From 1 October 2014, vendors of land in Victoria must comply with new requirements for vendor's statements – and failing to supply all of the information required may result in the purchaser being able to end the sale contract.
Vendors may also need to ensure they respond to two other changes to the Sale of Land Act 1962 (Vic) and to the Estate Agents (Contracts) Regulations 2008 (Vic): new due diligence checklists, and prescribed general conditions for use in contracts of sale of land.
New requirements for vendor's statements in Victoria: administrative
Some of the amendments are intended to ease the administrative burden on vendors of land.
For example, a vendor is only required to provide a vendor's statement to the purchaser before the purchaser signs a contract for the sale of land. Previously, a vendor was also required to include a vendor's statement in the sale contract.
In addition, from 1 October 2014, vendors are permitted to sign a vendor's statement by electronic signature.
New requirements for vendor's statements in Victoria: disclosures
In some cases, the amendments to the matters and documents required to be included are likely to reduce what must be disclosed.
For example, the previous requirement to disclose particulars of any notice, order, declaration, report or recommendation of a public authority or government department or approved proposal affecting the land now only applies to those matters directly and currently affecting the land.
In other cases, the amendments to the matters and documents required to be included will increase or clarify what is required to be disclosed, amend the way the information is required to be disclosed or give the vendor alternatives for disclosing the information required to be disclosed.
For example, from 1 October 2014, the vendor's statement must:
- include the name of any planning overlay affecting the land;
- disclose essential services which are not connected, rather than information on essential services whether or not connected;
- where there is an owners corporation, include specified information, whether from a certificate prepared by the owners corporation, or from information held by the vendor; and
- attach the Register Search Statement (title search) for the land, and the part of the search statement referred to as the "diagram location" that identifies the land and shows the location of the land, rather than a copy of the certificate of title for the land.
What are the consequences of non-compliance with vendor's statement requirements?
The purchaser may be able to rescind any contract of sale if information contained in the vendor's statement is false or hasn’t been sufficiently supplied. Therefore, it's essential that a vendor includes all required information, including that introduced by the Amendment Act, in a vendor's statement.
In addition, it is an offence for a vendor to knowingly or recklessly supply false information or fail to supply all of the information required to be given in the vendor's statement. This was previously an offence, but the maximum penalty has been increased from 50 penalty units to:
- 300 penalty units in the case of a body corporate ($44,283 based on the current penalty unit rate from 1 July 2014 of $147.61); and
- 60 penalty units in any other case ($8,856.60 based on the current penalty rate).
It is also now an offence for a vendor to fail to give a purchaser a signed vendor's statement at all, before the purchaser signs the contract of sale of land.
Due diligence checklists
The Amendment Act inserts a new Division 2A into the SLA. In the case of vacant residential land (vacant land on which the building of a residence is permitted) or land on which there is a residence, a vendor must provide the purchaser with a "due diligence checklist". The checklist is included to assist purchasers in identifying information they may wish to obtain in respect of the land for sale. The checklist must be in the form prescribed by the Director of Consumer Affairs Victoria (CAV), and must be published on CAV's website.
Where the checklist is required, the vendor must provide the checklist to the purchaser, unless there is a licensed estate agent acting for the vendor, in which case it is the agent's responsibility to provide the purchaser with the checklist.
The checklist may be made available by copies being displayed or offered to prospective purchasers at any inspection held of the land, and by including a link to CAV's website or including a copy on any website maintained by the vendor and the vendor's licensed estate agent.
If a vendor is required to provide a due diligence checklist, and fails to do so, the vendor will be committing an offence, with a maximum penalty of 60 penalty units ($8,856.60 based on the current penalty rate).
The new requirements for vendor's statements and for due diligence checklists do not apply if:
- before 1 October 2014, a vendor's statement has been prepared, and the vendor has signed that statement, or those statements; and
- on or after 1 October 2014, that land remains for sale.
In these circumstances, the old requirements apply, even if changes to the vendor'sstatement is required after 1 October 2014.
If the transitional provisions apply, but the land is withdrawn from sale after 1 October 2014, and then again offered for sale, the new vendor's statement and due diligence checklist requirements apply.
Warranty in the Estate Agents (Contracts) Regulations standard form contract
The Estate Agents (Contracts) Regulations prescribe a standard form of contract for the sale of land, which is not mandatory, but is very commonly used.
In the case of the general conditions for contracts for the sale of land, the amendments include changes to general condition 7 (dealing with releasing the property from security interests to which the Personal Properties Securities Act 2009 (Cth) applies) and general condition 18 (nomination).
General condition 2.1 of both the old and amended general conditions contains a warranty from the vendor that the general conditions are identical to the general conditions prescribed by the Regulations.
Consequently, any contracts of sale which use the prescribed form of general conditions, but which have not been signed by both parties by 1 October 2014, will need to be updated to include the new general conditions. Unless such change is made, the vendor will be in breach of the warranty.
What should you do?
With effect from 1 October 2014, all new vendor's statements must comply with the new requirements. Vendors should therefore check their vendor's statements and internal compliance materials now.
You'll also need to ensure you provide the new due diligence checklist for vacant residential land or land on which there is a residence, and amend your internal compliance systems to reflect this.
Even if vendors have any deals that fall under the transitional provisions, they could still have to comply with the new laws if the land is withdrawn from sale and reoffered.
Finally, any contracts of sale of land which use the general conditions prescribed under theEA Regulations, but which have not been signed by both parties by 1 October 2014, must be updated to include the new general conditions prescribed by the EA Regulations.