It takes a lot of time and research to buy the right investment property for your portfolio, not to mention the added stress of questioning if the seller has disclosed information that may affect the sale price or whether they have tried to ‘pull the wool over your eyes’.
Fortunately, for buyers, there is a whole raft of legislation that helps to make the due diligence process more transparent.
The rules also remove the risk of liability against vendors and selling agents later on for misleading or deceptive conduct.
Under the Australian Consumer Law (ACL), both vendors and agents are legally required to disclose known information or material facts, which is crucial to a person (buyer) when deciding whether or not to purchase a property.
That means it is considered a legal offence to omit information, mislead or deceive parties to a contract.
Non-disclosure can lead to termination of contract, fines, or a potential lawsuit down the track.
In more serious cases, sellers could face hefty penalties and even jail time.
The problem is that the rules around what a seller must disclose differ in every state so it can be tough to keep up with what applies to the property you’re looking to buy.
To help, here’s a complete rundown of everything a seller needs to disclose in each state.
According to Fair Trading NSW major reforms that commenced on 23 March 2020 now mean an agent could still be in breach of the law for failing to disclose a fact even though they didn’t know about it.
In NSW, sellers are required to disclose the following by law;
- A contract of sale including a copy of the title documents, drainage diagram and a current Zoning Certificate issued by the local council.
- If the property for sale has a swimming or spa pool, the seller needs to give a copy of a valid certificate of compliance, a valid occupation certificate, and evidence that a pool has been registered or a valid certificate of non-compliance.
- If the property has been subject to flooding from a natural event or bush fire in the last 5 years.
- If the property is subject to significant health and safety risks.
- If the property is listed as containing loose-fill asbestos insulation that is required to be maintained.
- If the property was the scene of a murder or manslaughter within the last 5 years.
- If the property was used for manufacture, cultivation, or supply of prohibited drugs in the last 2 years.
- If the property has any external combustible cladding, even if there is the intention to rectify it.
- If the property has been lodged under the Environmental Planning and Assessment Act 1979 for rectification of the building regarding external combustible cladding.
- If the property is undergoing a building work rectification order, prohibition order or a stop work order.
A seller must make certain disclosures to prospective buyers before the sale of real estate as per sections 32 and 33 of the Sale of Land Act 1962 for the sale of real estate.
The guidelines published by Consumer Affairs Victoria include a list of examples of what a “material fact” would likely be, and include the following:
- Structural defects
- Contamination or dangerous materials present on the property (such as asbestos or combustible cladding).
- Causes of obvious defects, or risks of future defects, that are not immediately apparent (such as underground tree roots or defective stumping).
- A significant event has occurred at the property, including a flood or bushfire
- Illegal or non-compliant building work.
- History of pesticide use or whether the property has been used for other horticulture or agriculture uses.
- Any restrictions on vehicle access
- Facts about the surrounding neighbourhood may affect the use and enjoyment of the property to a greater extent than ordinary properties in the area (such as significant development proposals nearby).
- If the property has been at a scene of a serious crime such as extreme violence, murder, or homicide.
- Whether the property has been used for the manufacture of substances such as methamphetamine.
- If the property was a training site for defence or the fire brigade using hazardous materials.
- Property enhancements, renovations, or improvements (although these are likely to be included in the property sale marketing).
Currently, there is no formal seller disclosure regime in Queensland applying to the sale and purchase of freehold land.
That means Queensland sellers do not need to provide as much property disclosure information or documents to the buyer as they do in other states.
Sellers are instead required to comply with a complex mix of common law, statutory and contractual obligations.
But there is a proposal in place for mandatory disclosure of certain information in a single document along with any prescribed certificates, including a body corporate certificate, where relevant.
The seller disclosure scheme seeks to simplify freehold land contracts and empower buyers to make informed decisions about property dealings.
At present, sellers in QLD are only required by law to do the following;
- Give a disclosure notice to a prospective buyer if the property has a pool and there is no pool safety certificate. There is also an obligation to provide a pool safety certificate or notice of no pool safety certificate to a buyer before settlement.
- Disclose all encumbrances affecting the property.
- Notify the buyer if the property is recorded on the contaminated land or environmental management register, or if there is an application or an order about a tree on the property.
- Neighbourhood disputes
If you are selling a unit or townhouse, you must also provide the buyer with information about the body corporate.
Additionally, before settlement you must:
- advise the buyer whether the property has compliant smoke alarms and an approved electricity safety switch
- obtain and give the buyer a clearance certificate from the Australian Taxation Office.
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.
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A disclosure statement must include the following;
- Energy Efficiency Rating Statement – this must be completed on a standard document by a professional assessor, has to 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 the 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. for 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 are 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 summary 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.
When selling a house in South Australia, a vendor needs to provide a document called a Form 1 to the buyer to disclose certain things about the property.
When the vendor has hired a real estate agent, it is the agent’s responsibility to prepare Form 1 and to make all the inquiries necessary to do so accurately.
Form 1 may include but is not excluded to:
- Cooling off rights
- Any restrictions that exist on the title, such as encumbrances
- Development plans and building approvals
- Rates of zoning
- Types of services connected to the property
- Emergency service funding
- Public and environmental health
If the property is strata-titled, further information must be provided.
Form 1 may not include information about encroachments, condition of the property, whether building regulations are complied with, or if the survey of the land is accurate.
A prospective purchaser is responsible for finding out anything that is not covered in Form 1 and needs to do their due diligence on the property they are purchasing.
There is no mandatory seller disclosure statement when selling property in Western Australia.
However, the agent must find out or verify pertinent facts about the property transaction and promptly communicate them to the potential buyer.
- Illegal drug contamination
- Any serious crime committed on the property (Depending on the seriousness and time frame of the crime committed, the agent might not see it as a material fact).
- Current tenancy agreements or leases
- Pool certificate or registration with the local council
- Building approvals and renovations
- Location of sewerage pipes
Vendors are not required to disclose to the purchaser a minimum set of specified information about the property.
Vendors however should advise purchasers of adverse title restrictions on the use of the property.
The purchaser is responsible to do their due diligence.
Similar to in Tasmania and Western Australia, sellers in Northern Territory are also not required to disclose any issues that may affect the saleability or value of the property, or to give any warranties.
While sellers in other states have minimum disclosure obligations and agreements, in NT any notable disclosures will be outlined in the property contract. These disclosures may include:
- Certificate of title
- Copy of plan
Agents need to use their judgment about when to disclose material facts.
Facts of a non-sensitive nature such as the area of the land on which the property stands should be provided in the standard marketing campaign, whereas more sensitive information may be more appropriately revealed when a buyer appears to be seriously considering purchasing the property.