Key changes to the Sale of Land Act 1962
The Sale of Land Amendment Act 2019 makes a number of amendments to the Sale of Land Act 1962, including an amendment to Section 12(d) and the insertion of Section 12A.
Section 12A of the Act (as amended) states:
“The Director of Consumer Affairs Victoria may make guidelines to assist vendors and their agents to understand what a material fact is likely to be for the purposes of section 12(d)”
Section 12(d) of the Act (as amended) further states that:
“Any person who, with the intention of inducing any person to buy any land-
(d) makes or publishes any statement, promise or forecast which he knows to be misleading or deceptive or “knowingly” conceals any material facts or recklessly makes any statement or forecast which is misleading or deceptive shall be guilty of an offence under the Act…”
This clearly indicates that a vendor or their selling real estate agent must disclose all known material facts, as soon as a prospective buyer indicates that they are considering purchasing the property. The vendor or selling real estate agent must answer all questions from prospective buyers as frankly as possible. This will inevitably provide more protection from unfair sales practices for property purchasers.
Section 12(d) of the Amendment Act replaces the word “fraudulently” with “knowingly”. This makes it an offence if the vendor or their selling agent knowingly conceals a material fact about the property, with the intention of inducing a potential purchaser to buy the land. It is sufficient if a vendor or their selling agent withholds a material fact which is known to be material, with the intention of inducing a potential purchaser to buy the property.
What constitutes a material fact under the Sale of Land Act 1962?
A material fact is a fact that would be important to a potential purchaser in deciding whether or not to buy the property and at what price. The fact must be material and can be so in two (2) ways:
- An average, reasonably informed purchaser with a fair-minded understanding of the property market would generally regard the information as material in their decision to buy the land.
- If the fact about the land is known by the vendor (or the selling estate agent) to be important to the potential purchaser. This knowledge can arise if a potential purchaser asks a specific question about the land or where the potential purchaser informs of their intended use of the land.
Other factors to be considered when determining whether something is a material fact would include:
- Whether the fact is known by the vendor;
- The reaction of other potential purchasers to the fact, including whether knowledge of the fact may impact the potential purchaser’s willingness to proceed with the purchase; and
- Whether the fact results in the property being in a rare on unusual category or position.
General examples of material facts (which may be known to the vendor) may include:
- a defect in the structure of the building, pest infestation, combustible cladding, asbestos or contamination through prior use of the land;
- occurrence of a significant event at the property including flooding or bush fire;
- restrictions on vehicular access to the property that is not obvious during the property inspection;
- facts about the neighbourhood such as sinkholes or development proposals that may not be immediately apparent but would affect the use and enjoyment of the property;
- building work undertaken without the necessary building permit, planning permit or constructed illegally; and
- the subject property has been the scene of a serious crime which may create long term potential risks to the health and safety of the occupiers. Such incidents may include acts of extreme violence, a murder, a terrorist act or the use of the property of the manufacture of illegal substances.
When are material facts ought to be disclosed?
Material facts should be disclosed to potential purchasers as they indicate that they are considering purchasing the property. Continuing disclosures should be made if further material facts become known. Material facts can be disclosed:
- In the contract of sale or section 32 vendor’s statement;
- Before the public auction;
- Specific disclosures made to particular purchases in the course of negotiations;
- In marketing material or information statement; or
- At the time of the physical inspection of the property by the potential purchaser.
If a potential purchaser asks a questions about the property, responses must be provided fully and frankly to the best of the vendor’s or their selling estate agent’s knowledge. If the vendor or their agent has no knowledge they can advise the potential purchase that they do not know.
For all further questions and inquiries on the Sale of Land Act 1962 contact our office on (03) 8590 8370.
This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.
Last updated: 3 March 2020
