Review of Section 32 of the Sale of Land Act 1962 options

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Overview

Section 32 of the Sale of Land Act 1962 (‘the Sale of Land Act’) requires those who sell land in Victoria to disclose certain information about the land to prospective purchasers, through the provision of a vendor statement.

In line with the Government’s commitment to reduce the burden of ‘red tape’ on businesses and the community, on 31 October 2012 a discussion paper was released inviting submissions from the public on the continuing relevance and utility of the disclosure required by section 32 of the Sale of Land Act. Public consultation closed on 20 December 2012.

Chapter 1 summarises the submissions received on the review in relation to key questions in the discussion paper. Submissions were made by the individuals and organisations listed in the table below.

Chapter 2 proposes a number of options for reform of section 32, ranging from minor refining amendments to significant changes that are likely to yield large red tape savings.

Stakeholder proposals for additional vendor disclosure requirements are outlined in Chapter 3.

Table 1: Organisations providing submissions on section 32 review

Organisation

Submission no.

Australian Institute of Conveyancers

1

C E Carter & Son Pty Ltd

2

Consumer Action Law Centre

3

Kevin and Wilma Clarke

4

Russell Cocks

5

Henry Cooper

6

Law Institute of Victoria

7

Legal Practitioners' Liability Committee

8

Legal Services Board

9

Queensland University of Technology

10

Real Estate Institute of Victoria

11

Strata Community Australia (VIC)

12

Colin Vincent

13

Cathie Wills

14

Ian Wood

15

Australian Livestock and Property Agents Association Ltd

16

Surveying and Spatial Sciences Institute (Vic. Regional Committee)

17

Victorian Farmers Federation

18

Estate Agents Council

19

Australian Bankers’ Association Inc.

20

Issues not considered in this paper

In addition to commenting on disclosure requirements under section 32, some stakeholders raised other issues in their submissions that are unrelated to this review.

These issues, outlined below, have not been addressed in this Options paper, as the focus of the review is solely on vendor disclosure requirements under section 32. However, where appropriate these other issues have been forwarded to the attention of relevant agencies, or will be considered as part of future reviews of the Sale of Land Act:

  • the possible benefits of a centralised and comprehensive database of property information;
  • anomalies in the title description of freehold land that contains riparian areas;
  • the possibility of obtaining updates to planning and other certificates issued by local government and regularly attached to vendor statements;
  • concerns regarding consumer protection under the National Occupational Licensing Scheme;
  • concerns about the use of standard clauses indemnifying vendors from claims for compensation as a result of omissions or mistakes in the description of the property or deficiencies in the area, description or measurements of the land for sale; and
  • the need to review the Sale of Land Act and associated regulations as a whole, in light of issues raised in recent court cases.

Consultation process

The options paper was open for public consultation until 14 June 2013.

All submissions received are currently being considered.

If you have any queries, please email cav.consultations@justice.vic.gov.au.

Submissions

Copyright for submissions resides with the author(s), not with Consumer Affairs Victoria.

Chapter 1: Key themes

This chapter provides a summary of the key themes arising from stakeholder feedback on the discussion paper.

Stakeholders expressed ongoing support for vendor disclosure, stating that benefits continue to flow to prospective purchasers as a result of the disclosure required under section 32. However, there was some disagreement amongst stakeholders about whether the right balance is being struck between the benefits flowing to purchasers and the costs to vendors that result from the disclosure requirements.

Various suggestions were put forward about ways to refine and amend section 32, to improve the effectiveness of disclosure while ensuring that the costs to vendors of preparing section 32 statements are not prohibitive.

The general themes of stakeholder submissions are discussed below, while many of the specific suggestions from stakeholders for amendments and improvements are discussed in more detail in chapters 2 and 3.

1.1 Value of vendor disclosure

Submissions to the review all expressed strong support for section 32’s continuing relevance and utility in property transactions. An example of this sentiment can be drawn from the submission from CE Carter & Son Pty Ltd which stated that:

“while the 1982 amendments were highly controversial at the time, they profoundly streamline estate agency procedures and led to a significant increase in knowledge and skill levels, not only of agents but also of vendors and purchasers”.

A number of stakeholders indicated they would not support changes that would reduce consumer protection or lead to greater risks for consumers. In particular, see the submissions from the Consumer Action Law Centre, Legal Practitioners’ Liability Committee and the Legal Services Board.

1.2 Effect of vendor disclosure on prospective purchasers

The positive effect of vendor disclosure on prospective purchasers was affirmed in a number of submissions. The Australian Institute of Conveyancers (“AIC”), Mr Russell Cocks (“R Cocks”), the Law Institute of Victoria (“LIV”), the Legal Practitioners Liability Committee (“LPLC”) and the Real Estate Institute of Victoria (“REIV”) all considered that the current statement has led to more effectively informed purchasers, although the LIV stated that many of the current requirements should be amended or streamlined.

The Australian Livestock and Property Agents Association (“ALPA”) stated that consumers find vendor statements of extreme importance, and that in most cases, they need the form of security and protection vendor statements offer.

However, there were divergent views on the extent to which purchasers read, understand and use information disclosed in the vendor statement in making a decision to purchase a property.

One submitter considered that purchasers do read, understand and use the vendor statement, in circumstances where legal advisers are also consulted (R Cocks).

Feedback from the LIV was that purchasers do not read the vendor statement, while the AIC noted that purchasers usually seek advice from conveyancers or solicitors about the vendor statement, and that the average consumer would find it difficult to know [without legal advice] what they should look for or what they might be missing.

The REIV stated that the approach of prospective purchasers does not differ from the approach of the general population on contracts and agreements. Some will ensure they fully understand the statement; some will seek formal advice whilst others will only briefly review it. The REIV suggested that by simplifying the wording of the statement, more purchasers would be likely to make full use of the information.

It was not considered common for purchasers to personally undertake a high level of due diligence (R Cocks, LIV). The AIC noted that advice is often sought from legal professionals for this purpose while the REIV noted that the depth of due diligence depends on the individual purchaser and the property.

Verifying the accuracy of disclosed information would not seem to be a priority for purchasers, (see AIC, R Cocks, REIV, LIV), in particular prior to the contract being signed (LIV, REIV) although the LPLC commented that it has seen many cases where purchaser enquiries – presumably after a contract has been signed – reveal inaccuracies in the vendor’s disclosures. Despite this many of these submitters considered that disclosure did affect a purchaser’s decision to buy (AIC, R Cocks, REIV – note that the LIV disagreed, stating that disclosure is more likely to affect the price paid).

The AIC and REIV both indicated that a purchaser in the first instance is not looking at paperwork (i.e. information disclosure). It is only once a purchaser finds a property they wish to make an offer on that they want to see relevant information.

1.3 Balance struck between benefits and costs

In terms of red tape and compliance costs, some submitters felt that the benefits of disclosure under section 32 outweighed the costs (AIC, R Cocks, REIV, LPLC), although the REIV noted that this did not mean the current level or form of disclosure cannot be simplified or improved, thereby eliminating or reducing ‘red tape’.

The LPLC indicated that a key benefit to vendors in providing information is in avoiding disgruntled or disappointed purchasers who may seek to avoid the contract. The ALPA stated that taking away the cost of preparing statements from the vendor would only move the impost onto multiple prospective purchasers.

