What Property sellers have to disclose

Knowing what a seller must disclose to you before you sign a contract can vary from one state to the next.

In this article we provide a rundown. 

With vendor disclosure reforms sweeping the nation, it’s tough to keep up with all the different rules, especially if you invest interstate.

Fortunately, for buyers, new legislation by some state and territory governments is making the due diligence process more transparent and is helping remove a risk of liability against vendors and selling agents later on for misleading or deceptive conduct.

However, some argue that the costs of the new disclosure can outweigh the benefits.

We sifts through the legislation and speaks to conveyancers about what’s happening in each state and territory – they range from stringent and what some say are ‘over the top’ rules to buyer be very aware.

AUSTRALIAN CAPITAL TERRITORY

ACT vendors are given the most exhaustive list of obligations in the nation, but that’s great news for buyers.

They’ve set a national benchmark in how properties should be exchanged and what buyers should be permitted to know upfront.

The ACT Planning and Land Authority (ACTPLA) requires the following documents and reports to accompany every sales contract:

• Energy Efficiency Rating Statement – this must be completed on a standard document by a professional assessor. It measures the energy performance of a dwelling from zero to 6 stars.  This rating must be included in the advertising campaign of a property and the report must be provided to the buyer. 
  
• A Building and Compliance Inspection report (and invoice) – this report discloses the structural soundness of the property and if structures are approved under legislation. The report must be undertaken less than 3 months prior to the property being advertised or offered for sale.
• Asbestos Advice and Assessment Report
• A Pest Inspection Report (and invoice) – this is where any termite or other pest damage is revealed. Like the building report, the Pest Inspection Report must be undertaken within 3 months of the date of the property being advertised or offered for sale.
• The Crown Lease of the land – this will outline the conditions of how the land is held and how it can be used, eg. commercial, residential or rural use. (remembering that properties in the ACT are owned leasehold, not freehold).
• The current edition of the certificate of title for the crown lease – this is a record of who holds the land and how it’s held, eg. joint venture. Also outlined will be anyone else claiming an interest in the land, eg. Banks holding a mortgage over the property. 
• The deposited plan – this demonstrates the approved plan on the land and if any easements exist.
• Encumbrances shown on the certificate of title (excluding any mortgage or other encumbrance to be discharged) – this outlines details of caveats or restrictive covenants over the land.
• If any other encumbrances exist but don’t appear on the Certificate of Title then they must also be disclosed in a statement, eg. Unregistered mortgage or other unregistered encumbrances.
• Lease Conveyancing Inquiry Documents for the property – ACTPLA must provide documents including if a heritage listing exists, outstanding rent under the Crown Lease, development applications affecting the property, breaches of the crown lease, any orders issued against the property and the compliance certificate.
• A building Conveyancing Inquiry Document – ACTPLA provides documents including : certificate of occupancy, survey certificate, approved building plans, drainage plan and building file summery sheet. These documents aren’t required if the property is a class A unit, the residence on the property hasn’t previously been occupied or sold as a dwelling, or If the contract is an off the plan purchase.
• For units – information relating to the owners corporation (body corporate) and levies payable.

NSW

Last year the – then NSW Labor Government went on a witch hunt for gazumpers. 

The result? (Editors note: this article was originally written in 2011 and has been republished for the benefit of our many new readers)

Still no regulatory impact statement outlining vendor disclosure obligations.

Instead, there was the addition of a swimming pool warning to be annexed to the sales contract if the property is for sale by auction only.

A decision is still yet to be made.

At this point in time, a vendor must attach the following documents to the contract:

• A section 149 certificate (the planning certificate) for the lot, stating the true status of the land at contract exchange.

Barrister Laina Chan of Level Nine Wentworth Chambers says the section 149 certificate must include:

• The zoning and land use
• If complying development may be carried out: 
• If the land is affected by the operation of Sections 38 or 39 of the Coastal Protection Act 1979 to the knowledge of the council:
• If the land is located in a mine subsidence district;
• If the land is affected by any road widening or road realignment or a policy that restricts the development of the land because of the likeliness of landslip, bushfire, tidal inundation, subsidence, acid sulphate soils or any other risk (other than flooding)
• If the land is subject to any flood – related development controls;
• If the land is reserved for resumption
• The name of each contributions plan applying to the land
• If the land is related to any bio-banking agreement
• Whether the land is bush-fire prone land
• Whether the land is land to which a property vegetation plan under the Native Vegetation Act 2003 applies

According to law firm Allens Arthur Robinson, the Coastal Protection and Other Legislation Amendment Act 2010 (NSW) passed by NSW Parliament on October 21, 2010 amends the Environmental Planning and Assessment Regulation 2000 (NSW) and inserts new clauses 4A into Schedule 4 of that regulation.

