Are you selling your property in Victoria? Then you need to understand material facts. Failing to disclose a material fact can give a buyer grounds to end the contract or claim compensation — and can expose agents to penalties. Here is what you need to know.
What is a material fact?
A material fact is information about a property that a reasonable buyer would consider important when deciding whether to buy, or how much to pay. Consumer Affairs Victoria treats material facts in two broad categories:
- General material facts — facts an average, reasonably informed buyer would regard as relevant; and
- Specific material facts — facts that matter to a particular buyer because of something they have told the vendor or agent, such as how they plan to use the property.
Examples of possible material facts
- a history of flooding, fire or significant damage;
- building defects such as water leaks, structural problems, mould or pest infestation;
- building work done without a permit, or illegal use of the property;
- planned major infrastructure next to or near the property;
- a violent crime or death on the property;
- the property having been used as a drug lab.
Your legal obligations as a seller
Since 1 March 2020, the Sale of Land Act 1962 (Vic) makes it an offence for a vendor or their agent to knowingly conceal a material fact from a prospective buyer. Once a buyer shows they are considering the property, known material facts should be disclosed, and buyers’ questions answered as fully and frankly as possible. Consumer Affairs Victoria publishes Material Fact Guidelines to help sellers and agents.
You must also give buyers a Section 32 vendor statement before they sign a contract.
In addition, the Australian Consumer Law and the Estate Agents Act 1980 (Vic) prohibit misleading or deceptive conduct — and in some circumstances, staying silent about a material fact can be misleading.
When should material facts be disclosed?
As early as possible — and before the buyer signs. Disclosure can be made in the marketing material, at inspections, before an auction, or in the vendor statement. If you become aware of a new material fact during the sale, tell your agent and lawyer straight away.
What happens if a material fact isn’t disclosed?
- The buyer may be able to rescind (end) the contract, particularly if the Section 32 statement is defective.
- The buyer may claim damages for misleading or deceptive conduct.
- Vendors and agents who knowingly conceal a material fact can face fines or penalties, and agents can face disciplinary action.
Frequently asked questions
The contract and Section 32 statement must include prescribed information such as title details, mortgages, easements and covenants, zoning and planning information, outgoings, building permits, owner-builder information and services connected to the land.
Whether a reasonable buyer would want to know it, whether the buyer asked a specific question, and whether the vendor or agent knew about it. If in doubt, disclose it and get legal advice.
Selling a property? Protect your sale
Shamac Lawyers prepares Section 32 statements and contracts, and advises sellers on what needs to be disclosed — so your sale is transparent and secure.