In terms of striking a balance between the interests of informed purchasers and the costs to vendors, the AIC considered that the right balance is being achieved, apart from the expense of obtaining an owners corporation certificate or certain water certificates.

R Cocks shared this view and further noted that the cost to a vendor of disclosure is largely a question for the vendor. If all possible certificates are obtained, the cost is high, but a statement prepared on the basis of knowledge is relatively inexpensive. Feedback from REIV members also indicated that the right balance is being struck.

In contrast, the LIV did not consider that the right balance is being struck. The LIV submitted that a vendor’s disclosure obligations need to be streamlined and amended to reduce red tape and compliance costs, without compromising relevant disclosure. The LPLC was also of the view that the current vendor statement contains too much information that is not being used by purchasers.

1.4 Refinements would produce even greater benefits

Notwithstanding the general support for vendor disclosure, the majority of submitters put forward ideas for refinements and improvements that could be made to disclosure obligations under section 32. Many of these ideas are discussed in the following two chapters, which set out three options for change, and suggestions for areas of additional disclosure.

Chapter 2: Options

Three options have been prepared for stakeholder consideration and comment. This paper does not contain a preferred option.

Each option consists of a number of individual proposals. Stakeholders are encouraged to provide comment on any or all of the options (as a whole) or alternatively, provide feedback on individual proposals contained within each option.

Option 1 comprises proposals 1 – 5. Option 2 would include the proposals set out in Option 1, along with proposals 6 – 13, while Option 3 could consist of all the proposals outlined in this Chapter, i.e. proposals 1 – 17, to maximise red tape savings.

Chapter 3 sets out additional areas of disclosure suggested by stakeholders. Each of these additional areas is explored in Chapter 3, and where appropriate, tied to proposals set out in this Chapter.

2.1 Option 1: Minor Red Tape Savings: retain current mix of issues for disclosure

Rationale for Option 1: Retain existing requirements in acknowledgement that general feedback from stakeholders during the discussion paper phase is that section 32 has been working reasonably well and the costs of vendor disclosure do not outweigh the benefits.

Under this option, a number of ‘housekeeping’ amendments could be made in response to stakeholder feedback, such as making sure section 32 is gender-neutral, and to remove redundant and outdated references.

This option will also clarify documents that must be provided to the purchaser with the vendor statement before the contract is signed and documents that also need to be attached to the contract. It is expected that some red tape savings can be generated by reducing the requirement for certain documents to be attached to the contract of sale.

Some of the proposals would remove outdated or redundant requirements that, in a practical sense are no longer being imposed on vendors. However, removing these requirements will improve the readability of the legislation, which may lead to minor savings by assisting vendors and their legal practitioners in quickly determining the extent of the disclosure required.

The proposals below could form part of Option 1.

2.1.1 Proposals to improve efficiency in the preparation of vendor statements

Proposal 1: Remove current requirements to include information required under section 32 in the contract of sale

Remove the requirements for information required under section 32(2) to be included in the contract of sale, and for copies of certificates and certain documents to be attached to the contract.

Under section 32(1)(a), a statement containing the matters for disclosure set out in section 32(2) must be provided by a vendor to a prospective purchaser prior to a contract being signed (“the pre-contractual statement”). Under section 32(1)(b) a second statement containing the same information must also be included in the contract of sale.

Additionally, sections 32(3) and 32(3A) provide that certain certificates and documents must be attached both the pre-contractual statement and the statement included in the contract of sale.

It is proposed to remove the requirement to include a second statement disclosing the matters set out in section 32(2), and attaching the certificates and other documents required under section 32, in the contract of sale. This proposal recognises that the information required to be disclosed is most useful to purchasers prior to the sale being finalised, as part of the pre-contractual statement. As such, there is minimal value in including this information in the contract of sale, after a decision to buy the property has already been made.

This proposal will also address inconsistencies in section 32, which requires certain other information to be included in the pre-contractual statement, but not the statement required to be included in the contract of sale. For example, section 32(1A) only requires information to be disclosed under that section in relation to a residence to be included in the pre-contractual statement. Similarly, section 32(4) provides vendors with the choice of attaching planning certificates, rates certificates and government notices which provide evidence of compliance with certain requirements under section 32 to either the pre-contractual vendor statement or to the contract of sale. Removing the requirement under section 32(1)(b) will resolve these anomalies.

Estimated red tape impact: Positive

The estimated red tape impact on this proposal is positive because it clarifies that the vendor statement (and any certificates required to be provided with it) must be supplied to the purchaser only once, prior to the contract of sale being signed.

Despite the inconsistencies in the legislation, in practice, it is routine for the entire vendor statement (including any information required under section 32(1A)) and accompanying certificates (including those produced under section 32(4)) to be attached to the contract of sale.

Therefore, removing this requirement will deliver an immediate reduction in administrative costs to vendors and their legal practitioners as the number of copies of the section 32 statement and accompanying certificates will be halved.

In estimating the red tape impact of this proposal, it is assumed that there is no variation in the information, which is disclosed to a purchaser in the pre-contractual vendor statement, and the information provided in a subsequent statement attached to the contract. However, feedback is sought from stakeholders on this issue.

Proposal 2: Remove requirement that vendor physically sign the vendor statement

The vendor is required to sign the statement before it is provided to the purchaser (see section 32(1)(a) and 32(1A)). Some stakeholders commented that this requirement was outdated and that it should be possible for the vendor statement to be provided by or on behalf of a vendor, without requiring an original signature (CE Carter & Son, REIV, LIV).

Estimated red tape impact: Positive

Removing this requirement may avoid delay costs as a solicitor or conveyancer preparing a section 32 statement on a vendor’s behalf would not need to physically obtain the vendor’s signature. Instead, options such as using an electronic signature, or enabling the solicitor or conveyancer to sign off on the statement on the vendor’s behalf (with a suitable level of authorisation) could be explored.

However, in order for this proposal to be implemented, it would need to be clear that liability for inaccurate or misleading disclosure would remain with the vendor, notwithstanding that vendors would no longer be required to physically sign the vendor statement. This is particularly the case, given that rights of rescission attach to the vendor statement. Therefore, possible legal liability issues associated with this proposal will need to be explored further, and stakeholder feedback is specifically welcomed on this point.

2.1.2 Proposals to improve the readability of vendor statements, and remove redundant and outdated provisions

Proposal 3: Update requirements in relation to the certificate of title and subdivision plans

Section 32(3)(a) requires the vendor to attach to the vendor statement and to the contract a copy of the Certificate of Title in the case of land under the Transfer of Land Act 1958. It is proposed to replace the reference to a copy of the Certificate of Title with a reference to a copy of the Register Search Statement and a copy of the plan or title diagram. This will ensure that the most up-to-date information is supplied to the purchaser and reflects common conveyancing practice.

The Register Search Statement is an electronic copy of the folio of the Register of land. The Register Search Statement includes information on current registered proprietors, a description of the land and any encumbrances, caveats or notices, including mortgages.

