Cooling off Period and Form 1
The cooling off period can be used by the purchaser to conduct further building or pest inspections or ensure the decision to purchase wasn't made in haste.
The cooling-off period expires at the end of the second clear business day after:
- The contract was made if the purchaser received the Form 1 prior to making the contract, or
- The Form 1 has been served on the purchaser if the purchaser received the Form 1 after making the contract. By law, a Form 1 must be served on a purchaser.
Although a purchaser is entitled to withdraw from a contract within the cooling off period, the vendor is bound upon entering into a contract with the purchaser.
Once the cooling off period has expired and provided there are no other conditions in the contract, the purchaser is bound to the contract and must pay a deposit. A settlement date will have been negotiated and the purchaser is obliged to follow through with the purchase.
If the purchaser decides to withdraw from the sale during the cooling off period, they must 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 fax. ‘In person' means physically handing the real estate salesperson or vendor the notice. Simply leaving it at the office does not constitute acceptance of the advice. Clear details of ‘how to' cool off are outlined in the Form 1.
Cooling off rights are not available when purchasing property by auction, if the purchaser is a body corporate and the contract is for the sale of non-residential land or if the purchaser has waived their cooling off rights with a certificate from a legal practitioner. Special rules also apply if the sale is by tender or option to purchase. All the exemptions from cooling off can be found in section 5(7) of the Land and Business (Sale and Conveyancing) Act 1994. If you have specific questions about the cooling off period, speak to the real estate salesperson handling the sale.
The Form 1
The Form 1 must be provided to the purchaser at least 10 clear days before settlement where sale is not by auction.
In the case of auction, the contract and Form 1 are required to be available for viewing, at the agent’s office, for at least 3 working days prior to the day of auction. It must also be available at the auction for at least 30 minutes before the commencement of the auction.
It is important for vendors to know that they must legally disclose any information on the property which would negatively alter the value so that the real estate transaction is transparent and the buyer knows exactly what they are purchasing.
These 'disclosures' from the vendor must then be included in the Form 1 which the real estate agent will complete when they prepare the contract for sale.
Disclosures may include information such as buildings on the property featuring asbestos, unusual easements, known building defects and advice of other parties, other than the vendor, that may have an interest in the property.
On rural properties, important information to disclose include native title claims on the land, restrictions on land use and water entitlements.
It is also important for vendors to ensure that any maintenance on the property is carried out by a licensed professional. A vendor has a duty of care to the purchaser and should any problems occur with the new owner in the future, the vendor may be legally liable.
Your real estate agent will be able to provide further information on what needs to be disclosed in a Form 1. If you're unsure, take the time to ask so that you can be confident your sale will go smoothly.
To assist consumers with real estate queries, REISA operates a free information service – REISA Query Connect on free call 1800 804 365, between the hours of 9.00am to 4.00pm each weekday. This service is staffed by knowledgeable real estate professionals with many years of practical experience.