Form 1 many agents seek independent legal assistance to prepare the Form 1 on their behalf. Scammell & Co.’s experienced and knowledgeable conveyancing team provide this service to agents with the aim of providing fast turn-around times. Please contact Tricia Jarvis or Anna Ardolino for prompt assistance.