As the Register Search Statement does not contain a sketch of the property, it is proposed that the vendor also provide a copy of the plan or title diagram to the purchaser. This diagram describes the legal boundaries of the piece of land for sale. In the vast majority of cases, the title diagram shows the boundaries in relation to abutting parcels and connections to street corners. The title diagram also describes any easements affecting the land.

It is also proposed to consolidate requirements for copies of subdivision plans, thereby assisting with the readability of section 32, and to remove the requirement to provide proposed plans of redevelopment that have not been approved.

Estimated red tape impact: Neutral

This proposal would ensure that vendors only have the option of supplying the outcomes of a current search of the Register of Land, rather than a potentially outdated copy of the Certificate of Title. In practice, it is understood that the majority of vendors provide a Register Search Statement as the preferred method of demonstrating title, so this is expected to be a red tape neutral proposal.

Proposal 4: Repeal the definition of ‘metropolitan area’

Repeal the current definition of ‘metropolitan area’ and reference to that term in section 32(2)(c)(iv).

Section 32(2)(c)(iv) of the Sale of Land Act requires a vendor selling land outside the metropolitan area to include a notice in the vendor statement if there is a planning instrument that prohibits the construction of a dwelling house on the land for sale. In commenting on the utility of continuing to require disclosure in these circumstances, there was stakeholder comment about the lack of appropriate definition of ‘metropolitan area’ (LIV).

While section 30 of the Sale of Land Act provides a definition of ‘metropolitan area’ for the purposes of section 32, this definition refers to a further definition of that term in the Melbourne and Metropolitan Board of Works Act 1958, as in force immediately before its repeal. This definition is outdated, referring to municipalities and shires that predate council amalgamations. There is capacity under section 30(3) for the Governor in Council to declare an area to be the metropolitan area by order published in the Government Gazette. However, this section has never been used and is not a particularly transparent and efficient way for vendors and their legal practitioners to determine whether disclosure is required.

Repealing the definition of ‘metropolitan area’ and reference to that term in section 32(2)(c)(iv) means that vendors would not need to determine whether the land for sale is inside or outside the metropolitan area.

If there is a planning instrument in force that prohibits the construction of a dwelling house on the land the vendor is selling, the vendor will be obliged to include notice of the prohibition in the vendor statement.

This proposal recognises that any new definition of ‘metropolitan area’ would become outdated as metropolitan boundaries change, and avoids the need to regularly reflect such changes through legislative or regulatory amendment, which may not be obvious to vendors or their representatives. It also recognises that there may be instances where planning controls prohibit the construction of a dwelling house within the metropolitan area and this fact should also be disclosed.

Estimated red tape impact: Positive

Repealing the definition of ‘metropolitan area’ and associated legislative references in section 32 should lead to minor red tape savings as it removes uncertainty about when a notice disclosing prohibition on the construction of a dwelling house should be included in a vendor statement. Instead a vendor is simply required to disclose any prohibition on the construction of a dwelling house on land for sale, irrespective of where that land is located.

Proposal 5: Remove redundant references to expired building guarantees

Repeal section 32(1A)(b) which requires disclosure of guarantees under the former housing contracts guarantee scheme. As this scheme ceased to apply after 1 May 1996, it is safe to assume that guarantees under this Act have been exhausted and no longer need to be disclosed.

It is also proposed to repeal section 32(10). This section was introduced to overcome concerns about the sale of houses with HIH builder’s warranty insurance cover that were required to be disclosed under section 32(1A)(c) by making it clear that successor owners could bring claims under the builder’s warranty for contracts of insurance underwritten by HIH before 1 April 2001.

Therefore, any insurance policies which had the protection of the State Government’s indemnity scheme would have expired, and no longer need to be disclosed.

Estimated red tape impact: Neutral

This proposal would simply remove redundant provisions and as such would have no impact on red tape savings.

2.2 Option 2: Medium Red Tape Savings: refine existing disclosure requirements

Rationale for Option 2: Refine some existing requirements identified by stakeholders to improve the effectiveness of disclosure under section 32 and generate red tape savings. Each of these proposals, if implemented, would be expected to generate red tape savings by improving clarity as to the information to be disclosed under section 32.

2.2.1 Proposals to clarify land use and building disclosure

Proposal 6: Limit disclosure to unregistered easements, covenants and other restrictions

The current requirement under section 32(2)(b) of the Sale of Land Act is to provide a description of any easement, covenant or other similar restriction affecting the land (whether registered or unregistered) and particulars of any existing failure to comply with the terms of that easement, covenant or restriction.

It is proposed to limit disclosure to unregistered easements, covenants and other similar restrictions affecting the land only on the basis that feedback from stakeholders confirms that registered restrictions are registered on title and therefore would be apparent on the Register Search Statement.

Continuing disclosure of unregistered easements, covenants and other restrictions is proposed as it is clear from stakeholder feedback that it would virtually impossible for a prospective purchaser to access this information.

Current requirements to disclose a failure to comply with the terms of any easement, covenant or restriction (whether registered or unregistered) would continue to apply.

Estimated red tape impact: Slight positive

Removing the requirement to provide a description of registered easements, covenants and other registered restrictions affecting the land is expected to deliver minor red tape savings as there will be small reduction in the size of the vendor statement.

This proposal will removal duplication as information about registered covenants, easements and other restrictions is already disclosed as it is as part of the information about the title.

Proposal 7: Clarify disclosure of planning information

Clarify that particulars of key planning documents, in particular, planning permits and planning overlays under the Planning and Environment Act 1987 require disclosure under section 32.

This proposal seeks to address concerns raised by stakeholders about a lack of clarity regarding requirements for the disclosure of planning information.

First, CE Carter & Son noted that there is a need to review the working of section 32(2)(c) to ensure that planning overlays that may adversely affect a use of the land that would otherwise be permissible under the relevant zoning are disclosed.

Second, the LIV stated that section 32 should expressly require vendors to disclose details of planning permits. Currently, planning permits are only required to be disclosed as notices affecting the land, as there is judicial authority that such permits are not planning instruments for the purposes of section 32(2)(c) of the Sale of Land Act.

Estimated red tape impact: Neutral to slight positive

As noted in the LIV’s submission, while planning permits are not considered planning instruments requiring disclosure under section 32(2)(c) of the Sale of Land Act, they would require disclosure under section 32(2)(e) as notices that affect the land, and of which the vendor might reasonably be expected to have knowledge. It is also arguable that planning overlays, which affect land use, would require disclosure.

Therefore, it is anticipated that including an explicit requirement that planning permits and overlays should be disclosed would not increase the burden on vendors, but rather will clarify the nature of the planning information to be disclosed. Feedback is specifically sought as to whether disclosure about planning permits should be limited to a specified timeframe (for example: disclosure could be limited to the last 7 years as is currently the case with details of building permits).

This requirement would only apply to planning permits applying to the land for sale. Vendors would not have to provide information about planning permits over neighbouring properties.

Proposal 8: Clarify disclosure of particulars of building approvals and permits

Clarify that disclosure of particulars of building approvals and permits includes details of certificates of final inspection and/or occupancy issued by councils. While not specifically required under section 32 details of these certificates are commonly included on building certificates issued by councils.

Estimated red tape impact: Neutral to slight negative

Requiring certificates is advantageous as the issuing of a certificate demonstrates that the building permit process has been completed. Another advantage to disclosure of these certificates is that the date of their issue is a trigger for calculating the period for any building insurance required to be disclosed under section 32(1A)(c).

