Should a seller be forced to disclose a property’s structural damage or planning issues? By Tim Mansfield
Monday, 12 March 2012
Caveat emptor, or let the buyer beware, is based on the 12th-century premise that a purchaser can view and handle goods offered for sale in marketplaces (such as meat or fresh bread) and make their own choice as to whether to buy them or not.
This principle still holds true today, whether in buying property or a tin of baked beans in your local supermarket. And the assumption remains that the consumer has an obligation to be satisfied about the quality of the purchase.
But buying a property is not the same thing as buying bread in a marketplace in the mediaeval era, or for that matter anything else you buy in your local supermarket today. Times have changed, and the onus of responsibility for a purchase has theoretically shifted from the buyer to the seller.
In real estate transactions nowadays a seller’s duty of disclosure is limited to disclosing latent defects in title, or issues directly related to the property. An example of latent defects or issues might be with neighbours.
Sellers are currently not obliged to disclose structural damage, planning issues or nonmaterial issues. They should declare events that occurred in or on the property (known as stigmatisation), such as a murder or suicide.
Either way, declaration or not can have an effect on the marketability of a property and can impact on the selling price.
Should legislation on this issue be brought up to date? What do you think? Tim Mansfield is founder and principal of Sydney-based buyers' agency Prime Property Buyer.
Murder and mayhem: What an agent should disclose if a property has an unsavoury past.
By Tim Mansfield
Monday, 20 February 2012
Under the common law principle of caveat emptor, or “buyer beware” there is a recognised duty upon a buyer of a property to be satisfied about what he or she is going to purchase. The doctrine assumes that the purchaser has acquired the property together with all defects either as to title or quality.
Over the years most Australian states have introduced statutory regimes for seller disclosure in residential property transactions. In New South Wales Section 52A of the Conveyancing Act 1919 requires a seller of residential property to disclose a range of matters covering defects in title and defects in quality of title through a combination of documents and certificates attached to the proposed contract of sale, and these are generally related to easements and that the property is sold free of encumbrances, etc. There is no requirement to disclose other defects (such as structural ones) irrespective of their impact on the value or use and enjoyment of the property.
So where do”‘stigmatised” properties come in to all of this? These are properties where a murder, suicide, violent crime or other horrific event has occurred on the property at some stage. The term can also include properties that are haunted or even have a resident poltergeist – and the stigmatisation effect can last for decades or even centuries.
Let’s face it. Nobody wants to live in a home where something awful has happened. But how do we know if a property has this type of history? The seller is clearly not going to explain the gory details to anyone, and in some cases not even to the selling agent. And agents and sellers cannot be held liable for not disclosing nonmaterial, or nonphysical, defects about a house, and they don’t have any obligation to disclose “latent defects” to the buyer even if they materially affect the physical health or safety of individuals on the premises.
But in reality the fact is that in these cases the onus of responsibility may come down to the selling agent. The reason for this is that he or she has a moral (if not legal) obligation and a duty of disclosure to inform prospective buyers that the events that occurred in the property may affect its value. It comes down to what did you do or say, or not do or say, that affected a decision to buy?
Real estate agents need to keep in mind that anything that could affect a purchaser’s decision to buy must be disclosed under the Material Fact section of current legislation. A Material Fact can be defined as “A fact that would be important to a reasonable person in deciding whether or not to proceed with a particular transaction”.
Schedule 1 (3) of the Property, Stock and Business Agents Regulation 2003 also states that: “You must be fair and reasonable to all parties, and must not mislead or deceive any parties in negotiations or a transaction.”
In other words, caveat actor,or “agent beware”. If you don’t disclose events that happened in a property you are selling that may affect its value you are open to be blamed and possibly taken to court.
Below are a few tips if you decide to list a stigmatised property:
Tim Mansfield is founder and principal of Sydney-based buyers' agency Prime Property Buyer.
- Separate fact from fiction, and determine the impact disclosure will have on you as the selling agent, the seller, the buyer, and price of the property.
- Don’t take the listing (or keep it) if the seller refuses to disclose stigmatised information or prevents you from discussing it.
- Maintain trust with your buyers by disclosing the facts as you know them.
- Don’t be silent, and don’t misrepresent. It's not just a matter of what you say. It can end up being about what you didn’t say.
Article originally published in PropertyObserver at:
My recent poll on LinkedIn had some interesting results from the following questions!
My favourite comment added to the poll is:"caveat emptor" ...buyer beware, you have a greedy vendor plus equally commercial real estate agent , this duo is backed up by the heavy artillery of a conveying solicitor all with one purpose in mind to win the negotiation in their vendors favour? Does the buyer need to have experienced representation ......hell.......yes! In a perfect world the R/E commission should be split by both agencies to reduce the adversarial nature of the negotiations." ~ Roy Norbury
- My Mother-In-Law would do it for free - 8% of votes
- Yes - if it saves me time & money - 69%
- No - I'd do it myself - 23%