Scene of a murder, drug lab, combustible cladding? | What do you need to disclose when selling a property?
Although the concept of ‘buyer beware’ exists in Victoria, a vendor is still required to make various disclosures regarding their property to a purchaser on sale. Failure to provide adequate disclosure, or knowingly making false representations, may give the purchaser a right to walk away from the deal prior to settlement – and in some circumstances, the vendor could be charged with an offence, and liable for a significant financial penalty or up to 12 months’ imprisonment.
Section 32 Vendor’s Statements
Certain disclosures are required under section 32 of the Sale of Land Act 1962 (Vic) (Act) and must be provided by way of a signed statement by a vendor to a purchaser before the purchaser signs the contract of sale. Commonly referred to as the Section 32 Vendor’s Statement, the statement is often annexed to the contract; however, technically it should be separate. Depending on the type and location of your property, the Vendor’s Statement may need to contain certain information regarding:
- rates, taxes, charges or other similar outgoings;
- easements, covenants or similar restrictions (and any existing failure to comply);
- zoning and the applicable planning scheme;
- whether the land is in a bushfire prone area, or liable for a Growth Areas Infrastructure Contribution;
- any mortgage that is not going to be discharged;
- building permits;
- your policy of insurance;
- any notice or order from a government department or public authority affecting the land;
- livestock disease or contamination for agricultural purposes;
- any intention to compulsorily acquire the land;
- any owners corporation affecting the land;
- connection of services (electricity, gas, water, sewerage and telephone);
- evidence of your right to sell the land; and
- staged subdivisions.
In addition to the above disclosures, vendors (and agents) must not knowingly conceal any material facts from a prospective purchaser. A person will be guilty of an offence if, with the intention of inducing any person to buy land:
- they knowingly conceal any material facts or recklessly make any statement or forecast which is misleading or deceptive; or
- they knowingly or recklessly make any false representation or promise.
The penalty for breaching section 12(d) of the Act is 120 penalty units (currently just under $20,000) or up to 12 months’ imprisonment.
A vendor or agent must also answer all questions from buyers about material facts, as fully and truthfully as possible.
The material fact guidelines specify that a material fact is a fact that would be important to a potential purchaser in deciding whether or not to buy land – whether to buy the land for a certain price, or to buy the land at all. Speculation or gossip would not be considered a fact; however, an opinion could be a material fact in certain circumstances if it is provided by an expert in the field.
Material facts, which may be known to the vendor or agent, but which may not be obvious to potential purchasers, could include:
- building defects or existing infestations;
- the existence of combustible cladding or asbestos in the property;
- facts about neighbourhood development proposals, which would likely affect the purchaser’s use and enjoyment of the property; and
- the property being the scene of a serious crime, including a murder or manufacture of illegal substances.
If a potential purchaser asks a vendor or agent a question about the property, they must answer that question fully, frankly, and to the best of their knowledge.
What should a vendor do?
A vendor should disclose all material facts to their agent prior to the commencement of the marketing campaign, and should answer any queries put forward by purchasers – whether directly or through the agent – openly and honestly.
Before putting their home on the market, vendors may wish to either rectify issues that could arise, or at least consider the cost of doing so. For example, it is worthwhile determining the cost of asbestos removal or rectifying any building defects.
What should an agent do?
When engaged by a vendor, real estate agents should discuss with the vendor what material facts may need to be disclosed. The agent should carefully inspect the property, review the contract and Vendor’s Statement and prepare the marketing material, while considering what may need to be disclosed. The agent’s statements should be accurate and honest throughout the campaign.
What should a purchaser do?
If you are a potential purchaser, you should consider what facts or issues may cause you concern, and ask the agent or vendor questions regarding the property. You may wish to discuss these with a solicitor when obtaining advice on the property before you sign.
If you have any questions about this article, please get in touch with an author or a member of our Property team.
This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to Cornwalls’ clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.