What has changed?
Under the new seller disclosure scheme, a seller must give a buyer the approved Form 2 Seller Disclosure Statement and the prescribed certificates applicable to the lot before the buyer signs a contract.
The obligations apply when selling land (including a house) and apartments in a community titles scheme. The obligations apply whether the property is residential or commercial.
The new requirements do not apply to ‘off the plan’ sales. There are some other exceptions in limited circumstances, for example, if the sale price is more than $10 million and the buyer has waived compliance with the legislation.
How does this affect me as a seller?
The seller must give the seller disclosure documents before a buyer signs the contract.
The changes mean a seller needs to prepare additional documents as part of selling their property. However, the benefit for a seller is the potential to discover serious concerns or issues with the property before the contract is signed. The seller can then address these issues, and the buyer then enters the contract with more information, reducing the risk that contracts are later after issues are found.
A seller should engage with their solicitor as early as possible, ideally around the same time they meet with their real estate agent, so that the seller disclosure documents can be prepared in parallel with other listing activities such as cleaning, staging, repairs, and photography.
What should I be aware of as a buyer?
The seller disclosure documents will give a buyer useful information about the property before the buyer makes an offer to purchase.
If the disclosure documents are incomplete, the buyer can terminate the contract. If the documents are inaccurate in a material way, the buyer may also have termination rights.
The disclosure documents do not provide all information which might be of interest to the buyer so a buyer will still need to carry out searches and investigations after the contract is signed.
Buyers should speak to their solicitors about the scope of the disclosure and any other issues of interest to the buyer, to ensure the right information is obtained before settlement.
Seller disclosure myths
Myth: Seller disclosure leads to delays
Preparing accurate seller disclosure documents does add a little more upfront work for the seller before listing the property.
However, accurately prepared documents can save time down the track, because a buyer is better informed about the property before the contract is signed and this can reduce disputes later in the contract process.
Myth: Buyers can terminate more easily
A buyer can only rely on the new laws to terminate a contract if the disclosure is incomplete or inaccurate, meaning the risk of a last-minute cancellation only arises if there is an issue with the documentation and the buyer wishes to terminate.
We encourage sellers to seek legal advice when preparing the seller disclosure documents to ensure the documentation is as accurate as possible and reduce the risk of termination rights arising. Both sellers and buyers are encouraged to seek legal advice before they make significant legal decisions around selling a property. A solicitor acts in their client’s best interests throughout the transaction.
Myth: No more buyers beware
This is not the end of ‘buyer beware’, even though the buyer will now be better placed before signing a contract. The seller disclosure documents do not include all of the information a buyer might need. For example, the Form 2 does not include information about flooding or other natural hazard history, structural soundness of the building or pest infestation, current or past building or development approvals for the property or whether there is asbestos in the buildings on the property. Buyers still need to speak to their solicitor about other searches to be done after the buyer signs the contract. The information required to be disclosed by the seller reflects existing statutory obligations such as owner-builder works, disputes about trees, providing pool safety certificates or information about whether the property is on the contaminated land register. The requirements also reflect warranties that a seller has been giving under the standard sale of land contracts for many years. The new process simply consolidates the obligations in one place.
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