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Cooling off

Under the Land and Business (Sale and Conveyancing) Act 1994 (SA) anyone selling a business for less than $300 000 (exclusive of GST) must give the purchaser a Form 2 [ss 5,7,8,10]. A Form 2 must be given even if the purchaser does not want it. However, a lawyer's certificate that the purchaser has declined a Form 2 after the consequences have been explained will avoid this requirement. A Form 2 states the gross income, purchases and operating expenses from which the net profit of the business for the last twelve months can be calculated. After receiving the Form 2, or from the time the last party executes the sale agreement (whichever is latest), the purchaser has five days to cool off. The maximum deposit that can be asked for is 10% of the purchase price. A purchaser wanting to cool off must give written notice to the vendor or the vendor's agent before the five days elapse. The contract is then rescinded and the deposit must be refunded. If after cooling off the purchaser reconsiders and wants to buy the business it is likely that the person selling the business must serve a new Form 2 and the five day cooling off period starts running again.

The sale contract may provide that after the cooling off period expires a more substantial deposit must be paid. There is then no limit on the amount of the deposit, as long as both parties agree.

Cooling off  :  Last Revised: Fri Dec 6th 2013
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