Although there is a common misconception that the purchase of property in NSW is “buyer beware”, this is not entirely the case. This concept has been diluted significantly due to a combination of both common law and legislation which we will explore in this article.

Vendor’s Agent’s Duty to not Misrepresent

In Hinton v Commissioner for Fair Trading [2006] NSWADT 257, the agents did not disclose that the property was the scene of a triple murder and were fined for their failure to do so.

When a vendor decides to sell a property, their agent cannot induce a person to enter into any contract by:

1. Any statement, representation or promise that is false, misleading or deceptive (whether to the knowledge of the agent or not),

2. or any failure to disclose a material fact of a kind prescribed by the regulations (whether intended or not) that the agent knows or ought reasonably to know.[1]

Examples of material facts are:

1. within the last 5 years, the property has been subject to flooding from a natural weather event or bush fire;

2. the property is subject to significant health or safety risks;

3. the property is listed on the register of residential premises that contain loose-fill asbestos insulation;

4. within the last 5 years the property was the scene of a crime of murder or manslaughter; or

5. within the last 2 years the property has been used for the purposes of the manufacture, cultivation or supply of any prohibited drug.[2]

Vendor’s Duty to not Misrepresent

General consumer laws will also apply to vendors for sale of land. Australian Consumer Law provides protections against bait advertising, accepting payment without intending to supply, and false or misleading representations.

A vendor can be sued for damages if the purchaser has relied on false information provided by the vendor, and has consequently suffered losses and may even face penalty fines of up to $50,000,000 if a court determines appropriate.

The vendor may also face criminal and civil charges if they deliberately conceal information, or provide false information to make the purchaser settle.[3]

In Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd, the Purchaser sought to buy a licenced restaurant from the vendor. A physical inspection by the Purchaser of the premises confirmed customer seating for 128 patrons. However, six weeks after settlement, a Licensing inspector advised the licence only allowed 84. The purchaser alleged that the vendor had misrepresented and was successful in recovering the full proceeds of the sale.

How Longton Legal can help

At Longton Legal, our team of lawyers conduct due diligence searches both before and after the exchange of contracts. When we act for purchasers, we will ask a variety of questions to the vendor and raise requisitions so that our clients remain well informed of the property they are purchasing. When we act for vendors, we ensure that any obligations to disclose are discharged to avoid any severe consequences.

[1] Property and Stock Agents Act 2002

[2] The Property and Stock Agents Regulation 2022

[3] Conveyancing Act 1919

*Disclaimer: This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice before taking any course of action.*