Form 1 disclosure statement
When selling a house, a vendor needs to provide a document called a Form 1 to the purchaser [Land and Business (Sale and Conveyancing) Regulations 2010 (SA) Schedule 1]. When the vendor has hired a real estate agent, it is the agent’s responsibility to prepare the Form 1 and to make all the inquiries necessary to do so accurately.
Even though it is the agent’s responsibility to prepare the statement, a vendor needs to ensure that they provide their agent with correct information so that the Form 1 is accurate.
It is also the responsibility of the vendor or, if they have an agent, their agent to serve the Form 1 on the purchaser. It needs to be served on the purchaser personally, or sent to their address by registered post. When the contract has already been signed, the Form 1 needs to be provided to the purchaser at least 10 clear days prior to the settlement date. It is advisable to get the purchaser’s signature to show that they received the Form 1, due to the ramifications if the Form 1 is not served.
If, as a purchaser, you have already signed the sales contract, it is important to carefully look at the information contained in the schedule of the Form 1. It is always preferable to obtain independent advice as soon as possible. If there is anything of concern within the Form 1, you should exercise your cooling off rights immediately, as you only have two days to do so
Where a property is to be sold at auction, the Form 1 needs to be made available to the public at the offices of the vendor’s real estate agent or at those of the auctioneer for three business days before the auction. It also needs to be available for at least 30 minutes before the auction at the place where the auction will take place.
Relationship between the Form 1 and the purchaser’s cooling off rights
The time the Form 1 is served on the purchaser will affect their cooling off rights. If the Form 1 is provided before the contract is signed, then the cooling off period will commence on the date which the contract is signed. However, if the Form 1 is not provided until after the contract is signed, then the cooling off period does not start until the Form 1 has been served on the purchaser. Also, should there be any inaccuracies in the Form 1, then it is deemed to be defective, and will not trigger the cooling off period. A vendor can alter the Form 1 to correct any inaccuracies, but the cooling off period will only commence on the date that the corrections are made.
If the Form 1 is not served on the purchaser, or the one served is inaccurate in some way, then the purchaser will have the right to rescind the contract at any time up until settlement. Therefore, it is important for the vendor to ensure that a complete and accurate Form 1 is provided to the purchaser in a timely fashion.
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
Consequences of not providing an accurate Form 1
There are remedies available to a purchaser when they have already settled on the property but were not provided with a Form 1, or the Form 1 was incorrect. The purchaser may apply to a Court to have the contract set aside, and can be awarded damages so as to restore them to the position they were in before the contract was completed. The purchaser may not wish to have the contract set aside, but can seek damages from the court to compensate them for any loss which they incurred as a result of the vendor’s failure to provide them with an accurate Form 1 disclosure statement. For example, if the Form 1 failed to disclose that there was restoration work required to be done to the house under the Heritage Act 1993, this may not affect the purchaser’s wish to retain the property, but they may want to be reimbursed for the costs incurred in carrying out the required building works.
In addition, it is an offence not to provide a Form 1 disclosure statement to the purchaser at least 10 days prior to settlement. It is also an offence if the Form 1 which is served on the purchaser is incomplete or incorrect in some way. These are punishable by a fine of up to $10,000.