There may be minor costs to individuals who choose to provide their own particulars rather than rely on a council certificate to demonstrate compliance with the building permits requirement. However, these costs are expected to be negligible.

2.2.2 Proposals to improve the disclosure of owners corporation information

Proposal 9: Enable vendors to disclose owners corporation information through the provision of ‘prescribed particulars’

Under this proposal, the mandatory requirement that vendors supply an owners corporation certificate as part of disclosure under section 32 would be removed. Instead, vendors will be able to provide prescribed particulars about the relevant owners corporation or, alternatively, supply an owners corporation certificate.

Currently, where there is an owners corporation, the vendor must attach the owners corporation certificate to the vendor statement under section 32(3A) of the Sale of Land Act. In its submission, the LIV suggested that—

“it would be preferable if section 32(3A) was amended so that a vendor is not required to attach a copy of an owners corporation certificate to a vendor statement, but is simply required to provide information about the owners corporation – the required information could be specified in a schedule. The vendor could elect to apply to the registered manager for an owners corporation certificate to attach to the vendor’s statement but the vendor should not be required [to] obtain the certificate. The vendor could simply provide the information in the schedule. The schedule might usefully include a copy of the most recent annual budget.”

Under this proposal it would no longer be mandatory for a vendor to attach a copy of an owners corporation certificate to a vendor statement. Instead, if the land is affected by an owners corporation, a vendor would be required to either supply an owners corporation certificate, or disclose prescribed particulars of the owners corporation.

Section 151(4)(a) of the Owners Corporations Act 2006 (“Owners Corporations Act”) states that an owners corporation certificate must contain the prescribed information while regulation 11 of the Owners Corporations Regulations states that the prescribed information for the purposes of section 151(4)(a) is—

  • the current fees for the lot for each quarter or annually or other period;
  • the date up to which the fees for the lot have been paid;
  • the total of any unpaid fees or charges for the lot;
  • any special fees or levies which have been struck, and the dates on which they were struck and are payable;
  • any repairs, maintenance or other work which has been or is about to be performed which may incur additional charges to those set out above;
  • in relation to the owners corporation’s insurance cover the name of the company, number of the policy, kind of policy, buildings covered, building amount, public liability amount and renewal date;
  • if the owners corporation has resolved that the members may arrange their own insurance under section 63 of the Act, the date of this resolution;
  • total funds held by the owners corporation;
  • whether the owners corporation has any liabilities (in addition to any liabilities disclosed above), and if so, the details of those liabilities;
  • details of any current contracts, leases, licences or agreements affecting the common property;
  • details of any current agreements to provide services to lot owners, occupiers or the public;
  • details of any notices or orders served on the owners corporation in the last 12 months that have not been satisfied;
  • details of any legal proceedings to which the owners corporation is a party and any circumstances of which the owners corporation is aware that are likely to give rise to proceedings;
  • whether the owners corporation has appointed, or has resolved to appoint, a manager and, if so, the name and address of the manager;
  • whether an administrator has been appointed for the owners corporation, or whether there has been a proposal for the appointment of an administrator; and
  • the minutes of the most recent annual general meeting of the owners corporation.

The particulars to be disclosed under this proposal could include some or all of the information currently required to form part of an owners corporation certificate.

Estimated red tape impact: Positive

This proposal is expected to deliver positive red tape savings where vendors elect to provide particulars rather than supply an owners corporation certificate.

It is expected that there will be vendors who will hold or have ready access to the information required to satisfy particulars of the owners corporation, and will elect to take this approach rather than obtain an owners corporation certificate. Red tape savings are anticipated for these vendors as they will not incur the fee for obtaining a certificate and will not have to wait (up to 10 business days) for the certificate to be provided.

Proposal 10: Review fees for owners corporation certificate

Under section 151(1) of the Owners Corporations Act, any person may apply to the owners corporation for an owners corporation certificate. Section 151(2) states that the application must be in writing and accompanied by the fee determined by the owners corporation, which must not exceed the prescribed fee. Under section 151(3) the owners corporation must issue an owners corporation certificate within 10 business days after it receives an application and fee.

The prescribed maximum fee for providing an owners corporation certificate is set under regulation 10 of the Owners Corporations Regulations 2007 at $150, inclusive of GST. In setting the prescribed maximum fee, the Regulatory Impact Statement for the Owners Corporations Regulations 2007 (“RIS”) stated that this fee would cover the range of particular costs imposed on small and large owners corporations for the production of the certificate and information and advice statement, and enable an owners corporation to charge a maximum amount of $150, inclusive of GST, for cost recovery.

There was comment from multiple stakeholders that the fees charged for obtaining an owners corporation certificate are excessive. In response, this proposal suggests that the fee be reviewed as a separate project, to assess whether the prescribed maximum fee is set at an appropriate amount. To this end, stakeholder feedback is welcomed on the following options that could become part of a separate review of owners corporation certificate fees:

  • differential fees for initial requests for a certificate and subsequent requests made within three months of the initial request (updates);
  • a reduced fee for any additional certificates that may be required for the lot for sale (where there is more than one owners corporation);
  • prescribing different fees depending on whether the owners corporation is small (fewer than 20 lots) or large (20 lots or more) and therefore more likely to produce certificates of a more complicated nature;
  • assessing the regulation making powers under the Owners Corporations Act to ensure that any changes arising out of the review could be implemented; and
  • making it an offence under the Owners Corporations Act for an owners corporation to charge a fee exceeding the maximum fee or to charge an additional fee for a priority service.

In New South Wales, the Strata Schemes Management Regulations 2010 prescribe different fees depending on the circumstances of the request. Initial requests and requests made more than three months after a previous request by the same person in respect of the same lot, attract a greater fee than requests that are made within three months of an earlier request. Fees for additional certificates for lots that service the lot for sale (e.g. a lot comprising a garage, parking space or storeroom) are also at a reduced price.

The RIS for Victoria’s Owners Corporation Regulations 2007 categorised small owners corporations as those with less than 20 lots. Smaller owners corporations account for 95 per cent of the sector and the RIS assumed that these smaller owners corporations may charge, on average, $80 to produce a certificate while a larger owners corporation might charge $130 for production of a certificate, depending on the time and effort put into producing the certificate. As such, 95 per cent of the sector may currently be, if charging the prescribed maximum fee, over-recovering their costs.

In addition, there have been reports that some owners corporations are charging a ‘premium’ fee to provide an owners corporation certificate with a shorter period than the 10 business days provided for under the Owners Corporation Act.

The Owners Corporation Act makes it clear that an owners corporation cannot charge more than the prescribed maximum fee, even if it agrees to expedite processing of its certificates.

Estimated red tape impact: Positive

The RIS estimated the costs to vendors of obtaining owners corporation certificates at $4.5 million per annum.

The fee was established by investigating the cost of preparing an owners corporation certificate. Advice from the REIV and the Institute of Body Corporate Managers (now Strata Community Australia) was that there are two tiers for the production of an owners corporation certificate. The first tier is based on a smaller owners corporation (fewer than 20 lots, which amounts to around 62,400 owners corporations) with relatively few issues. It was estimated that preparing the certificate for this tier of owners corporation may take one hour.

