Vendor Statement and Breach of Section 32 of the Sale of Land

Here, at Legal Point Lawyers & Attorneys, we place great emphasis on conducting a thorough conveyancing process from beginning to end, whether we are acting for the vendor or purchaser whether located within or outside New South Wales.

Taking an example from Victoria, we focus on Section 32 of the Sale of Land Act that has received recognition Australia wide. Section 32 of the Sale of Land Act requires the vendor to provide a ‘vendor statement’ disclosing particular items of information in relation to the property they are selling. This in turn protects the purchaser from any unforeseen surprises in relation to their purchase.

Many cases now refer to Section 32 of the Sale of Land Act and a case of great relevance to this section is that of Nicolacopoulos v Khoury [2010] VCC 1576.

In this case, the conveyancer for the vendor, in preparing a ‘vendor’s statement’ failed to attach to it an Owners Corporation Certificate issued per Section 151 of the Owners Corporations Act 2006. The reason for this being that the conveyancer was of the opinion that the property was not affected by an owners corporation as they believed that there was no common property. This view was formed in reference to the fact that the subdivision was divided by separate road access. However, the property was on a subdivided plan and the Court found it to be affected by the Owners Corporation. Accordingly, per Section 32(5) of the Sale of Land Act, failure to attach the Owners Corporation Certificate allowed the purchaser to rescind the contract pursuant to Section 32(5). There was found to be a breach of Section 32(3A) and a right to rescind following from such breach, once again, per Section 32(5).

The vendor, in rebuttal, argued that Section 32(7) was to apply. In order for the vendor to argue this, effectively, the vendor had to prove that;

• That the vendor had acted “reasonably” and
• That the purchaser was “substantially in as good a position as if all the relevant provisions had been complied with”.

The first issue being point (a), raised the question whether or not the vendor was liable in relation to statements within the vendor statement. This issue has been subject to great debate over the years. Cases such as Payne v Morrison [1991] V ConvR 54-428 held the vendor to be vicariously liable for negligent conduct of their lawyer or conveyancer. One the reverse side, Paterson v Batrouney [2000] VSC 313 held that vicarious liability would not apply; rather the court held that personal liability was attributable.

There have been other cases addressing the issue without coming to a decisive view on the matter. Similarly in this case, the judge found that vicarious liability was not of issue and accordingly did not need to form an opinion. Instead, the judge found the vendor liable for personal negligence. The case turned here as the vendor should have been aware of the owners corporation and therefore should have disclosed so to the purchaser. The outcome in this case may differ to other cases as in determining vendor liability as courts consider what the vendor ought to have reasonably known and thus disclosed to the purchaser. It appears as though, if a fact or feature is so plain, fundamental or obvious to the vendor, there is no reason for failing to provide adequate disclosure, even if the error was made by the vendor’s representative, whomever that may be.

The second issue being point (b) addresses the effect of a vendor breaching the disclosure requirements and ultimately considers where it leaves the purchaser. Here the vendor argued that no misrepresentations were made under the ‘vendor statement’ and that the purchaser had not been affected adversely in any way. However, lawyers acting for the purchaser argued that the purchaser was interested in the property because the sale brochure stated, “say good-bye to the body corporate”. At the time of the proceedings, the purchaser had owned a strata property (subject to an owners corporation) and the purchaser did not want her new property to be also subject to an owners corporation. The vendor argued that the purchaser liked the brochure as a whole and that it would not have made a difference to the purchaser.

The vendor also argued that the owners corporation was dormant or inactive. The vendor gave evidence to the effect that the owners corporation had never convened meetings and that it had not issued any levies. However, the court was quick to dismiss this argument and held that just because the owners corporation had been inactive, that did not give sufficient rise to the assumption that it would never be active in the future. The owners corporation was held to be in existence.

Upon considering all the evidence, the Court held that if all the required information had been included as required by Sub-section 3(A) in the Vendor Statement, then there was a strong possibility that the purchaser would have not purchased the property. Accordingly, in this case the purchaser was able to establish that the breach occurred under Sub-section 3A.

Please contact our firm for advice specific to your circumstances.

Disclaimer: This publication is general information only and does not purport to provide legal advice. We do not accept responsibility for any losses for reliance upon this publication.