16 July 2021

A swift deal may result in future pain

Our current real estate market has seen the quick negotiation of sales transactions, with some homes being sold almost ‘sight unseen’. This bulletin is a timely reminder for all property industry professionals to fully disclose material facts about a property.

Recent cases

In recent months we have seen two cases where the State Administrative Tribunal issued fines to sales representatives, and their agencies, for failing to disclose material facts about properties they were selling. These failures adversely impacted the buyers.

These cases* highlight the serious implications that can arise if real estate agents, sales representatives and others involved in property transactions fail to carry out proper checks as soon as practical.

What are my obligations?

The Real Estate and Business Agents and Sales Representatives Code of Conduct 2016 (the Code) sets out obligations relating to the disclosure of information. Specifically, rule 24 outlines the requirements for obtaining and disclosing facts material to a sales or leasing transaction. After making all reasonable efforts to obtain and verify all facts relevant to any property transaction, you must then promptly communicate this information to any person who may be affected by it. This allows the prospective buyer or tenant to make a fully informed decision before entering into a contract.

In addition, the Australian Consumer Law (ACL) has provisions that make it an offence to mislead or deceive parties to a contract - this can be by omission.

Example:

Sales representative, Mabel, signed a listing for her agency to sell a block of land for the owner. As part of the listing process, Mabel obtained documents and a Certificate of Title from Landgate about the land. To cover any potential concerns with building restrictions on the land, Mabel obtained a sewerage plan. By doing this, Mabel identified sewer lines on the land which will impact the building process and was able to disclose this to prospective buyers.

The Commissioner for Consumer Protection, Gary Newcombe, advises that “It is the responsibility of the selling agent to make all the necessary checks for any possible restrictions regarding a property and disclose/communicate this information so that prospective buyers can make a fully informed decision before entering into a contract. Making use of services such as the Landgate Property Interest Report, the Water Corporation’s Dial Before You Dig plans and maps available on real estate industry websites can avoid costly mistakes.”

At a time when properties are selling within a relatively short time-frame, the Commissioner also advises that agents should ensure that sellers complete disclosure statements so that any known issues are revealed and confirmed in writing and suitable searches are undertaken.

While there is no specific definition as to what constitutes a material fact, it could include what would be important to a reasonable person in deciding whether or not to enter into a particular transaction. When trying to establish material facts, you may wish to seek further information about:

• Building approvals for structures such as sheds, pergolas etc.
• Recent history of use or activity in the dwelling, such as the production of drugs and any residual effects that may affect the health of occupants.
• Proposed developments of the surrounding area, for example major road infrastructure, high-rise building etc.
• Potential psychological stigma associated with the property which may be known only to those that live in the area or agents which specialise in an area and that a prospective buyer may not make enquiries about, such as a serious criminal offence having occurred on the property.

More information

*Our media statements provide an overview of the SAT proceedings from May and June 2021.

More information on your obligations is available on the Consumer Protection website or by emailing consumer@dmirs.wa.gov.au or calling 1300 304 054.