Everything you need to know about Form 1 Disclosure Statements in SA.

The Form 1 – Vendor’s Statement is a required statutory disclosure statement that must be provided by a vendor to a purchaser of land.

Selling property, or in the market to buy? If it’s your first time doing either, the paperwork can be overwhelming. Understanding what is a Form 1, and the nuts and bolts of Form 1 disclosure statements in SA can take some time to get your head around, but our registered conveyancers and property lawyers make real estate transactions simple.

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What is a Form 1?

The Form 1 is an important statutory disclosure statement for any purchaser of a property. It’s critical that a Form 1 is prepared in accordance with the Act and doesn’t contain any defects. There may be serious consequences to both a vendor and agent for any defective or invalid Form 1. The Form 1 – Vendor’s Statement contains certain details relating to the property being sold and must take the form prescribed in the regulations. It must set out:

• The purchaser’s “cooling-off” rights; and

• The particulars required under the regulations, relating to:

  • All mortgages, charges and prescribed encumbrances affecting the land subject to the sale;

  • If the vendor acquired a relevant interest in the land within 12 months before the date of the contract of sale – and all transactions relating to the acquisition of the interest occurring within that period; and

  • Any matters prescribed by the regulations.

This information is based on responses received from statutory authorities, council searches and the vendor’s knowledge of the property.

Important things to know about Form 1 Disclosure Statements in SA

What does disclosed information mean?

The Form 1 Disclosure Statement in SA discloses all required information so that a purchaser is aware of any particulars of the land that could affect their purchase and can make an informed decision on whether or not to proceed with the purchase. If the purchaser isn’t satisfied with the information contained in the Form 1, the purchaser has the right to withdraw from the contract during the “cooling off” period.

How do you serve a Form 1?

The Form 1 Disclosure Statement in SA (signed by the vendor) must be served on the purchaser by no later than 10 clear days before the settlement date. It may be served either before or after the signing of the contract and can be served in one or more of the following ways:

• Delivering it to the purchaser personally;

• Posting it by registered post to the purchaser at their last known address;

• Faxing it to a fax number provided by the purchaser; or

• Emailing it to an email address provided by the purchaser.

We always recommended to our clients and referral agents that the Form 1 is served in accordance with the express requirements of the Act. The recommended practice is for the purchaser to acknowledge receipt of the Form 1 upon service (as evidence of receipt), but this isn’t actually a requirement under the Act. There are cases where judges have found a Form 1 to be validly served by a purchaser, even though the method of service did not comply with these statutory requirements. In Birdseye v The Registrar-General of Lands Title Office and W & R Pty Ltd [2007] SADC 130, her Honour Judge Shaw found that a Form 1 was served on the purchaser even though it was served by ordinary post, as it was sufficient if the contents of the Form 1 were brought to the attention of the purchaser.

Verification of the Form 1

Where an agent acts on behalf of a vendor, the agent must:

• Make sure the prescribed inquiries are made into the matters as to which particulars are required in the Form 1;

• Sign a certificate (known as the Part D certificate) in the form required by the regulations certifying that the responses to the inquiries confirm the completeness and accuracy of the particulars in the Form 1 (subject to any applicable exceptions);

• Ensure that a copy of the certificate is given to the vendor within 48 hours after the agent has signed the certificate; and

• Ensure that the certificate is endorsed on, or attached to, the Form 1 at the time of service on the purchaser.

The Form 1 must be accurate at the date of service

This includes the statutory searches. As the searches become “older”, there is an increased chance that they may be inaccurate and a change in circumstances has occurred.

If, after the service of a Form 1 but before the purchaser signs the contract, circumstances change so that if a fresh Form 1 was to be prepared there would have to be some change in the particulars contained in the Form 1, then the Form 1 will be regarded as defective until a Notice of Amendment is served and when such a notice is served it will be presumed that the Form 1 was served, as amended by the Notice of Amendment, on the date of service of that Notice.

Non-compliance with the Act

Any non-compliance with the requirements of the Act relating to Form 1 Disclosure Statements could potentially lead to serious consequences to the vendor and (if an agent acts on behalf of a vendor) the agent.

If the vendor doesn’t provide a valid Form 1, the Act doesn’t render the contract void, but there are certain remedies provided to the purchaser. Broadly speaking, the remedies are:

• A right to cool-off; or

• A purchaser’s right to affirm the contract and seek a remedy under the Act or at common law.

There are court cases where judges have found that the cooling-off period does not commence to run until the purchaser has been served with a valid Form 1 which complies with the Act. If a Form 1 is defective, a purchaser may exercise a right to cool off and withdraw from the contract.

A purchaser may also apply to a Court for an appropriate remedy. The Court may, if satisfied that the purchaser has been prejudiced by the failure to comply with this Act, exercise any one or more of the following powers:

• Avoid the contract and make other orders the Court thinks necessary or desirable to restore the parties to the contract to their respective positions before they entered into the contract (including refunding any deposit paid);

• Award damages that, in the opinion of the Court, may be necessary to compensate loss arising from the non-compliance; and

• Make other orders as may be just in the circumstances.

Damages may be awarded against:

• The vendor; or

• If it appears that the purchaser has been prejudiced by a failure on the part of an agent to carry out duties – the agent, or both.

It’s an offence under the Act to not comply with the statutory requirements of Form 1 Disclosure Statements in SA and it carries a maximum penalty of $10,000.00. There are limited defences available in the event of a charge for an offence or civil proceedings brought by a purchaser.

What is a cooling off period?

A purchaser of land is entitled to a “cooling-off” period, during which the purchaser may withdraw from the contract by giving written notice to the vendor or the agent acting on behalf of the vendor.

There’s only a reasonably short period of time – two business days – for the purchaser to review their decision to purchase the property and withdraw from the contract if necessary. The date of service of the Form 1 will determine when the cooling-off period commences and expires:

• If the Form 1 is served after the contract is signed by all parties: the cooling off period commences on the next business day after the Form 1 was served, and expires at the end of the second business day after it was served

• If the Form 1 is served before the contract is signed by all parties: the cooling off period commences on the next business day after the contract was signed by the last of the parties, and expires at the end of the second business day after it was signed by that party

The method of cooling off must comply with the requirements of the Act for giving written notice to the vendor or the agent acting on behalf of the vendor. Where a purchaser exercises its cooling off right and withdraws from the contract, they’re entitled to the return of money paid (the deposit) under the contract. However, if the deposit does not exceed $100.00, the vendor is entitled to keep that money.

Not all purchasers of land have the right to cool-off

The cooling-off period doesn’t apply if:

• The property is being purchased by auction; under a contract for the sale of land (other than residential land) by a company; or under an option to purchase and that option is exercised; or

• The purchaser, before signing the contract, received independent advice from a legal practitioner concerning the contract and the practitioner signed a regulation approved certificate that the practitioner gave the purchaser that advice;

We know that Form 1s sound complicated, but don’t worry, we’re here to help.
Our registered conveyancers and property lawyers have extensive experience in the preparation of a Form 1 for vendors and agents. We make it simple to get your Form 1 Disclosure Statement right, so that you have peace of mind through the process. To get started, get in touch with Andrew Mitchard or send us a message.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.