The second tier is based on a large owners corporation (20 lots or more, which amounts to around 3,250 owners corporations) with a number of issues. It was estimated that preparing the certificate for this type of corporation may take four hours at $55.5 per hour including on-costs, overheads and paper. Therefore, if the average is taken for both tiers and the average certificate takes 2.5 hours, the average cost for the preparation of one certificate may be $139.

The cost of the certificate must then be added to the cost of the advice and information statement ($9) for a total of $148 for the preparation of the certificate and the information and advice statement.

The RIS concluded that for the purposes of cost recovery, smaller owners corporations producing simple certificates would incur minor costs, whilst larger owners corporations producing more complex certificates would incur more significant costs. However, comment is sought from stakeholders about potential cost efficiencies that may arise where an owners corporation is receiving frequent requests for certificates. In particular, feedback is sought on the likelihood that a large owners corporation receiving multiple requests for certificates over the course of a year would, as a result, have ready access to the required information and be able to implement efficiency gains thereby reducing costs.

2.2.3 Proposals to clarify and tighten requirements for government notices

Proposal 11: Tighten disclosure requirements relating to government notices, orders, etc.

Section 32(2)(e) requires a vendor to list particulars of any notice, order, declaration, report or recommendation of a public authority or government department or approved proposal affecting the land of which the vendor might reasonably be expected to have knowledge, including notice of intention to acquire the land served under the Land Acquisition and Compensation Act 1986.

This proposal would result in notice requirements under section 32(2)(e) being tightened to require disclosure of notices, orders, declarations, reports, recommendations and approved proposals of public authorities and government departments (“government notices”) that directly affect the land for sale.

In addition, requirements relating to the vendor’s knowledge, would also be tightened by clarifying that the circumstances in which a vendor ‘might reasonably be expected to have knowledge’ of government notices includes where—

  • the vendor has been made personally aware of the notice (such as direct service or mailing of the notice); or
  • the vendor should be aware of the notice as a result of government communication efforts such as public advertising or letter drops in the area.
This proposal responds to feedback from stakeholders that this requirement is too general and has been difficult for vendors to comply with (LIV, REIV).
Estimated red tape impact: Positive

This proposal is expected to generate red tape savings as vendors would only be expected to provide particulars of government notices of which they already have details (i.e. through direct receipt of the notice or via broader government advertising or letter drop). It would not be incumbent upon a vendor to seek out further details of government notices of which they do not already have some available particulars.

There should be positive red tape savings from limiting the test to government notices that directly affect the land, as this would mean that past notices that have no continuing effect on the land for sale would not require disclosure. It is proposed that only notices that have a current (present day) application to the land would require disclosure. Historical documents that do not have any continuing impact on the land would not need to be produced.

Proposal 12: Remove specific reference to land use restriction notices under the Agricultural and Veterinary Chemicals (Control of Use) Act 1992 and rely on general notice provisions under section 32(2)(e)

Where farmland is chemically contaminated, the Department of Primary Industries (“DPI”) has the ability to issue a land use restriction notice under the Agricultural and Veterinary Chemicals (Control of Use) Act 1992 (“Agricultural and Veterinary Chemicals (Control of Use) Act”) which sets out conditions for managing the land (stocking rates, fencing required, permissible plants etc.). Nearly all land use contamination cases that DPI deals with involve dieldrin or DDT contamination.

It is proposed that the specific reference to land use notices under section 32(2)(g)(i) be removed, as these notices, when issued by DPI, are required to be disclosed by vendors under section 32(2)(e).

Estimated red tape impact: Neutral

It is not known whether the explicit reference to the Agricultural and Veterinary Chemicals (Control of Use) Act in section 32(2)(g)(i) induces vendor disclosures over and above the requirements of section 32(2)(e). Removal of 32(g)(i) does not change vendor obligations to report notices of land contamination, as this is still a requirement under 32(2)(e). The risk is that vendors may not realise this requirement still exists; the extent of the risk is not known. Therefore, the impact of this approach is expected to be neutral.

2.2.4 Proposals to limit disclosure of essential services to non-connected services only

Proposal 13: Limit disclosure to services that are not connected to the land

Currently, vendors are required to disclose information about essential services (e.g. gas, electricity, telephone, water), including information about services that are connected to the land for sale and services that are not connected.

This proposal would limit the information vendors are required to disclose to information about services that are not connected to the land (for example, if there were no electricity connection to the property, this would need to be disclosed).

The requirement under section 32(2)(ea) for a vendor to disclose a list of connected services would be removed. However, there would still be a requirement on vendors to disclose services that are not connected, and the requirement under section 32(2)(eaa) to disclose particulars of connected water supply and sewerage services that are not of the standard level available in the locality would also be retained.

Feedback from stakeholders indicated that it is important for non-connected services to be disclosed to prospective purchasers as this information is not easily obtainable by prospective purchasers, and the cost of establishing such service connections is often very high. Therefore, a lack of particular service connections can have a definite impact on the value of a property to a prospective purchaser (REIV, LIV, AIC, R Cocks).

Estimated red tape impact: Positive

Removal of requirements on vendors to disclose information about connected services will lead to a minor reduction in the size of the vendor statement. It will also ensure that the disclosure is focused on disclosure of non-connected services or connected water and sewerage services that are below the current standard in the area.

2.3 Option 3: Large Red Tape Savings: revise existing disclosure requirements and migrate some requirements from section 32 to pre-contractual due diligence checklist

Under this option, there would a total revision of existing requirements under section 32 to streamline vendor disclosure by:

  • Migrating generic warnings and other information aimed at encouraging prospective purchasers to make their own inquiries to a mandatory due diligence checklist that would be provided by the vendor to the purchaser when the property is first advertised and marketed; and
  • Consolidating the remaining detailed information required to be disclosed in the vendor statement under key themes: for example, ‘financial disclosure’; ‘planning and building disclosure’; ‘services’; and ‘government notices’, to improve readability and understanding of the information being disclosed.

Under this option, generic warnings that are aimed at alerting prospective purchasers of land to particular issues that may affect that land would be removed from section 32, and relocated to a due diligence checklist, which would be provided by vendors to purchasers when the property is first advertised and marketed. Other generic information currently provided as part of the vendor statement could also be relocated to the due diligence checklist (e.g. general information accompanying an owners corporation certificate).

Feedback from stakeholders was that generally, the generic warnings required to be included in vendor statements are ineffective in raising awareness of the matters to which they are intended to alert purchasers. The LIV suggested that purchasers have become desensitised to the multitude of warnings and, accordingly, disregard them.

Relocating the generic warnings contained in the section 32 to a due diligence checklist (to be provided when the property is first advertised and marketed) would ensure that purchasers are made aware of general issues affecting land that may influence their decision to buy a property (and which are therefore in their interests to consider at an early stage in their decision-making process), before they receive a vendor statement containing information specific to the title of the property.

