Imagine the following scenario:
You have just purchased a property and prior to settlement, your solicitor applied for various searches and found that a Building Order was issued by the Council prior to the date the contract was signed requiring the illegal pergola to be removed. The notice was not included in the Vendor’s Statement as required under the Sale of Land Act 1962 and therefore this new information means that the Vendor’s Statement is 'defective'.
As the Building Order, which is a notice on the land, was issued prior to the day of sale, the Vendor will have to bear the cost to take down the pergola. Sound fair right?
However, this also means that, as a buyer, you will lose the pergola and the value of the property may well decline. Not such a great result for you as you liked the pergola and it was part of the property's appeal.
Can the purchaser end the Contract?
There are essentially two considerations.
- Has the Vendor acted honestly and reasonably and ought to be excused for the contravention? and
- Is the Purchaser (in this case you) substantially in the same position if the disclosure had been made?
If you have answered YES to either of the above points then it is unlikely that a purchaser is able to rescind the Contract due to the defective Vendor’s Statement.
If you have answered NO, the purchaser may have a right to rescind the Contract prior to settlement, although it will always depend on the particular circumstances.
Provided that the purchaser has grounds to rescind the Contract, prior to settlement, the purchaser may serve a notice on the vendor in accordance with the Contract terms to rescind the Contract of Sale and with the deposit to be refunded. However, where the purchaser serves notice on the vendor ending the Contract when it does not have grounds to do so, this can be treated as what is known as a repudiation of the Contract, which if accepted by the vendor, changes the position whereby the purchaser would forfeit the deposit and the vendor retains the right to sue for damages.
In the circumstances of this or any similar scenario, it is critical that you seek legal advice to understand your position completely before taking any steps to end the Contract, as there may also be other options available, such as seeking to negotiate a resolution with the seller, for example, where the purchaser still wishes to proceed with settlement they may be able to negotiate an alternate arrangement with the vendor to allow the removal of the Pergola and the purchaser receive a reduction in sales price.
Purchasers
As the purchase of a property is always an important decision and financial investment, it is vital to obtain pre-contractual advice so that your solicitor can review the sale documents and advise you of any terms and conditions that may be unfair to you and also raise any potential red flags of disclosure in the Vendor’s Statement (or failures to disclose) if they exist, such as illegal building works, building defects, cladding, water leaks etc.
As the purchaser you should also conduct your own due diligence and carry out such enquiries and inspections required to satisfy yourself prior to signing the Contract of Sale. We suggest you read an over about due diligence HERE.
Vendors
It is important to discuss any concerns you may have with your solicitor in preparing the Vendors Statement so that your solicitor can advise you of your disclosure requirements.
Click here to read about what should be included in a Section 32 document.
Our Real Estate Lawyers have extensive experience in all aspects of property and real estate law. This property team, including an accredited specialist in Kristy Muhlhan have assisted and supported clients especially in regards to a defective vendor's statement.
If you have any questions about your impending purchase or would like to find out how our property lawyers can help you contact our office on +61 3 9822 8588 or email your request HERE.
