Download Review of section 32 of the Sale of Land Act 1962 submission

Our ref:
MM
21 December 2012
Section 32 Red Tape Review
Policy and Legislation Branch
Consumer Affairs Victoria
GPO Box 123
MELBOURNE VIC 3001
Review of Section 32 of the Sale of Land Act 1962
The discussion paper asks many questions, many of which are answered by the
application of broad principals, which seek to maintain protection for consumers, either
as vendors or purchasers.
1.
Need for disclosure
LPLC does not comment on whether the current information disclosed is
appropriate, but considers it would be inappropriate to lower the bar on
information about a property.
Information supplied by vendors assists purchasers in making a decision as to
whether or not to proceed with the purchase of a property, or in determining an
appropriate price to be paid for a property. The costs incurred by vendors in
providing this information are far outweighed by the benefits to purchasers in
paying the appropriate price based upon information supplied.
It is difficult to contemplate a purchaser making an informed purchase in the
absence of such information
There is a benefit to vendors, in that provision of information will not lead to a
disgruntled or disappointed purchaser who may not proceed or who may seek
remedies later in the transaction. It also enables a sale to take place more quickly
as the necessary information in the Section 32 Certificate is provided.
LPLC is not of the view that the current vendor statements contain too much
information.
Sale of Land Act Red Tape
-22.
Purchasers verifying disclosures
It is prudent for purchasers to satisfy themselves that information supplied has
been disclosed. However, it is untrue to say that the value placed on disclosing
information by potential purchasers is less if purchasers undertake their own
independent enquiries. Purchasers in making such large purchases are sensible in
ensuring the information disclosed is correct.
LPLC has seen many cases where purchaser enquiries reveal inaccuracies in the
vendor’s disclosures. The current provisions in Section 32 is enabling purchasers
to avoid contracts, subject to S.32(7) appears to reasonably balance rights as
between vendors and purchasers.
LPLC considers that the current vendor statements do lead to purchasers being
better informed before making what, for homeowners in particular, will be the
most significant financial commitment of their lives.
While verification of the information disclosed by the vendor may entail some
duplication, the cost of not only the vendor providing the information, but of the
purchaser verifying it, is minimal when compared with the price paid.
The cost of vendor disclosure and purchaser verification does not outweigh the
benefits either to the vendor or the purchaser.
The cost of an avoided contract to a vendor can be high, and includes agent’s
commission, further mortgage costs and possible loss on resale.
3.
Timing for disclosure
It is desirable that the vendor statement be attached to the contract of sale. While
preparation of the vendor statement can impose delay, the impact of the delay is
likely to be significantly less than the consequences of a sale where the purchaser
ascertains the property is unsuitable.
It is imperative that full disclosure about mortgages is made where a purchaser
becomes entitled to possession, as the purchaser in entering into possession may
act to his or her detriment if a mortgagee seeks possession.
4.
Land use disclosure
Failure to disclose planning details regardless of whether they are readily
available to a purchaser, should entitle a purchaser to rescission. The vendor
should disclose planning and land use information. The impact, for example,
Sale of Land Act Red Tape
-3of inability to build a dwelling house on the value of land is considerable.
5.
The need for centralised and comprehensive property information
If “red tape” is a concern, the best way of addressing this concern would be to
eliminate the need to make multiple enquiries (by both vendor and purchaser) is
the creation of a central database for which all relevant information relating to a
property must be entered.
6.
Questions for consultation
LPLC has seen the successful rescission of contracts as a result of incomplete
disclosure.
Substituting additional rights of compensation for a right of rescission is not an
appropriate alternative because such rights:

Take time to pursue and involve incurring legal costs to pursue those rights.

Expose the purchaser to vendor insolvency.
LPLC is aware that Section 32(7) reduces some immaterial claims by purchasers.
LEGAL PRACTITIONERS’ LIABILITY COMMITTEE
21 December 2012
Sale of Land Act Red Tape