A complete guide of what property owners must disclose when selling a property

Additionally, there is also the Australian consumer law that protects consumer rights when buying goods and services, including real estate. 

Nowadays, not disclosing all the details about your property can put you at serious risk of landing in hot water with the law.

Before putting your property on the market, sellers should first understand their legal obligations and potential repercussions for failing to make a proper disclosure.

While your real estate agent will probably brief you on the information you need to provide, it’s worth taking a look at the things that must be disclosed when the property is being advertised, especially when people are starting to take interest in it. 

If you are planning on selling your house or any property you own, here are the things you should know about your disclosure obligations.

What does disclosure mean in real estate? 

In real estate, disclosure refers to the sharing of information and facts between the vendor and the buyer about a property. 

Generally, this information is known as “material fact”. A material fact is a fact that would be important to a reasonable person in deciding whether or not to proceed with a particular transaction. In a property services context, these are facts which:

• maybe sufficiently significant or relevant to influence decisions on whether to buy, sell or rent, and/or
• could impact the market value of a property.

Material facts are commonly compiled into a document known as a vendor statement. Also known as a section 32 statement, this document tells potential buyers what they need to know about a property before signing a contract to purchase.

It’s a vital part of the buying and selling process and discloses all information that isn’t readily available during an inspection. Kindly note that both residential and commercial properties can be covered by material fact disclosure requirements.

So why do sellers need to disclose information? 

Disclosing material facts about a property is not just an act of courtesy – it’s the law.

Under the Australian Consumer Law (ACL), both vendors and agents are legally required to disclose known information or material facts, which is crucial to a person (buyer) when deciding whether or not to purchase a property. Therefore, it is considered a legal offence to mislead or deceive parties to a contract, even by omission.

In more serious cases, you could risk hefty penalties and even jail time, and the best-case scenario is losing a prospective buyer. To save you court time (and money), it’s not worth the risk.   

So, for example, you are planning to sell a property, but you’re worried that its issues might make it unsellable. Here’s the good news: you can still sell your property regardless of its condition, as long as you abide by your duty of disclosure.

In this scenario, it’s advised to be honest with your real estate agent at the very start of the selling process. Be transparent and inform them of any defects or hazards that you know of so that they have a general idea of the property’s condition and allow for more chances of the sale of your home to run smoothly.

What do you have to disclose when selling a property?

The specific requirements for disclosure vary from state to state. Although generally, a vendor statement includes the following: 

1. Pre-contractual disclosure obligations

Pre-contractual disclosure obligations include limitations, restraints, or “defects” in the property title.

• Easements – These refer to sections of the area that can be used or entered for specific purposes, regardless of whether a person owns the property or not. A good example of this is a shared driveway. However, easements can also refer to utility easements for authorities. 
• Leases – These include contracts that entail the terms under which one party allows another party to use or rent the property even after settlement. 
• Covenants – These refer to the conditions tied to the ownership or use of the property. When property owners are required to abide by certain rules due to their property’s location, these are referred to as covenants. For example, a property owner may be required that street landscaping or home-front finishes be maintained to an agreed finish and quality. If covenants apply to all the property owners in the area, they need to be disclosed before the sale of the home is finalised. 
• Zoning – Zoning is defined as the law that regulates how real property can be used in certain areas, designating the type of operations allowed on a site. Councils in certain areas will have laws dictating what they allow the land to be used for.

This could include information regarding nature developments and address issues regarding future developments and renovations for properties in the area.

Zoning disclosure laws vary considerably across states and territories. For instance, in Victoria and the NSW, legislation requires sellers to disclose if their properties are in a bushfire-prone zone. In Tasmania, graves on your land must be disclosed to buyers.

2. Building consent 

If you have made renovations to your property, you will need to provide the necessary documentation that proclaims all works are up to date and approved by authorities. It also means property owners need to disclose any improvements made to the building that did not get full approval. 

3. Property defects

In most states, sellers are required to disclose any property defects. These include structural problems, damages, insect infestation, or fixtures and appliances that are faulty. 

They should also disclose any defects or hazards invisible to the naked eye, such as termite damages. 

4. History of the property/ sensitive information

Following changes to legislation in some states, home sellers are now legally required to disclose property history, particularly any sensitive information relating to the property. 

For example, if a home was used for illegal drug activities (i.e. drug manufacturing), sellers need to disclose this information, and proof of the rehabilitation of the property will also need to be provided, as it may have affected the health of the new property owners. 

Sellers and real estate agents are also required to disclose to prospective buyers if criminal activities such as murder have been committed on the property. Vendors are also obliged to inform buyers regarding suicides that have occurred in the home.  

And while you think it’s mostly to avoid ghosts haunting the new property owners, failing to provide this information has tangible ramifications. Failure to reveal the history of the property may put your prospective buyer at risk of being prosecuted for the conduct that has taken place on your property.

5. Asbestos

Most states in Australia require sellers to disclose whether you have, could have, or have had asbestos present on the property. 

For instance, the ACT requires an Asbestos Advice and Acceptance Report from sellers. Victoria has followed suit and has also recently added asbestos disclosure to its Material Fact Guidelines. If your state or territory currently doesn’t have asbestos disclosure requirements yet, it’s likely that similar requirements will be added soon. 

Disclosure requirements by states and territories

While vendor disclosure laws and requirements are generally standard across states and territories, as stated above, there are several distinctions and points from a state-by-state perspective. The majority of regions have stringent rules, while a few are quite lenient with theirs.

To determine what information sellers need to disclose to prospective buyers, here are information provided by the government agencies across respective states and territories: 

• NSW

• Victoria 

• Queensland

• ACT

• Western Australia

• South Australia

Kindly note that there are no specific laws requiring a seller to provide a vendor’s statement or disclose any relevant details about a property that is being sold in Tasmania and Northern Territory. However, it’s a good idea to consult with your seller’s agent or your real estate agent to make sure that nothing slips through the cracks. 

Note: As with any legal information, it’s strongly advised to get professional and independent legal advice for your circumstances. 

What happens if you fail to disclose?

The penalty for disclosing the required information to prospective buyers will depend on what state or territory you are selling property in. 

In most cases, failure to comply with the relevant disclosure laws within your jurisdiction could result in penalties, fines, and even imprisonment. And it won’t be just you who will be in a pickle – if you worked with a real estate agent throughout the transaction and they failed to help you provide material facts, they will also be subject to the consequences imposed by that state.

There is also a fair chance of the sale contract being nullified, which will give the buyer the chance to ​withdraw from the contract​.

You may also have to provide compensation to the buyer if they are out of pocket or disadvantaged by the seller’s failure to disclose relevant information.

While it’s understandable for sellers to get the best possible price for their properties within a short period, the trouble you get for misleading by concealing material information from prospective buyers just to get quick, favourable results may not be worth it in the end. 

Disclaimer: This is a general guide only and is not intended as a substitute for financial advice.

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