Amendments to Section 32 of the Sale of Land Act 1962 (Vic)

by K&L Gates LLP
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Summary

The Sale of Land Amendment Act 2014 (Vic) (Act) will amend the Sale of Land Act 1962 (Vic) (SLA). The objective of the Act is to re-enact, reform and modernise the provisions relating to statements made under section 32, enhancing consumer protection by simplifying a vendor's disclosure obligations.

When Will The Amendments Take Effect?

The Act has received Royal Assent and the main operative provisions will come into operation on 1 October 2014.

The Main Amendments

1. Owners Corporations

No Longer Compulsory to Provide an Owners Corporation Certificate

The Act will amend the SLA so that it is no longer compulsory to attach an owners corporation certificate to a vendor's statement. However, the same information currently set out in an owners corporation certificate must be provided by a vendor in the vendor's statement.

Vendors run the risk of purchasers rescinding their contracts if they do not provide all information that would normally be provided in an owners corporation certificate. Therefore, other than in the case of 'inactive owners corporations', it is recommended that vendors still provide owners corporation certificates to ensure vendors are aware of all information that is required to be disclosed.

For example, owners corporation certificates contain information regarding legal proceedings that owners corporations are a party to. If a claim is made against an owners corporation and the owners corporation manager has not informed its members of the claim, a vendor will have no way of disclosing that information. Where legal proceedings are issued, in most instances a manager will only notify the owners corporation committee and therefore members will only become aware of the legal proceedings at the annual general meeting.

On this basis, vendors who do not seek current information by way of owners corporation certificates will be running a risk.

Inactive Owners Corporations

The Act provides that if an owners corporation is inactive, the vendor's statement only needs to specify this. There is no requirement to provide an owners corporation certificate or owners corporation information in accordance with the new provisions in the Act. This amendment is a welcomed change as the existing requirement to provide an owners corporation certificate has been problematic for properties subject to inactive owners corporations.

An inactive owners corporation is defined by inactivity in the previous 15 months. The definition of 'inactive' includes an owners corporation that has not: 

  • had an annual general meeting 
  • fixed any fees 
  • held insurance.

All three of these requirements must be met for the owners corporation to be inactive. The term 'includes' suggests that there could be other circumstances when an owners corporation may be inactive.

2. Vendor's Statement

The requirement to attach a copy of the vendor's statement to each contract will be removed. Therefore, only one separate vendor's statement has to be provided to the purchaser before the contract of sale is signed.

Presently, it is usual conveyancing practice to prepare two contracts of sale with attached vendor's statements and a separately bound vendor's statement. The vendor's statement is then returned to the vendor or its legal practitioner, proving that a vendor's statement was provided to the purchaser prior to the execution of the contract.

Once the Act becomes operative, we expect that the existing practice will change so that vendors will provide purchasers with two contracts of sale and two vendor's statements for signing. The vendor and purchaser will retain one copy of each.

3. Due Diligence Checklist

The Act introduces a new due diligence checklist which must be provided by the vendor to prospective purchasers of vacant residential land or land which has a residence from the time the land is offered for sale. This checklist must be in the form approved by the Director of Consumer Affairs Victoria (CAV).

These provisions do not apply to a vendor if the vendor has engaged a licensed estate agent to act for the vendor. In that case, the licensed estate agent must ensure that the checklist is made available to any prospective purchaser from the time the land is offered for sale.

The checklist is made available if:

  • copies are on display or offered to prospective purchasers at any inspection of the land
  • any website "maintained by the vendor and any person acting as a licensed estate agent of the vendor where the land is offered for sale", allows access to a copy of the checklist directly or via a link to another website where a copy may be obtained.

Presumably, a link to the checklist on the CAV website will suffice as the Act provides that the Director of CAV must publish a copy of the checklist on its website.

4. Amendments to Current Requirements

Disclosure of Essential Services

The existing requirement that a vendor's statement disclose essential services that are connected at the property will no longer apply. The Act provides that a vendor's statement must only disclose essential services, such as gas, electricity, water, sewerage and telephone that are not connected at the property.

Disclosure of Notices

Under the Act, a new concept of notices is included so that a vendor's statement must disclose information 'directly' and 'currently' affecting the land. The intent is to allow vendors to provide current information as opposed to historical information.

The Act also requires disclosure of notices, property management plans, reports or orders issued by a governmental department or public authority in relation to livestock disease or contamination by agricultural chemicals affecting the ongoing use of the land for agricultural purposes.

Planning Scheme

Where a planning scheme applies to the land, the vendor's statement must now include the name of any planning overlay affecting the land. The existing practice of disclosing planning certificates will satisfy this requirement.

5. Non-compliance and Penalties

Currently, a purchaser is entitled to rescind a contract if the vendor gives false information or fails to supply all of the information required in a vendor's statement.

The Act provides purchasers with an additional right to rescind a contract if the vendor fails to provide the purchaser with a signed vendor's statement before the purchaser accepts title and is entitled to possession.

The current provision creates an offence where a vendor supplies false information or fails to supply all requisite information with a consequent penalty of up to 50 penalty units.

The Act creates an offence for the failure to provide a vendor's statement at all, as well as increasing penalties to 300 penalty units for a body corporate and 60 penalty units in any other case.

Implications

Once operative, the Act will have a range of practical implications for the conveyancing process, in particular for vendors and their legal practitioners.

As the provisions are not yet operative, no action is necessary at present.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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