Allens Arthur Robinson partner Nicholas Cowie says these new clauses took effect from February 25, 2011 in coastal councils across NSW to ensure property owners and prospective purchasers could obtain additional information relating to coastal matters affecting their properties.  

Other mandatory vendor disclosure documents, according to the Conveyancing (Sale of Land) regulation 2010, require the following items to be included with the contract:

• A diagram for the land from a recognised sewerage authority
• A property certificate and a copy of a plan for the land issued by the Land and Property Management Authority or any of its predecessors
• Copies of all deeds, dealings and other instruments lodged or registered in the Land and Property Management Authority including easements, profits, restrictions on the use of land and covenants.
• If in a strata scheme or a lot under a community plan, precinct plan or neighbourhood plan, copies of all deeds dealings and other instruments plus copies of easements, profits, restrictions on the use of the land, covenants, property certificates, a building management statement and a strata scheme by-law.

VICTORIA

Whilst pre-purchase reports aren’t mandatory in Victoria, there’s a statutory requirement to disclose certain information about the property. 

A vendor’s statement (commonly known as a ‘section 32 statement) is required by The Sale of Land Act 1962 and must be available to an intending buyer before the contract is exchanged or signed.

Law institute of Victoria spokesperson Eu Ming Lim says the statement must be signed by the vendor before the buyers sign the contract.

“If the vendor statement isn’t provided at the stage of signing, the contract is still valid but the purchaser has a right to avoid or terminate the contract any time up to the settlement completion date” says Lim.

From a vendor’s perspective, you’d be worried until settlement if you haven’t provided the statement or if you give inaccurate information, he says.

Lawyers Conveyancing outlines some of the vendor’s obligations required to be included in the section 32:

• Statutory warnings to the purchaser
• Vendors details
• Title details
• Any details related to building permits issued in the past 7 years
• Details of owner-builder warranty insurance if it applies to the property
• If the vendor is the owner-builder who completed building works, a written inspection report (listing defects) must be outlines in the vendor statement
• If any mortgages, debts or charges are charged against the land
• Information about covenants, easements and any other restrictions on the title (whether or not they appear on the title)
• Planning information, particularly where zoning restricts land use
• Information regarding outgoings payable by the owner of the property
• Disclosure of any notices or orders issued by the authorities, regarding fencing, road widening, sewerage etc.
• If there is access to the property by road
• Information on services connected to the property

Apart from the statutory obligations in the Sale of Land Act 1962, the vendor must also act honestly and reasonably in disclosing any variables that might affect the property, says Lim.

Lim refers to land contamination as an example.

He says while a specific disclosure item may not be listed in section 32, The Trade Practices Act may impose an obligation.

QUEENSLAND

Whilst the standard information available in Queensland includes title details such as registered encumbrances affecting the land and details of unregistered leases and tenancy agreements, Argonaut Legal Solicitor Tim O’Dwyer says vendor disclosure is barely alive in the form of a mandatory vendor sustainability declaration and a swimming pool fencing compliance certificate introduced last year. 

The sustainability declaration, introduced last year, has been criticized by agents and vendors as a waste of time.

This is because for vendors to complete the form, they need to pay up to $400 for an energy assessment.

As buyers aren’t frequently enquiring about the property’s energy rating then paying for an energy assessment is considered to be a waste of time and money, so incomplete forms are handed over.

However, legislation requires agents to have the form readily available for buyers – blank or not.

Pool fence compliance is a different matter; the pool fence must be assessed and approved and if it hasn’t been, then the vendor must give the buyer and the Department of Infrastructure and

Planning a prescribed notice stating that the pool may be non-compliant at the time of settlement.

SOUTH AUSTRALIA

A Form 1 Vendor’s Statement must be provided to the buyer at least 10 days before settlement.

When a property is for sale by auction, the statement must be provided 2 days prior to the day of bidding.

The statement requires standard information only, including: if any restrictions (such as encumbrances) exist on the title, types of services connected to the property, the rates, zoning, notices, orders and building approvals.