2.3.1 Key disclosure themes

Proposal 14: Group elements of disclosure into ‘key themes’ to improve accessibility and readability

Under this proposal, section 32 would be revised to group matters it requires vendors to disclose into key themes. Such themes could include, for example:

  • Financial disclosure – including rates, charges and outgoings, and any necessary information relating to undischarged mortgages, insurance and terms contracts if applicable;
  • Land use and planning disclosure – this category could incorporate changes identified under option 2 to improve disclosure of planning information and details of easements, covenants and other restrictions on the land;
  • Building and structures on the land – including building permits and owner builder insurance;
  • Services – to include information about services that are not connected to the land or, in the case of water supply and sewerage, are connected at a level below the standard in the area;
  • Government notices directly affecting the land – this category could incorporate changes identified under option 2 to clarify circumstances in which government notices and orders are to be disclosed;
  • GAIC information (only provided where the land for sale is in an urban growth boundary) – including details of any work in kind agreements; and
  • Bushfire risk - where land is in a bushfire-prone area within the meaning of regulations made under the Building Act 1993.
Estimated red tape impact: Positive

It is anticipated that this proposal would improve the readability and accessibility of vendor statements for prospective purchasers. Purchasers would be able to understand, at a glance, the obligations they may have and restrictions that may apply to the land they are interested in purchasing.

2.3.2 Due diligence checklist

Proposal 15: Introduce due diligence checklist

During the discussion paper phase, stakeholders were generally not in favour of mandating that the vendor statement be prepared before a property is placed on the market as it would lead to delays in marketing (and potentially sale) of a property (LIV, REIV, AIC, CE Carter & Son).

These stakeholders argued that providing detail about specific properties at any early stage would not result in improvements in disclosure because purchasers are concentrating on more general considerations at that point (e.g. selecting the area/location and the type of property they wish to buy).

The introduction of a due diligence checklist acknowledges this feedback as it would focus on general information that would assist purchasers in concentrating on particular locations and/or types of property.

In its submission, the Consumer Action Law Centre noted that the current warnings to prospective purchasers should be amended to ensure they are targeted and meaningful, stating that the current warnings provide little indication of the risk and what the purchaser can do to avoid the risk or find out more information.

It is proposed that the due diligence checklist could provide such information in a plain English format that vendors would be required to distribute to prospective purchasers when the property is advertised and marketed. The due diligence checklist could pose generic questions for a purchaser to consider such as—

  • what information the purchaser has about the neighbourhood or surrounding location in which the property is situated: this would enable the purchaser to consider whether the neighbourhood suited their particular needs (for example if the property is located in a commercial agricultural area with possible amenity impacts such as noise and smell and the types of activities that may occur in such a location);
  • how the purchaser intends to use the property, including whether building works or renovations are proposed. This would encourage prospective purchasers to consider activities that may be prohibited or restricted under planning controls applying in the area (for example, limits on renovations and extensions or constructing fences or pools, or heritage controls), or issues such as the potential presence of asbestos; and
  • the features of the particular property for sale, for example, whether it is part of an owners corporation, or whether it is near a waterway, or neighbouring Crown land.

The due diligence checklist could also provide avenues for prospective purchasers to make their own enquiries and find out more information about the areas of particular interest to them.

The introduction of a due diligence checklist would also ensure that the vendor statement is not swamped with information, some of which may be irrelevant to particular purchasers. Generic information would be moved to the due diligence checklist, empowering purchasers to pick the issues of most importance to them to follow up on.

It is proposed that provision of the due diligence checklist would be mandatory. However, there would be no rights of rescission should a vendor fail to provide the checklist to a prospective purchaser. CAV would develop the due diligence checklist for distribution by vendors.

As a result, there will be two opportunities for vendors to disclose information to prospective purchasers—

  • the due diligence checklist providing generic information at the marketing and advertising stage to assist purchasers in determining the issues of particular importance to them, and providing avenues to follow up with their own enquiries; and
  • the vendor statement which provides specific information about the property for sale and is provided closer to an offer.

It is proposed that the due diligence checklist would be made available by vendors (and their agents) during the advertising and marketing stage (i.e. inspections and agent inquiries), thereby ensuring that the issues are drawn to a purchaser’s attention as early as possible. It is possible that the due diligence checklist could also be made available by a vendor or his or her agent to a purchaser on request.

Estimated red tape impact: Positive

The introduction of a due diligence checklist is expected to be positive as it would result in the removal of generic information, reducing the size of the vendor statement.

As the due diligence checklist will be mandatory it will impose costs on vendors. However, these costs are expected to be minor as Consumer Affairs Victoria would develop the checklist and it would be available for downloading from the Consumer Affairs Victoria website at no charge. The costs of the due diligence checklist should be exceeded by savings made from reductions in the size and complexity of the vendor statement. In addition, the information to be included in a due diligence checklist which has been subject to rights of rescission would no longer attract this remedy, relieving vendors from potential litigation.

It is expected that significant benefits would also flow to purchasers as a result of the introduction of a due diligence checklist. The vendor statement would be targeted towards those issues that are critical to purchasers across the board and should attract the remedy of rescission. In contrast the due diligence checklist could accommodate a greater variety of issues that may be important to certain purchasers of property, allowing those purchasers to choose the issues that may be of interest to them, and about which they require further information.

It is not considered that this proposal would shift costs to multiple prospective purchasers as it would be at each purchaser’s discretion as to whether he or she undertakes any due diligence. Feedback is sought from stakeholders about the mix of issues currently proposed to be included in the due diligence checklist.

Proposal 16: Relocate information accompanying owners corporation certificate to due diligence checklist

Section 151(4)(b) of the Owners Corporations Act states that an owners corporation certificate must be accompanied by—

  • a copy of the rules;
  • a statement in the prescribed form providing advice and information to prospective purchasers and lot owners (“the information and advice statement”);
  • a copy of all resolutions made at the last annual general meeting;
  • any other documents of a prescribed kind (none are currently prescribed); and
  • a statement advising that further information on prescribed matters can be obtained by inspecting the owners corporation register.

The information and advice statement, which is prescribed under the Owners Corporations Regulations 2007 for the purposes of section 151(4)(b)(ii) of the Owners Corporation Act, contains general information for prospective purchasers about–

  • what an owners corporation is;
  • how decisions are made by owners corporations;
  • owners corporations rules;
  • lot entitlement and lot liability; and
  • encouraging prospective purchasers to seek further information about the particular owners corporation into which they are considering buying.

The information and advice statement provides prospective purchasers and lot owners with information and advice about the functions of an owners corporation, enabling prospective purchasers to make an informed choice before buying into an owners corporation. Therefore, the information and advice statement may be of greater benefit if it is provided with the due diligence checklist where an owners corporation exists. This would ensure that general information about owners corporations is dispersed as early as possible in negotiations.

Under this proposal, this information would be relocated to a due diligence checklist on the basis that the information is generic in nature and not specifically directed to the property for sale. Rather, the aim of the information is to provide general disclosure to a prospective purchaser about obligations and rights for owners corporations.

Estimated red tape impact: Positive

Information that is currently provided as part of the vendor statement would be relocated to the due diligence checklist, reducing the amount of mandatory information required to be disclosed.

Rights of rescission would no longer be available in the event a vendor failed to supply this information or supplied incorrect information.

Proposal 17: Relocate warnings to the due diligence checklist

The generic information contained in warnings that are currently provided as part of the vendor statement would be relocated to the due diligence checklist.

