Form 1 statement
One of the things that should help with your decision making about a property is the Form 1 statement.
A Form 1 statement is a legal requirement, and is meant to give you important information about a property. It includes the property’s title particulars, mortgages on the property, covenants, easements, zoning, and outgoings, such as water rates. It does not include any information about encroachments, or the condition of any buildings, whether they comply with building regulations or if measurements on the title are accurate. It is your responsibility to find out about anything that is not covered in the statement. Your solicitor or registered conveyancer can help you here.
The Form 1 is usually prepared by the vendor’s agent several weeks prior to the sale or auction. It is signed by the vendor and made available to you and other prospective buyers.
The Form 1 must be factually accurate and complete. If it contains incorrect or insufficient information, you may be able to withdraw from the sale or take legal action.
Making an offer
Any offer to buy a property should be made through the vendor’s agent if one has been engaged. An agent who receives an offer is obliged to record the offer in writing in a particular form. This form must be signed by the person making the offer. If the agent discloses to you that another offer exists, you have a right to ask that they confirm this in writing.
All copies of signed offers must be kept by agents to allow inspection by Consumer and Business Services in the event of a complaint.
An offer is not binding on the person making the offer until a sale contract has been signed. If you require anything to happen before settlement (for example obtaining finance or a satisfactory building inspection report), you should make the contract subject to that event occurring. This is done by including special conditions in your contract that must be satisfied before you can be required to settle (i.e. finalise by paying the balance of the purchase price). You should consult a solicitor or conveyancer concerning the need for and wording of such special conditions.
For example, simply stating “subject to finance” does not automatically imply that this is a lending institution of your choice, or the amount.
When deciding the price that you are willing to offer, you may need to consider whether to offer a lower price and negotiate up, or to offer your best price first, knowing that the vendor may accept another offer without you having a chance to increase yours. In some cases the vendor may not be prepared to negotiate at all.
Once the contract is signed and an accurate Form 1 has been served on you, the cooling-off period (two clear business days) will commence. When the cooling off period has expired the agreement to sell the property will become legally binding. A deposit is payable once the cooling-off period has expired.
If the vendor does not accept your offer, the agent may come back to you to see if you are prepared to make another offer. Through a process of negotiation the agent will attempt to achieve mutually acceptable terms for the contract. Often there will be others making an offer on a property. The agent will negotiate between the parties to obtain the highest acceptable price for the vendor. Offers are not binding on the person making the offer. Only when a contract is signed by both parties will the parties be bound by the contract.
If you buy a property (other than at auction) in South Australia you have a cooling-off period in which to reconsider the purchase, conduct further inspections, or to just change your mind if you feel you have made a hasty decision.
The Form 1 details your right to cool off and how you must go about serving a cooling-off notice.
The cooling-off period expires at the end of the second clear business day after:
- The contract was made (if you received the Form 1 prior to making the contract), or
- The Form 1 was served on you (if you received the Form 1 after making the contract).
However, you cannot cool off once settlement has occurred.
The cooling-off notice must be in writing and served on the vendor or the vendor’s agent Precise details of how the notice is to be served are set out in the Form 1. There is no special wording for the notice and no reason has to be given, however the notice must be clear that the purchaser does not intend to be bound by the contract.
If a property is to be offered for sale by auction but you make a successful offer before the auction, a cooling-off period does apply unless you waive that right after obtaining independent legal advice.
You also have no right to cool off if you buy after the auction but on the same day the auction was held.
You may have a limited right to cool off if you buy by tender or if the contract is made by exercise of an option to purchase the property.
It is important to read and understand any legal document before you sign it. The following information will help you to understand the terms and conditions specified in a contract document.
Joint ownership vs tenants in common
If you are buying a property with another person you must elect whether to hold the land as ‘joint tenants’ or ‘tenants in common’.
In a joint tenancy, each owner owns all of the property jointly and there is one title containing the names of all owners. If one of them dies, the property automatically passes to the others(s).
In a ‘tenants in common’ situation, each holds a set share of the whole property. Tenants in common can sell their shares or leave them to someone in their will.
If you are considering these forms of ownership but are not sure about them, seek professional legal advice.
Chattels are things that do not form part of the real estate that may be included in the sale of the home. The vendor may want to list some of those that are included in the sale. Similarly, those excluded from the sale must be listed on the contract e.g. TV aerial or portable dishwasher.
As a general rule, all movable items such as personal effects, furniture, pot plants, garden ornaments etc. are excluded from the sale unless specified. If unsure of what is included always ask the vendor’s agent. If you want to purchase any chattel and are in any doubt about its status, ask for the chattel to be specifically mentioned in the contract.
Where the vendor is to take any chattel that is affixed to the property, also ensure that the contract includes a condition that the vendor repairs any damage caused by the removal and, if appropriate, reinstates the surface using matching paint, wallpaper, or whatever you require.
An encumbrance is a restriction over the land. It sets out the rules on what you can and cannot do with the land. For example, you may not be allowed to erect a metal fence or a galvanised shed.
Make sure you read and understand any encumbrance before you sign the contract.
An easement is a right over land granted to a third party, usually for underground pipes or wiring. It is common for blocks of land in major land developments to contain an easement for stormwater or sewerage pipes.
Easements should be noted on the Form 1 and certificate of title. You should take specific note of where the easements are located on the property. You cannot build a solid structure over an easement without the approval of the person to whom the easement is granted. If you do, and they want access to the easement, you must remove your structure at your own cost.
If GST applies to a sale, the contract must clearly specify whether the price is inclusive or exclusive of GST and how the GST will be calculated.
Generally there is no GST on established homes, but there is for new constructions or where the property includes commercial premises. It is recommended you speak to the vendor’s agent and seek legal advice if you are unsure about the GST.
Building and pest inspections
When making an offer on a property you should add a condition to the contract making the sale subject to a satisfactory building inspection report. You should enlist the services of an independent building consultant, surveyor or architect to provide a professional building report as they will know what to look out for.
They may also check items such as electrical wiring, plumbing and roof spaces, which are potentially dangerous if they do not meet building standards. The possible presence of asbestos in the building should be evaluated.
The consultant will provide a written report, pointing out faults in the property, whether they can be repaired and how much these repairs are likely to cost. The report may also highlight any unsafe or unauthorised renovations and extensions that can be ascertained.
You may be able to use this report to negotiate conditions in the contract as well as the price. While there will be a cost for the report, it could save you thousands if you were to buy a property that needed unforeseen repairs.
If the house has recently been renovated or extended, you can check with the local council to make sure a building permit was obtained for the work completed. Illegal alterations may become your responsibility if they contravene building regulations.
Also check for proof of ongoing termite inspections. If no proof exists, approach a licensed professional pest controller for a report that complies with the Australian Standard. If buying at auction you will need to arrange a building and pest inspection prior to the auction day.