If you’ve bought a property in the past, you may be familiar with section 32 disclosure statements, where a vendor (the person selling a property) must provide you with information such as council rates, easements and planning schemes. These are not the only facts that a vendor must disclose, however. New amendments to section 12 of the Sale of Land Act 1962 (Vic) (‘the Act’) also require the vendor to disclose any ‘material facts’ relevant to the property, of which they are aware.
In this blog, we explain what a ‘material fact’ is for the purposes of s 12, the penalties for breaching s 12, and what you should do if you think the vendor has knowingly concealed a material fact or has not included important information in the section 32 statement.
What are ‘material facts’?
Material facts are facts that could influence your decision whether to purchase a property or to purchase the property for a particular price.
Facts can be material both generally, where the average, reasonably informed purchaser would consider the fact important, or specifically, where a purchaser has asked the vendor or their agent a specific question about the property.
Generally material facts when buying and selling property
An example of a fact that is ‘generally material’ (a material fact) is contamination from hazardous materials. If a property had previously been used as a firefighting training site and the ground could now be contaminated with dangerous fire-retardant chemicals, then it would be an offence for the vendor to knowingly conceal this fact from any purchaser.
Other generally material facts suggested by Consumer Affairs Victoria include:
- A known current defect in the structure of the building;
- The presence of asbestos or combustible cladding;
- A termite infestation;
- A significant natural event that has occurred on the property, such as flood or bushfire;
- A history of pesticide use at the property;
- Any restrictions on access to the property that are not obvious during an inspection or on the plans of the property, such as truck curfews;
- Any building work performed on the property without a permit; and
- Any serious crimes or other hazardous events that have occurred at the property, such as a homicide or the construction of a methamphetamine lab.
These facts will no longer be generally material if they have been remediated (e.g. asbestos fully removed from the property by a licenced asbestos removal company).
Specifically material facts when buying and selling property
In contrast, a purchaser might ask a question that is specifically material to them.
The purchaser might inform the vendor that they intend to construct a pool in the backyard, for example, and ask if the backyard is appropriate for pool construction. The vendor may not know the answer, in which case they can tell the purchaser quite frankly that they aren’t sure. If the vendor knew of a specific issue with the property that could make pool construction difficult or impossible, however, it would be an offence for them to knowingly conceal that specific material fact.
It can be difficult to determine whether something is material to a specific purchaser or merely useful information. If you are a vendor and you are unsure whether a question goes to a material fact, check with your agent or solicitor and err on the side of caution.
What are the penalties for knowingly concealing a material fact?
Under s 12(d) of the Act, a vendor or their agent who knowingly conceals a material fact in order to induce a purchase to buy property is guilty of an offence.
The penalty is 120 penalty units or up to 12 months’ imprisonment. The value of a penalty unit as at 1 July 2020 is $165.22, so the maximum fine under s 12 is currently $19,826.40.
I think the vendor has knowingly concealed a material fact. What should I do?
The vendor and the vendor’s agent should disclose all material facts to potential purchasers, usually in documentation such as the section 32 statement, contract of sale, or in other information statements provided at auction or inspection. They can also verbally inform potential purchasers during contract negotiations or in the opening statements of an auction.
In the course of inspecting a property, you might suspect that certain material facts exist. You might be aware, for example, that firefighters had previously trained in the area around the property, potentially using hazardous chemicals. To determine whether this material fact exists, you should first ask the real estate agent. The agent must answer the question to the best of their knowledge.
Remember that vendors are not required to carry out additional tests and inspections of a property to determine if there are any unknown material facts – they just need to be honest about what they do know.
If you still have your suspicions, you can engage a solicitor and/or conveyancer to assist you in making further enquiries. At David Davis, our solicitors and conveyancing clerks are experienced in property matters. Depending on the material fact in question, we may be able to carry out additional searches and investigations on the property to determine whether it exists.
If a material fact does exist, we can also negotiate with the vendor, with the aim of ensuring that the issue is remediated before you take possession, or that the purchase price is lower as compensation.
If we believe that a vendor has knowingly concealed a material fact, we can assist you to report the vendor to the relevant body. We can also assist you in lodging any claim for compensation arising under a purchase contract, including court actions and related mediation.
Get help from a conveyancing and property lawyer
Contact us today for a quote for conveyancing services. Our friendly and experienced team can review up to three section 32 statements and contracts free of charge.
Contact David Davis Lawyers
Phone: 03 9014 1299
Email: admin@ddavis.com.au