If you have ever bought or sold a property, you would likely be familiar with the terms “Vendor’s Statement” or “Section 32 Statement”. These Statements are consumer-protection measures which are designed to provide certain key information about the property to a prospective purchaser before they sign the contract.
If a vendor fails to provide adequate disclosure in a Vendor’s Statement before the contract is signed, the purchaser may have the right to escape the contract under the Sale of Land Act 1962 (Vic) (“the Act”).
What needs to be disclosed?
Under Section 32 of the Act, a Vendor has an obligation to disclose certain information. Some of these include:
- Easements, covenants and other encumbrances;
- The vendor’s right to title;
- Zoning, planning permits and building permits;
- Mortgages;
- Owners Corporation information; and
- Connection of utility services, etc.
Additional obligations – “material facts”
In addition to these obligations, a vendor (or anyone else such as a real estate agent) must ensure that he or she does not make any statement or promise, with the intention of inducing a person to buy the property, which the vendor “knows to be misleading or deceptive or knowingly conceals any material facts or recklessly makes any statement or forecast which is misleading or deceptive”
What is a material fact?
The simplest way to determine whether a fact might be material is to ask whether it would influence an ordinary purchaser in deciding whether or not to purchase the property on the terms proposed.
A material fact is not specifically defined in the Act however can include:
- history of events at the property such as serious floods, fire or even extreme violence;
- history of the property being used to manufacture illegal substances or for the disposal of chemicals;
- undisclosed building defects such as termite infestation, combustible cladding, asbestos, etc
- history of pesticide use if the land has been used for horticulture or other agricultural purposes; or
- information regarding the surrounding neighborhood such as sinkholes, development proposals, etc that would likely affect the use and enjoyment of the property.
What happens if a material fact is not disclosed?
It is an offence to knowingly conceal any material facts or make misleading and deceptive statements with the intention of inducing someone to buy a property. A vendor who commits such an offence could be liable to significant fines or potentially imprisonment.
In addition to these consequences, section 48A of the Act provides that these breaches might entitle the purchaser to apply to the Court for relief and remedies that are available under the Australian Consumer Law and Fair Trading Act 2012 (Vic) which may include an order setting the contract aside, refunds of the deposit and any other money paid and compensatory orders.
What should you do?
Vendors should be careful to ensure they are frank and forthright when selling a property and purchasers should be aware that there may be options available to them if a vendor failed to disclose something material before the contract was signed.
At Nevett Ford, we can advise on rights and obligations and can assist a vendor in making proper disclosure or understanding your rights as a purchaser. Our Property Team can assist you from before the contract is signed through to settlement and beyond and we can be contacted on 03 9614 7111 or email us at melbourne@nevettford.com.au