Skeletons in the closet. It’s an offence to withhold a ‘material fact’ when selling a property
It is an offence for vendors or agents to knowingly conceal any material facts about the land they are selling, with the intention of inducing an interested purchaser to buy the land.
What is a material fact?
There are two categories of a material fact.
1. General
General material facts are facts known by the vendor or their agent and are likely to affect the decision-making of an ordinary, interested purchaser who is considering making an offer or deciding if they want to purchase the land being sold. The material facts may not be obvious to an interested purchaser.
2. Specific
If the vendor or their agent is aware of a fact about the land which may be of interest to a specific purchaser, because of questions asked by that specific purchaser or because of matters raised during the course of discussions with the purchaser, then that is considered a specific material fact that must be disclosed to that specific purchaser. These facts may not be important to another purchaser, but if a particular purchaser has made it clear to the vendor or their agent that those facts are important to them, then if the vendor or agent is aware of those facts disclosure must be made to that particular purchaser.
The following may be indicators that the fact may be material:
- Whether the fact is only known to the vendor.
- The reaction of the interested purchaser to the fact, and whether the knowledge of the fact may impact the interested purchaser’s willingness to buy the land.
- Whether the fact results in the property being in a rare or unusual category or position.
Examples provided by Consumer Affairs Victoria include:
- the vendor or agent is aware of prior tests or investigations which reveal building defects, a termite infestation, combustible cladding, asbestos or contamination;
- building works or other works done without the relevant permits;
- damage or defects arising from prior significant events, such as a flood;
- a serious crime or event has occurred at the property which may put the health and safety of future occupants at risk, such as:
| homicide or murder,
| the land being used for the manufacture of illegal substance, or
| the presence of hazardous material due to past use of the premises
.
If you are a vendor or agent
Vendors should ensure they inform the agents of any material fact. Vendors and agents should work together to ensure all material facts are disclosed to interested purchasers. Any specific enquiries made by a purchaser must be answered with full transparency. Agents should take note of specific enquiries made by particular purchasers, and their reaction to the fact to determine if the fact may be material. There is an obligation to make continuing disclosure if further material facts become known. The disclosure should be made in the marketing materials and information statement or the vendor’s statement or contract. It can also be shown at the property or by specific disclosure.
If you are a purchaser
Ensure you ask the vendor or their agent specific questions relating to the property which you deem to be important to you.
What are the consequences?
If in breach of section 12(d) of the Act, vendors and/or their agents may be found guilty of an offence which may result in a fine of up to $22,190 (as at 1 July 2022) or up to 12 months imprisonment.
Under Australian consumer law, there is scope to argue misleading and deceptive conduct which could lead to the loss of the sale.
In addition, this may cause reputational damage to the agent, which is just as costly.
Our Property Team is available to assist you with any questions you might have. Email us your enquiry.
The content of this article is intended to provide a general guide only. You should seek advice for your specific circumstances.
