Buyer beware and vendor’s material fact disclosure

A TRADTIONAL legal aspect of buying a property was the “buyer beware” principle.

This principle of buyer beware places the onus on purchasers to make the necessary enquiries and thoroughly inspect the property before they sign the contract.

The effect of the principle was that properties are sold “as is” and purchasers had limited recourse of defects or issue were later discovered.

This landscape somewhat shifted with the introduction of amendments by the Victorian government to the Sale of Land Act 1962 (Vic). As a result of these amendments, from March 1, 2020 a vendor or real estate agent who “knowingly” conceals material facts from a prospective purchaser with the intention of inducing them to buy the property, will be guilty of an offence.

According to the Consumer Affairs Victoria guidelines, a “material fact” is a fact that influences a person in deciding whether or not to buy the property at all, or to buy the property at a certain price.

A material fact could include structural defects, existence of contamination, a significant event having occurred at the property (such as a serious crime) or illegal building works.

Whilst these amendments significantly increase a vendor’s disclosure obligations beyond what is prescribed to be included in the Vendor Statement, purchasers should not rely solely on vendor honesty.

Unlike a deficient Vendor Statement, the failure by a vendor to disclose a material fact does not grant a purchaser a statutory right to terminate the contract.

The purchaser would need to pursue a claim in court to allow them to rescind the contract before settlement or seek damages after settlement.

Given this, it is essential that to the extent possible a purchaser carries out its own thorough investigation of the property with the assistance of a legal practitioner and separately consider obtaining a building and pest inspection.

At Coulter Legal, the team can help purchasers carry out investigations on the property which will include a thorough assessment of the Vendor Statement and advising purchasers of all of the information required to be supplied.

This includes outgoings, owners builders warranty insurance where owner builder works have been completed, information in respect of any encumbrances affecting the property, whether the property is in a bushfire zone, the planning scheme details including the zone and any overlays affecting the property, any notices in respect of the land, details of any building permits, services and title enquiries.

Coulter Legal can also make enquiries of the local council planning and building department where required or of any authorities in respect of other encumbrances such as easements and make sure that the purchaser can use the property for their desired use after settlement.

The team can also assist vendors in preparing compliant sale contacts and Vendor Statements and advise on the need to make any particular disclosures to interested parties.

Coulter Legal is there to assist. Contact them today for a pre-signing contract review to protect your most important financial investment.

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