This could cover warnings relating to planning, commercial agricultural production, essential services and GAIC.

In its submission, the Consumer Action Law Centre noted that the current warnings should be amended to ensure they are targeted and meaningful, stating that the current warnings provide little indication of the risk and what the purchaser can do to avoid the risk or find out more information.

It is proposed that a due diligence checklist provides a better avenue for providing this level of detail, as it can be more flexible in its format and provide more meaningful information than is currently the case.

Estimated red tape impact: Positive

Rights of rescission would no longer be available in the event a vendor failed to supply this information or supplied incorrect information.

In addition, only those warnings that apply to the particular property for sale would need to be provided, leading to minor savings.

Chapter 3: Proposals for additional disclosure

These proposals have been suggested by stakeholders during feedback on the discussion paper as areas where additional disclosure under section 32 may be warranted. Feedback is sought from stakeholders on the merits of each of these proposals.

It should be noted that proposal 15 (proposing the introduction of a due diligence checklist) could also accommodate other information that it would be worthwhile for a prospective purchaser to consider prior to deciding on a particular location and property.

CAV has provided an assessment on the merits of these proposals, but also welcomes stakeholder views on these suggestions for additional disclosure.

3.1 Require vendor to disclose prominent noises and smells, and introduce purchaser ‘acknowledgement’ of certain agricultural activities

Suggested by: the Victorian Farmers Federation

The Victorian Farmers Federation (“VFF”) advises that ‘there a raft of policy options that could be adopted to strengthen farmers ‘right to farm’ and prevent needless and vexatious complaint against farmers.’

The VFF believes the first step towards improving the understanding of new purchasers of land in agricultural zones comes with an improved warning under section 32, and recommends that vendors be required to detail prominent noises and smells to ensure prospective owners of rural property acknowledge and accept they exist prior to purchasing.

As part of the 2010 Victorian Liberal National Coalition Plan for Agriculture, an election commitment was made to “require section 32 statements to detail prominent noises and smells to ensure potential owners of rural property acknowledge and accept they exist prior to purchasing”.

The VFF states that its proposal is consistent with this commitment.

The aim of the proposal is two-fold—

  • to provide more detailed information to prospective purchasers; and
  • to establish proof, should there be noise or odour complaints, that the purchaser of the land was aware of and acknowledged surrounding commercial and agricultural activities.

The VFF also suggests that, in addition to detailing prominent noises and smells, vendors provide information about visual amenity (e.g. silage left in paddocks covered by plastic tarps) and stock crossing roads, which the purchaser would be required to acknowledge and accept before moving into the area. While the VFF is silent on how the purchaser would acknowledge his or her acceptance of the disclosure, this could be achieved by requiring the purchaser to sign the vendor statement, acknowledging that he or she has read the contents.

The aim of vendor disclosure is to improve the position of a purchaser by requiring a vendor to disclose information about a property that may be difficult for the purchaser to access and is likely to impact on their decision to purchase property and the price they will pay.

The disclosure (or non-disclosure) of information does not provide any protection to third parties, including neighbouring properties or businesses. Therefore, it is important to note that increasing the amount of disclosure vendors must make about agricultural activities in the location will not protect neighbouring farmers from complaints from the purchaser at some later date – even where disclosure is combined with a purchaser acknowledging and accepting the presence of agricultural activities.

Potential approach: Consider as part of proposal 15

It is critical that purchasers carefully consider whether a particular location is appropriate, in particular, where purchasers may be making a ‘tree change’ and moving into a new environment. Therefore, it is proposed that this information could be detailed in the due diligence checklist.

This approach would ensure purchasers receive information at an early stage, and would prompt purchasers to look more closely at the surrounding location, including neighbouring activities, which may impact on their amenity. The due diligence checklist could also encourage purchasers to visit potential locations at various times of day to maximise their exposure to the full range of activities that may take place in an agricultural area.

Providing detail about activities in the location, including those activities that generate prominent noises and smells or have an impact on visual amenity will assist purchasers in determining whether a particular location is ‘right’ for them.

3.2 Include a general warning about the application of overlays (including Aboriginal heritage overlays) and where information on applicable overlays can be found

Suggested by: the Victorian Farmers Federation

The VFF states that ‘there is no requirement for Aboriginal Heritage overlays to be stated in the section 32 and this should be considered.’

Places of heritage significance to a locality can be protected by a heritage overlay. Heritage overlays are contained within local council planning schemes and assist in protecting the heritage of a municipality. Heritage overlays include places of local significance as well as places included in the Victorian Heritage Register.

While some Aboriginal heritage places are included in heritage overlays, broad protection of Aboriginal heritage is provided under the Aboriginal Heritage Act 2006 (‘Aboriginal Heritage Act’). Therefore, heritage overlays cannot be relied upon for information about the existence of places of Aboriginal heritage value.

Potential approach: Consider as part of proposals 7 and 15

Heritage overlays could be included as part of proposal 7 as key documents affecting the land for sale.

The Aboriginal Heritage Act requires Aboriginal places and objects to be recorded on the Victorian Aboriginal Heritage Register. This Register holds the details of all known Aboriginal cultural heritage places and objects within Victoria, including their location and a detailed description.

Prospective purchasers would not be able to access the Register but could apply for an Aboriginal heritage certificate from Aboriginal Affairs Victoria. This certificate provides information about any Aboriginal cultural heritage places or objects located on the land for sale or if the land falls within an area of Aboriginal cultural heritage sensitivity. The certificate also provides a listing of any registered Aboriginal cultural heritage places or objects.

Therefore, information about Aboriginal cultural heritage could be included as part of the due diligence checklist proposal, including information about how to access Aboriginal heritage certificates.

3.3 Include mandatory disclosure of land area subject to Government licence arrangements

Suggested by: the Victorian Farmers Federation

The VFF states that in certain circumstances Crown land may be perceived by a purchaser to be part of the land for sale (because it adjoins the land for sale and may be unfenced), although it is actually Crown land that is subject to a Government licence.

Potential approach: Consider as part of proposal 15

Although a physical inspection of the land may not obviously distinguish between Crown land and private land for sale, if the boundaries are unfenced, checking the Register Search Statement (see proposal 3) should provide sufficient information for a prospective purchaser to be aware of the extent of the land for sale.

However, the due diligence checklist could highlight the need for purchasers to carefully check the extent of title and make enquiries of the vendor as to whether there are any Crown land leases or licences adjoining or within the property boundaries.

3.4 Include details of any lease of the property to which the sale is subject and/or specify where the lease may be inspected

Suggested by: the Law Institute of Victoria

The LIV suggests that vendors should be able to disclose the details of any lease of the property to which the sale is subject and/or specify where the lease may be inspected.

The LIV states that under section 42(2)(e) of the Transfer of Land Act 1958 the purchaser’s interest as registered proprietor is subject to the interest of a tenant in possession of the land, but the purchaser might not be able to obtain details of the lease as it is neither mandatory nor common for leases to be registered.

The standard form contract states that at settlement, the purchaser is entitled to vacant possession of the property unless the words ‘subject to lease’ appear in the contract. If the contract is subject to lease, then particulars of the lease are required to be included in the contract of sale.

