Vendor Disclosure Obligations

Eales & Mackenzie Lawyers Melbourne

Article by Richard Mackenzie

This legislation affects the sale of any residence where building works have been carried out in the past six and a half years.

A vendor’s statement (or Section 32 Statement) discloses information about a property being sold which may affect a purchaser. It must be shown to a purchaser before he or she signs a contract and if it is inaccurate in anyway, the purchaser may be able either to withdraw from the sale or take action against the vendor.

Section 32 of the Sale of Land Act 1962 sets out the information, which must be included in a vendor’s statement. Section 32 (1A), which commenced operation on 1 August 1997 now requires details of guarantees and insurance to be given in the vendor’s statement in specified circumstances.

Vendors are now required to disclose:

any building permit in the past seven years (this is not new);
details of any guarantee imposed on owner-builders under the House Contracts
Guarantee Act 1987 in the past seven years (this also is not new); and
details of required insurance covering building works to residences to which s.137B of the Building Act 1993 applies and which have been carried out in the past six years and six months.
Section 137B of the Building Act imposes obligations on a person who builds a house and then sells it. It also applies to registered builders selling a house that they have constructed on their own land. It requires registered builders, prior to selling a house, to be covered by insurance and to provide a number of warranties in relation to the quality of the work and materials used.
Section 137B of the Building Act requires owner-builders (or vendor’s who have carried out renovations & extensions to their own properties) to comply with the insurance requirements and in addition, owner-builders must also provide a building inspector’s report to the purchaser. The report must not be more than six months old. The obligation applies not only to the construction of the residence but also to renovations and extensions.
If the vendor does not comply with these requirements, he or she can be liable to a penalty and the contract will be voidable by the purchaser at any time up until completion of the contract.

This legislation affects the sale of any residence where building works have been carried out in the past six and a half years and will affect the obligations of registered builders and owner-builders who are selling a house and all vendor’s generally. It also substantially alters the rights of purchasers. It is important to obtain legal advice before signing a contract.

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