What Are Material Facts?

What Are Material Facts

When buying or selling real estate in Victoria, Australia, it's crucial that all parties disclose any material facts about the property. This is done through a Section 32 Vendor Statement, a mandatory disclosure document that sellers must provide to buyers before they sign a contract of sale. But what exactly constitutes a "material fact" and what do you need to know about Section 32 statements? Let's take a closer look.

What is a Section 32 Vendor Statement?

A Section 32 Vendor Statement, also known as a vendor's statement or statement of disclosure, is a legal document that sellers must provide to prospective buyers before they sign a contract of sale in Victoria. It takes its name from Section 32 of the Sale of Land Act 1962, the legislation that governs these disclosure requirements.

The purpose of a Section 32 statement is to disclose important information about the property that may not be readily apparent from an inspection, putting buyers and sellers on a more even footing. It ensures that buyers have access to pertinent facts that could influence their decision to purchase the property or the price they are willing to pay.

What Must Be Disclosed in a Section 32 Statement?

A Section 32 statement must include a comprehensive list of documents and details relating to the property, such as:

  • Vendor details and title documents proving ownership
  • Details of mortgages, covenants, easements and other encumbrances
  • Zoning and planning information
  • Building permits and owner-builder details
  • Rates and outgoings
  • Owners corporation details for units/apartments

Guidelines from Consumer Affairs Victoria provide further examples of material facts that should likely be disclosed, including:

  • Structural defects, infestations or contamination
  • Illegal or non-compliant building work
  • Significant events like floods, bushfires or crimes that have occurred at the property
  • Restrictions on vehicle access
  • Certain facts about the surrounding neighbourhood that may impact enjoyment of the property

This is not an exhaustive list anything that could meaningfully affect the property's value or desirability to a purchaser may need to be disclosed. If in doubt, it's best to err on the side of disclosure.

Recent Changes to Disclosure Requirements

It's important to note that the disclosure requirements for Section 32 statements in Victoria have been strengthened in recent years:

  • In October 2014, changes were made requiring vendors to provide a due diligence checklist and making some updates to the prescribed information.
  • In December 2019, additional disclosure obligations were introduced for off-the-plan sales of residential property, including more details about the proposed lot and a requirement to notify purchasers of material changes.
  • As of March 1, 2020, Section 12(d) of the Sale of Land Act 1962 was amended to make it an offence for sellers to knowingly conceal material facts in the Section 32 statement, with penalties of up to $19,826.40 or 12 months imprisonment.

Consequences of a Defective Section 32 Statement

Failing to provide a complete and accurate Section 32 statement can have serious consequences for vendors. If the statement contains errors, omissions or misrepresentations, the purchaser may have the right to pull out of the contract, even after signing.

For example, if a seller fails to disclose an easement, major structural defect, or unapproved building works, the buyer could potentially rescind the contract due to the defective Section 32 statement. In some cases, the buyer may also pursue compensation or other legal action.

Knowingly providing false information or concealing material facts is especially risky. Under the 2020 amendments to the Sale of Land Act, this is now a criminal offence that can result in hefty fines or even imprisonment for the vendor.

Protecting Yourself as a Buyer or Seller

Whether you're buying or selling property in Victoria, it's essential to understand your rights and obligations around Section 32 statements and the disclosure of material facts.

For sellers, this means working with an experienced lawyer or conveyancer to compile a thorough and compliant vendor statement. Disclose all known material facts about the property - when in doubt, it's better to include something than risk a dispute down the track. Have the completed statement reviewed carefully before providing it to any prospective buyers.

As a buyer, you should always review the Section 32 statement in detail and discuss any red flags or unclear details with your lawyer before signing the contract. Don't just rely on the seller's assurances do your own due diligence as well, such as organising building and pest inspections, checking titles and planning information, etc.

If you discover major undisclosed issues with the property after signing the contract, seek prompt legal advice. Depending on the circumstances, you may have grounds to rescind the contract or pursue the seller for damages, especially if they have knowingly concealed material information.

The Bottom Line

In Victoria, the Section 32 Vendor Statement plays a crucial role in promoting transparency and informed decision-making when buying and selling real estate. By requiring sellers to disclose all known material facts about a property, it helps level the playing field and protect the interests of both parties.

As a seller, it's critical to understand your disclosure obligations and work with a professional to compile a thorough, accurate vendor statement. Failing to disclose material information simply isn't worth the legal and financial risks.

For buyers, carefully reviewing the Section 32 statement and doing your own due diligence is an essential step in making a sound property purchase. If something doesn't add up, don't be afraid to ask questions or get advice before proceeding.

With significant penalties now in place for vendors who knowingly conceal material facts, the importance of full and frank disclosure is clearer than ever. By understanding the key requirements and seeking appropriate advice, both buyers and sellers can navigate the Section 32 process with greater confidence.

To learn more about material facts and Section 32 statements, or to get a free review of your contract, contact the experienced team at Pearson Chambers Conveyancing on 03 9969 2405 or email contact@pearsonchambers.com.au. Our knowledgeable conveyancers are here to guide you through the process and protect your interests.