> Consumer advice  > Buying or selling a home  > The purchase process

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• Form 1 statement
• Making an offer
• Cooling-off
• Contract terms

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 usually signed by the vendor and made available to you and other prospective buyers, usually via the agent.

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. Unless the offer is recorded in writing the agent is not allowed to pass the offer on to the vendor of the property.

All copies of signed offers must be kept by agents to allow inspection by the regulator 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.

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.

When you make your offer you may wish to insert in the contract document a date by which your offer will lapse. This way you will be notified in a timely manner as to whether or not your offer has been accepted.

If your offer is accepted, the vendor will countersign the contract and it will become legally binding. Once the contract is signed and an accurate Form 1 has been served on you, the cooling-off period will commence. 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

Cooling-off

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 if you have gone through settlement.

The cooling-off notice must be in writing and served on the vendor or the vendor's agent personally, by certified mail or by facsimile. Precise details of how the notice is to be served are set out in Form 1. There is no special wording for the notice and no reason has to be given

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
• in the name of a company
• by assignment (that is, if the contract is assigned to you after the cooling-off period has expired)
• by tender or option to purchase.

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.

Contract terms

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

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

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.




Encumbrances

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.


Easements

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 contract documents and 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.

GST

The purchase of an established home does not attract GST, however services rendered by professionals involved in real estate transactions do. Do not sign the contract without checking whether GST applies. GST is payable on the purchase of the properties that are newly constructed.

If uncertain, seek professional legal advice. 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.



Unfair contract terms

The Australian Consumer Law provides that unfair terms in consumer contracts are void. A ‘consumer contract' is a standard-form agreement for the supply of goods or services which is wholly or predominantly for personal, domestic or household use or consumption.

A term is ‘unfair' when it:

• causes a significant imbalance in the parties' rights and obligations arising under the contract; and
• is not reasonably necessary to protect the legitimate interests of the supplier; and
• causes financial or non-financial detriment to a party.

A court must have regard to the transparency of the term and the contract as a whole in determining whether a term is ‘unfair'.

For further information on unfair contract terms, see Contracts.

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