Potential approach: Consider as part of proposal 15

Proposal 15 considers introducing a due diligence checklist.

The due diligence checklist could advise purchasers that it may be in their interests to make enquiries about any current leases over the property, including whether the contract of sale would be ‘subject to lease’, potential obligations imposed on the owner of the property under current lease arrangements and opportunities to re-negotiate terms.

3.5 Expand owners corporation disclosure to initial owners (developers) for off-the-plan sales

Suggested by: Strata Community Australia

Generally, when land is sold ‘off-the-plan’, it is not affected by an owners corporation. Therefore the obligation to disclose information about owners corporations does not apply. Strata Community Australia argues that if an owners corporation is to be created by an ‘off-the-plan’ sale, then to the full extent known, purchasers should receive the same information as that required for an existing owners corporation.

Strata Community Australia suggests that many developers go to the market with presales documentation budgets that are ‘poor and inadequate’. It is noted this may be because developers have an incentive to predict low fee levels for the first year’s budget, as it aids the marketing of a building.

Potential approach: Consider as part of proposal 9

Under proposal 9, a vendor will need to provide particulars of any owners corporation. An owners corporation certificate could provide evidence of compliance with this requirement, but would no longer be mandatory.

Removing the requirement for mandatory certificates may facilitate this proposal, as it would difficult for developers to obtain an owners corporation certificate when there is no existing owners corporation in place.

Therefore, feedback is sought from stakeholders as to whether there is sufficient information available to developers about the proposed owners corporation to provide particulars at the point of sale.

3.6 Expand information contained in statement of advice

Suggested by: Strata Community Australia

Strata Community Australia has suggested that the existing ‘statement of advice’ that accompanies an owners corporation certificate needs further information about the obligations of an owners corporation to comply with the Owners Corporations Act –particularly where an owners corporation is self-managed – as well as information outlining the administrative duties of a professional manager.

Strata Community Australia also suggests that further information be provided in the statement about multiple owners corporations.

Potential approach: Consider as part of proposal 16

Proposal 16 considers relocating the statement of advice to the due diligence checklist. The merits of including this additional information should be considered as part of that proposal.

3.7 Include a site survey with the vendor statement

Suggested by: Henry Cooper

Mr Cooper suggested including a site survey with the vendor statement to make clear any discrepancy between the title boundary and the fence line boundary as his experience is that in many cases the fence line boundary is not the same as the title boundary and neither the vendor nor the purchaser is aware of the true boundary of the land for sale.

Potential approach: Consider as part of proposal 15

As Mr Cooper outlines in his submission, a vendor may not necessarily be aware of the true boundary of the land for sale. As such, the rationale for placing an additional requirement on the vendor to source this information on behalf of both parties, and to include it in the vendor statement, is unclear.

An alternative option is to consider alerting purchasers to this issue in the due diligence checklist that forms proposal 15. The checklist could inform purchasers that there may be a discrepancy between the boundaries of the land that they are considering buying (as reflected on the title) and the boundaries as reflected by the existing fence line on the land.

The due diligence checklist could advise purchasers that it may be in their interests to make enquiries to determine whether the title boundary and the fence boundary match (possibly by engaging a surveyor to prepare a site survey), as this information could affect their decision whether or not to buy the property and/or the price to pay.

3.8 Provide full and complete details of covenants

Suggested by: Colin Vincent

Mr Vincent states that a registered covenant on title often just mentions the covenant with a reference number. The prospective purchaser must then go to the relevant office and pay a fee to gain access to the full details of the covenant.

Mr Vincent argues that this is inadequate disclosure, and submits that ‘it would be more efficient and more honest if the vendor presented full covenant information in the section 32’.

Potential approach: Consider as part of proposal 3

Proposal 3 suggests that a copy of the Register Search Statement and a copy of the plan or title diagram be provided to the purchaser, replacing the current reference to a copy of the Certificate of Title.

Information from Land Victoria is that the majority of covenants are created in plans of subdivision and transfers. For covenants created in a plan of subdivision the relevant information sought by Mr Vincent would be provided to a prospective purchaser through the Register Search Statement and the relevant plan required under proposal 3.

For other covenants, the Register Search Statement will show when a covenant exists on title and include the reference to the relevant instrument or plan. Land Victoria estimates that generally these covenants are between two to five pages in length. Therefore, the inclusion of these covenants would impose a red tape cost. Therefore, feedback is specifically sought as to the benefits and costs of requiring the vendor to provide a copy of the covenant with the Register Search Statement and the plan or title diagram.

3.9 Include requirement that Council approval of pool and spa fences is required as part of section 32

Suggested by: Kevin and Wilma Clarke

Mr and Mrs Clarke state that the selling of a house should be a means of enforcing compliance with requirements for fencing of swimming pools and suggest that requiring Council approval prior to sale is a ‘simple solution to all of the issues relating to unfenced or incorrectly fenced private swimming pools’.

Potential approach: Consider as part of proposal 15

Proposal 15 considers introducing a due diligence checklist. Information about regulatory requirements for swimming pool fences could be included in the checklist to prompt purchasers to make enquiries for themselves about whether a pool meets current regulatory requirements. The outcome of such enquiries may influence a purchaser’s decision whether or not to buy a property.

This proposal recognises that it is not the purpose of section 32 (and vendor statements) to enforce compliance with the legal requirements associated with particular types of structures on land (e.g. houses, pools, greenhouses and freestanding garages or sheds).

The purpose of section 32, and of vendor disclosure generally, is to ‘even the playing field’ between vendors and purchasers, by requiring the vendor to disclose to the purchaser specific information about the land that is relevant to a purchaser’s decision whether or not to buy a property, and which is generally not easily obtained by the purchaser.

3.10 Declare asbestos in buildings under section 32

Suggested by: Cathie Wills

Ms Wills suggests that there should be a requirement to declare asbestos as part of the vendor statement, and that there should be some certification about visible or known asbestos on site.

Potential approach: Consider as part of proposal 15

Proposal 15 considers introducing a due diligence checklist. Information about asbestos could be included in the due diligence checklist to prompt purchasers to make enquiries about asbestos, particularly if they are intending to renovate the property.

It should be noted that a recent review on asbestos management commissioned by the Commonwealth Government estimated the cost of producing an asbestos content report prepared by a licensed assessor at between $100 to $1,155 depending on the size of the property, and the type and complexity of the assessment. Therefore, introducing requirements for certification at point of sale would certainly increase costs for vendors.

3.11 Include details of any planning permit affecting the land for sale

Suggested by: Law Institute of Victoria

The LIV stated that section 32 should require vendors to disclose details of planning permits.

As noted in the LIV’s submission, while planning permits are not considered planning instruments requiring disclosure under section 32(2)(c) of the Sale of Land Act, they would require disclosure under section 32(2)(e) as a notice that affects the land, and of which the vendor might reasonably be expected to have knowledge. It is also arguable that planning overlays, which affect land use, would require disclosure.

Potential approach: Consider as part of proposal 7

Proposal 7 seeks to address concerns raised by stakeholders about a lack of clarity regarding requirements for the disclosure of planning information by specifying the key planning documents that require disclosure under section 32. Explicit reference to planning permits is being considered as part of this proposal.

Last updated: 08/08/2015

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