Recent developments in the sale of land
The Victorian Government recently made massive changes to the Sale of Land Act 1962 by passing into law the Sale of Land Amendment Act 2019 (Amendment Act) on or about 4 June 2019 but which came into effect from 1 March 2020.
Highlights of amendment to material facts disclosure requirements pursuant to section 12(d) as amended under the Act are as follows;
Section 12(d) of the Act as amended provides;
Any person who with the intention of inducing any person to buy any land makes or publishes any statement, promise or forecast which he knows to be misleading or deceptive or knowingly conceals any material facts or recklessly makes any statement or forecast which is misleading or deceptive shall be guilty of an offence against this Act.
This means any vendor or estate agent who for the purposes of inducing a potential purchaser of land knowingly conceals any material facts or recklessly makes any statement or forecast which is misleading or deceptive shall be liable to a fine of 120 penalty units or up to twelve (12) months imprisonment.
Section 12A of the Act (as amended) provides “The Director of Consumer Affairs Victoria (CAV) may make guidelines to assist vendors of land and their agents to understand what a material fact is likely to be for the purposes of section 12(d)”.
The purpose of these guidelines according to CAV is to assist vendors of land and their agents including estate agents to understand what a material fact is likely to be under section 12 (d) of the Act.
The obligation on vendors or their agents to disclose material facts known to them to a potential purchaser bridges the information imbalance gap between the parties particularly in assisting the potential purchaser make a fully informed decision before they buy land.
Meaning of material fact
The CAV guidelines define a material fact as a fact that would be important to a potential purchaser in deciding whether or not to buy any land. This means in the context of a proposed sale of land a material fact is one that influences a potential purchaser in deciding whether or not to buy any land at all or to buy land only at a certain price.
The CAV guidelines make it clear a fact is not inuendo, gossip or mere speculation. However, an opinion may be a “material fact”, if it is an expert opinion that is honestly held on reasonable grounds, and the vendor or agent have knowledge of that expert opinion.
Failure to disclose a fact alone according to the guidelines is not sufficient to establish an offence under s12(d). The fact must be material. A fact can be ‘material’ in two ways:
- Generally: a fact that an average, reasonably informed purchaser with a fair-minded understanding of the property market, including the role of an estate agent, would generally regard as material in their decision to buy land (examples are provided below).
- Specifically: if a fact about land is known by the vendor (or the vendor’s agent, including an estate agent) to be important to a specific purchaser, it can be material, even if other agents and consumers would not generally consider that fact to be important or of significance to them. This knowledge could arise if (for example) a particular purchaser:
- asks a specific question about the land of the vendor or the vendor’s agent (including their estate agent), and/or
- where a purchaser informs the vendor/agent of their intended use of the land.
Examples of material facts
The CAV guidelines provide general examples of material facts about land which may be known to the vendor or agent, but which may not be obvious to a potential purchaser include (but are not limited to) circumstances where:
- prior tests or investigations have revealed (or the vendor or agent otherwise knows of) a defect in the structure of the building, a termite infestation, combustible cladding, asbestos (including loose-fill asbestos insulation) or contamination through prior uses of the land,
- the underlying cause of an obvious physical defect is not readily apparent upon inspection (for example, whilst a large uncovered crack in a wall would be obvious to a purchaser upon inspection, the underlying reason for the crack, such as defective stumping, may not);
- there has been a significant event at the property, including a flood, or a bushfire,
- there is a history of pesticide use in the event the property had been used for horticulture or other agricultural purposes,
- there are restrictions on vehicular access to a property that are not obvious during a property inspection (such as truck curfews or where access is via an easement that is not apparent on the Certificate of Title or plans),
- facts about the neighbourhood surrounding the property which may not be immediately apparent upon inspection (such as sinkholes, surface subsidence, development proposals) that would likely affect the use and enjoyment of the property to a greater extent than the usual disturbances and inconveniences of occupying land of the kind and in the local area of the land being sold,
- building work or other work done without a required building permit, planning permit or that is otherwise illegal,
- the property during the current or previous occupation has been the scene of a serious crime or an event which may create long-term potential risks to the health and safety of occupiers of the land, such as:
- extreme violence such as a homicide
- use for the manufacture of substances such as methylamphetamine, or
- a defence or fire brigade training site involving the use of hazardous materials.
When must material facts be disclosed
The CAV guidelines provide estate agents (or vendors where they are not using an estate agent) should disclose all known material facts to potential purchasers as soon as they indicate that they are considering purchasing the property. They must also make continuing disclosure if further material facts become known until the property is sold.
Generally, material facts will not be concealed from purchasers if they are disclosed:
- in marketing material or information statements; or
- in a section 32 statement or contract of sale; or
- on a physical inspection of the property where they are clearly visible; or
- by specific disclosures made to particular purchasers in the course of negotiations; or
- before the start of a public auction.
Vendors obligations
- Vendors are required to prepare the property for inspection by potential purchasers without taking any steps to hide defects or any other important feature which would otherwise come to the attention of potential purchasers during inspection.
- Vendors are required to carefully consider all information known to them or disclosed to them by their solicitor or conveyancer after having conducted the usual searches and inquiries for section 32 statement.
- Vendors are required to disclose all known material facts full and frankly to their agents prior to the marketing of the property.
- Vendors are required to answer all inquiries about the property put to the vendor by purchasers through their agents as fully and frankly as possible.
Agents (Estate agents) obligations
- Estate agents are required to discuss with vendors any material facts that are likely to be the subject of statements or representations by the estate agent in the course of marketing the property.
- Estate agents are required to answer all inquiries by purchasers as fully and frankly as possible in circumstances including by referring those inquiries back to the vendor or the vendor’s solicitor or conveyancer as necessary and diligently following up those responses.
This article is general in nature and does not constitute a legal advice. If you require assistance with any of the topics dealt with in this article we strongly recommend you seek legal advice or contact our office to speak with our experts.
