What vendors & agents must disclose to buyers

Thursday July 23, 2020

What vendors & agents must disclose to buyers

Vendors have been aware of their obligations under a vendor's statement (section 32 of the Sale of Land Act 1962 (Vic) (Act)) to provide specified written information to a purchaser, prior to the purchaser signing the contract.

A vendor providing false or incomplete information, in breach of section 32, is guilty of an offence, and in addition the purchaser, in many cases, may be able to rescind or cancel the contract at any time prior to settlement.

1 March 2020 - important changes to section 12 of the Act

Further obligations for vendors have been in force since 1 March 2020. Under section 12 of the Act, from that date, the offence of “fraudulently concealing material facts” was altered to “knowingly concealing material facts”.

A breach of this section 12 does not provide the purchaser with the right to rescind or cancel the contract, but it does result in a criminal penalty for the vendor of a fine not exceeding approximately $19,800, or 12 months in jail.

What is a "material fact"?

A "material fact" is one which is of a nature which is likely to make a difference to the decision of a purchaser, in whether to purchase the property.  In determining whether a fact is material, it is taken into account whether the fact is only known to the vendor, and the reaction of potential purchasers to the fact.

The legislation empowers the Director of Consumer Affairs Victoria to publish material fact guidelines to assist vendors and their agents.

The guidelines give a non exhaustive list of facts which would be material, including:

  1. Whether prior tests have revealed, or the vendor is aware of a defect in the structure of the building, termite infestation, combustible cladding, asbestos or contamination
  2. The underlying cause of a defect, for example defective stumping which would have caused cracking
  3. A significant event at the property such as a flood or bush fire
  4. A history of pesticide use (for an agricultural or horticultural property)
  5. Restrictions on right of vehicle access which are not obvious
  6. Facts about the neighbourhood such as sinkholes, surface subsidence or development proposals
  7. Building works done without the correct building permit, planning permit or are otherwise illegal
  8. Whether the property has been the scene of a serious crime or an event which might result in long term health and safety risks, e.g. a murder at the property, use as a meth lab, or use as a fire brigade or defence training site.

These requirements significantly add to the obligations of vendors, who must be careful to make all required disclosures.

If you have any queries regarding your obligations as a property vendor please contact our Property Law team on 03 9550 4600 for advice.