Nothing to declare … really?

It was once a case of buyer beware, but new laws are forcing sellers to ‘fess up to everything from termites to crime scenes.

What would be a deal breaker for you? Flooding? Asbestos? A meth lab?

They’re all on a growing list of issues homeowners must now declare before selling a property in most Australian States. Queensland is the latest region to formalise protections for buyers with new property laws before Parliament now.

Once upon a time it was up to buyers to sniff out potential issues – searching title deeds, flood maps and planning records to find out if their dream home could actually turn out to be a bit of a nightmare.

But in recent years as property prices escalated, so have expectations that home buyers should be afforded more protections than someone popping out to buy a toaster.

Don't ask, don't tell

While Australian Consumer Law dictates agents and vendors must not lie or mislead, what they are required to disclose voluntarily has often been a grey area. And as more cases cropped up of buyers getting burned by less than-forthcoming sellers, State Governments moved to introduce their own mandatory disclosure rules.

These required owners and vendors not to conceal material facts that could affect buying decisions. But there was still debate about whether only structural and habitation issues were relevant.

One controversial test case in New South Wales concerned a Taiwanese family that unknowingly bought a house that was the scene of an infamous triple murder in 2001. When they found out the family tried to cancel the contract, but the real estate agents refused to refund their $80,000 deposit. The agents argued consumer law did not require they disclose the house’s disturbing history, merely that they not conceal it. And the buyers simply never asked, they said.

The agents lost a court battle and were fined more than $20,000. The NSW Government later amended Fair Trading legislation to specify agents must declare, among other things, if a property has been the site of a murder within the past five years.

While a dark past may not be a deal breaker for all potential buyers, it will affect sale price, which is why some investors actually target so-called stigmatised properties that can go for 10 per cent less than market value.

Duty to declare

In the past three years, many States have beefed up regulations in an effort to shift the onus away from buyers to discover problems, and on to sellers to declare them.

In 2020, NSW formally amended the wording of regulations governing property sales from stating there must not be any concealment of material facts, to there must not be any failure to disclose them.

Despite growing protections, legal experts say nothing beats asking a lot of detailed questions – in writing. Vendors are required to answer honestly.

Here’s a brief overview of the state of play around the country.

NSW

Sellers must provide title and zoning documents, a drainage plan and certifications for any pools or spas. They must also disclose all material facts about the property including whether it:

• Has been subject to flooding or bush fire in the past five years.

• Is subject to significant health and safety risks or is listed as containing loose-fill asbestos insulation.

• Was the scene of a murder or manslaughter in the past five years.

• Was used for the manufacture, cultivation or supply of illegal drugs in the past two years.

• Has combustible cladding or is undergoing a building work rectification order.

Victoria

Sellers must provide a vendor’s statement, commonly called a Section 32 document, that outlines material facts. Consumer Affairs Victoria specifies these include but are not limited to:

• Structural defects, infestations and contaminations.

• Previous flood or bushfire impact.

• Non-compliant building work.

• Significant development proposals nearby.

• If the property has been the scene of a serious violent crime, or used for the manufacture of substances such as methamphetamine.

ACT

Vendor disclosure statements in the ACT are the most exhaustive in the country and require the provision of:

• A recent building and compliance report (which covers approvals and structural defects), pest report, asbestos assessment, and an energy efficiency rating statement.

• Zoning and title documents, including any encumbrances on the land.

• A building conveyancing inquiry (includes drainage plan and building approvals) and a lease conveyancing inquiry (includes any heritage listings, contaminated land issues and development applications affecting the property).

South Australia

Sellers are required to complete a 90-page Form 1 document that sets out the cooling-off rights of the buyer and discloses:

• Any encumbrances on the land.

• Development plans and building approvals.

• Zoning or heritage restrictions.

• Contamination issues.

• Sewerage plans.

• It does not include a general building condition report, or cover building compliance, which buyers are expected to tick off as part of their own due diligence.

Tasmania, WA and NT

Although there are no mandatory disclosure schemes in these States, there is still an expectation under Australian Consumer Law that agents will not mislead buyers about:

• Known structural defects.

• Asbestos.

• Whether the house has been the scene of a serious crime or drug contamination.

• Whether there are any unapproved renovations or known building encroachments.

• The presence of any easements (including for sewer pipes and electrical cables) or zoning restrictions.

Last year in WA, a couple were found to have made reckless fraudulent misrepresentations and breached the contract of sale on their Perth unit after failing to disclose details of an unruly neighbour who lived directly above the unit they were selling, and who often hammered on the floor/ceiling between the units.

Queensland

The Sunshine State has a proposed mandatory seller disclosure scheme before Parliament. The Property Law Bill 2023 is expected to pass before the end of the year, with changes coming into force in 2024. The proposed scheme would require sellers to sign a declaration:

• That no building work has been carried out by an unlicensed person in the past six years.

• That there are no tree orders or applications under the Neighbourhood Disputes Act (Dividing Fences and Trees) 2011 affecting the property.

• That there are no known development proposals that impact the property and no known easements or encumbrances.

No warranty of structural soundness is mandated, although the seller is expected to produce proof of title and zoning, and compliance certificates for any pool on the property.