If the property is strata-titled, further information must be provided.

WESTERN AUSTRALIA

We thought Queensland was the land of the lawless where it’s a case of ‘buyer beware’, but in Western Australia, buyers have hit frontier land where only the basic rules apply.

However, like South Australia, in the case of a strata-titled property, a copy of the strata plan, the strata scheme by-laws and the unit entitlement must be available to vendors.

TASMANIA

If given the go ahead on July 1 this year, residential land vendors must disclose information when advertising land for sale. (Editors note: this article was originally written in 2011 and has been republished for the benefit of our many new readers) 

But apparently, it’s a big ‘if’ because the proposed draft amendment to part 10 of the Property Agents and Land Transactions Act 2005 has been kicking around for some time, so many people question just how far it will be watered down before it’s enacted.

“It’s been 10 years overdue,” announces Tasmanian buyers agent Rob Zubin of Real Estate Buyers Agents Association of Australia.

“Up until now it’s been a ‘buyer beware’ market.  In the past, building inspection clauses would be removed from the contract by selling agents and opportunities to amend a contract before it became unconditional still existed.”

The Mortgage Choice Conveyancing Guide states that currently the buyers conveyancer must perform all searches related to titles, easements and covenant, rates, local government, land tax and bankruptcy.

The proposed draft amendment provides a proposed cooling off period in residential sale contracts, which lasts from when the purchaser becomes bound by the contract and expires at 5pm on the second business day following.  When a sale is by auction, cooling off periods won’t apply.

Under the proposed changes so far vendors will be required to disclose the following in a government – supplied statement.

• Building, electrical or plumbing work – f any of this work has been undertaken, has it been approved with the required council permits? Any information on any illegal rewiring/replumbing, drains, decks, balconies, balustrades, roofs, stairways, pergolas or other illegal additions or renovations to the property.
• Planning – is the land zoned for residential use? If it’s in the process of being rezoned, further details must be supplied.  Any council conditions imposed on the land use and evidence of any applications submitted to council for rezoning purposes must also be disclosed.
• Heritage listing – is the property (dwelling or land) heritage listed or in the process of being heritage listed? Evidence of any related correspondence must be provided. 
• Notice, orders, letter, judgements or writs issued regarding the property – if any these documents have been issued for the building or structure, fences, trees or tree roots affecting neighbouring properties, fire hazards, plumbing or soil contamination, they must be disclosed.
• Building defects – do any defects or faults (such as structural faults, rising damp, drainage problems, water seepage soil movement) exist that might affect the property’s use as a residence? (Note: pest inspection reports aren’t necessary, see API’s May edition pg 102.)
• Building work requiring an indemnity insurance policy – if a builder or owner builder has undertaken any building work, an indemnity insurance policy must be provided (as required under the Housing Indemnity Act 1992)
• Asbestos – has any asbestos been used as a building material in any building on the property? Details must be provided.
• Residing at the property – the vendor must disclose if he or she has lived at the property since purchase. If the vendor hasn’t lived at the property (eg. Property manager, family member, tenant).

Apparently this triggers a search on any capital gains tax or land tax owed.

NORTHERN TERRITORY

Already passed through the NT Parliament last year, The Sale of Land Act 2009 is anticipated to take action from July 1 this year. (Editors note: this article was originally written in 2011 and has been republished for the benefit of our many new readers) 

Up until this point, the NT has adopted only a partial approach to vendor disclosure with basic information relating to the land title. 

Once the draft is activated, vendors of properties in Darwin, Palmerston, Litchfield, Coomalie and Alice Springs local council areas must annex a number of documents to the sales contract, valid for 6 months.

These include:

• A building status report
• A personal Knowledge Declaration – the vendor must state their knowledge of any pollution by contaminant, or a drug premises order (if the police have placed a sign on the house declaring it a house used for the exchange and use of drugs under The Misuse of Drugs Act).
• A land Titles Office title search
• Details of registered and unregistered encumbrances
• Unit information
• Evidence of occupancy or tenancy
• A swimming pool fencing compliance certificate
• A rates notice.

Editors note: Please note some of the details required to be disclosed by vendors may have changed  as this article was originally written by Nicole Navarro in July 2011 and has been republished for the benefit of our many new readers. It first appeared in Australian Property Investor Magazine and has been republished with their permission.