The Sale of Land Amendment Bill 2014 (the Bill) proposes amendments to the Vendor’s Statement that is given by a seller of a property to a buyer under section 32 of the Sale of Land Act 1962 (Vic) (the Act).
The amendments aim to simplify a seller’s disclosure obligations, reduce duplication and enhance consumer protections.
However, it seems unlikely that sellers will adopt all of the new options offered by this Bill.
As a result, the Bill’s promised benefits may not result.
Furthermore, the Bill does not address some of the deficiencies in consumer protection in the current requirements for Vendor’s Statements.
- No duplicate Vendor’s Statement attached to a contract for sale of land
The Bill removes the requirement for a copy of the Vendor’s Statement to be attached to a contract for sale of land.
A seller will still be required to give a signed Vendor’s Statement to the buyer before the buyer signs a contract for sale, but the current requirement that a copy of the Vendor’s Statement be attached to the contract for sale will be discontinued.
- Electronic signatures
Sellers will be permitted to sign the Vendor’s Statement electronically.
This proposal makes it easier for sellers to sign statements and may reduce time delays.
- Re-instatement of current requirements with some variations
The Bill re-enacts many of the existing requirements under section 32 with some changes.
If the Bill passes into law, it will be important for sellers to familiarise themselves with these new requirements so they give a correct Vendor’s Statement under the Act.
Some of the main changes are.
- While the Bill retains the existing disclosure requirements in relation to planning law it also requires sellers to disclose the name of any planning scheme overlay affecting the land.
- A seller will only have to disclose notices, orders and declarations that directly and currently affect the land. This confirms that there is no need to include historical documents that do not currently apply to the land.
In some circumstances it may be difficult to judge what currently affects the land, with the result that a cautious seller may still include some historical information. For example it is sometimes difficult to quickly determine if a planning permit is current and in effect.
The inclusion in the Bill of the qualification that the notice, order or proposal to be disclosed is to be one which “directly” affects the land is difficult to interpret.
The Explanatory Memorandum that accompanied the Bill gives no guidance with interpretation.
Does this mean that a seller will not be obliged to disclose a planning permit issued for development of a neighbouring property which development may overlook or cast a shadow over the land? A cautious seller will continue to include that information if the Bill passes unamended and until the courts decide otherwise.
- The Bill requires disclosure of notices and reports relating to livestock disease or contamination by agricultural chemicals that affect the ongoing use of the land for agricultural purposes.
In so doing, the Bill makes a seller’s obligation to disclose that information explicit. Currently, a seller is only required to include in a Vendor’s Statement a warning that a buyer should conduct further investigations if the property is located in an agricultural area.
- The Bill amends the disclosure requirements regarding essential services so that sellers will only be required to disclose information of essential services that are not connected at the property.
4. Owners corporations
The Bill makes some changes to the requirements for owners corporations.
If the Bill is passed, a seller could chose to supply information regarding an owners corporation by either providing a certificate (as is currently required) or by disclosing information that would be contained in a certificate.
This allows sellers to use information that is already in their possession and could be potentially useful when the seller is the owner of an existing property which it has subdivided before sale to individual owners.
This choice does however increase the likelihood that a seller may inadvertently include incorrect or incomplete information. Again, although useful, it seems unlikely that a cautious seller would make use of the new provision.
The Bill also addresses the issue of inactive owners corporations.
The seller of a lot with an inactive owners corporation does not have to provide further information once it discloses that the owners corporation is inactive.
This amendment addresses the difficulty faced by sellers in obtaining information regarding inactive owners corporations.
The Bill proposes consequential amendments to the Owners Corporation Act 2006 (Vic).
Currently, owners corporations charge one fee for certificates with no regard to the size, complexity or urgency of the request.
The amendments allow for Regulations to be made to vary the fees.
- New right of rescission
The Bill gives buyers a new right to rescind a contract for sale.
Currently, a buyer is entitled to rescind if a seller gives false or incomplete information in a Vendor’s Statement.
The Bill gives a buyer a right to rescind if the seller does not receive a signed Vendor’s Statement before the buyer signs the contract.
This in effect confirms that the failure to give a Vendor’s Statement may have the same effect as giving incomplete information in a Vendor’s Statement.
The Bill also increases the penalty for providing false or incomplete information in a Vendor’s Statement and sets penalties for failing to give a Vendor’s Statement.
Currently the maximum penalty is 50 penalty units.
The Bill propose an increase to a maximum of 300 penalty units for a body corporate and 60 penalty units in any other case.
As at February 2014, a penalty unit is $144.36 and therefore the maximum penalties have increased from $7,218 for all sellers to $43,308 (for a body corporate) and $8,661.60 (for all others).
- Due diligence checklist
The Bill introduces a new concept of the “due diligence checklist” that applies to the sale of vacant residential land or land on which there is a residence.
The checklist will have to be in the form approved by the Director of Consumer Affairs Victoria and is intended to identify for prospective buyers information they should be aware of regarding the purchase of the land.
The form of the due diligence checklist has not yet been published.
The due diligence checklist must be made available to prospective buyers by:
- display, for example at a residence during inspection; or
- being offered to prospective buyers,
AND the checklist must be available for a prospective buyer to view on the website where the land is offered for sale.
Breach of this obligation will result in a fine of up to 60 penalty units, ($8,661.60 at February 2014).
- What needs to be done now
The Bill has been presented to the Victorian Parliament.
It may yet be amended before it is passed.
When it is passed it may not come into effect for some time.
Accordingly at present nothing needs to be done because nothing has changed in respect of Vendor’s Statements.