Whether you’re buying or selling, understanding how to use a Form 1 to your advantage during the cooling off period of a contract is critical to a successful purchase or sale. Property law is by no means simple; there are a whole host of protocols and practices to follow that protect both the seller and buyer. Navigating those legal checks and balances is absolutely key to a smooth and safe property sale.
The cooling off period on a contract is one necessary check to protect a seller from unknown problems with the house they’re seeking to purchase. So, just what does the cooling off period actually do?
What is a cooling off period?
As we mentioned, the cooling off period on a contract is a measure in place to protect the buyer of a property from any nasty surprises. The Form 1 document, which we’ll go into shortly, must disclose many specifics about the property that may change how the buyer considers their purchase.
So, the cooling off period allows buyers to back out of the contract for any reason within the window. Here in South Australia, that window is two full business days, but it varies in other states. The two days begin on the day after both of two prerequisites are fulfilled – the contract is signed, and the Form 1 has been served.
It’s important to note that not all contracts between buy and seller include a cooling off period. Any property bought in an auction, through a tender process (which is like a silent auction), or in many cases, though not all, where the buyer is a company, are not subject to a cooling off period.
So, why have a cooling off period? Signing a contract to purchase property is a big step towards completing that purchase; after coming so far, what is there to check?
Why would you want to back out of a contract?
The cooling off period allows buyers to reassess and come to terms with all the information they have about the property in question, the market in general, and their financial position. With the Form 1 presented, the buyer should have enough information to determine if they do indeed wish to continue with the purchase or if they’d prefer to back out.
So, what can cause a buyer to reassess the contract? Some common reasons include:
- A building and pest inspection reveals an undisclosed issue with the property. The cooling off period is the right time to have that inspection done. If you’re interested in what a building and pest inspection can do for you, check out our blog here.
- Their finances aren’t approved. If there is a significant concern about finances going into a contract, you should make the contract subject to financial approval.
- A more suitable property has emerged into the market that you’d like to make an offer on.
- Changes in the property, or the area around, such as construction projects, changing zoning laws, or any other concerns, are all valid reasons to reassess your purchase.
- Personal changes in the finances of the buyer. Life is chaotic, and any change can impact your capacity to go through with a purchase, so relying on the protection of the cooling off period to sort your finances is sensible.
Everything you need to know about your rights during the cooling off period is included in the Form 1, which brings us to the question.
What is a Form 1?
The Form 1 is a heavy-duty legal document that includes the particulars of the property in question, as well as the rights of the purchaser during the cooling off period.
Any legal claims on the property, such as easements, mortgages, encumbrances, and many other inquiries, must be listed on the document. Any specifics that may inhibit the buyer’s ability to build on or alter the property, such as wastewater, development plans, or environmental stipulations, are also included.
The Form 1 is essential – serving it to the buyer triggers the cooling off period. But, if the document is inaccurate, or missing vital information, then it’s considered defecting and cooling off does not initiate. So, working with a legal expert to carefully write the document is recommended. Australians who are entering into a property contract for the first time may need to use Form 1 and be aware of a special ‘Cooling Off Period’. Additionally, they will also require their identity to be verified before any agreement is in place.
Notably, the Form 1 instructs the buyer on what they can do during the cooling off period.
How do I back out of a contract?
If you decide that your situation has changed or the property does not provide what you initially thought it would, the cooling off period will allow you to back out of the purchase.
Inside the Form 1 document, included with your rights during the cooling off period, will be instructions on how to back out of the contract. A written note to the vendor or real estate agent, fax, or post by registered mail will be enough, and since 2014 – email is also acceptable. It’s possible to do it yourself, though the services of a conveyancer will be invaluable.
How can your conveyancer help you with a Form 1?
Whether you’re looking to buy or sell property, Form 1’s are extremely important and often complex.
If you’re presenting it, it’s crucial to have the correct information, as mistakes can lead to headaches and fines. And as a buyer, you need to understand precisely what is included, as they can impact your plans to build on or indicate hidden costs that you may miss.
So, it’s often a good idea to have someone well versed in property law to help you through buying or selling. Your conveyancer will help read or write a Form 1, provide notice for backing out, and advise you through the entire process of buying a property with no hidden cost.
At Beltana Property Group, we are experienced conveyancers in South Australia. We tailor our advice and services to meet your specific circumstances to ensure we provide you with a smooth, stress-free experience. This means that by engaging Beltana Conveyancing, you can be assured that you won’t be caught out while navigating the property market.
So, if you’d like to have a chat with us about your property goals, whether it’s in metropolitan Adelaide or regional South Australia, we’d love to hear from you and find out if we can help you achieve your dreams.
