What is a material fact?

Five years ago, while inspecting a line up of properties in Ballarat for a client, the agent I’d asked to show me through the properties stopped outside the second one, turned to me and said, “Cate, I need to tell you this. Something not-so-great happened in this house. I know how much you care about your clients and I’d rather you knew now, than found out later.”

What she did that day was not a legal requirement at the time. Only as recently as March 1st this year has our legislation changed to incorporate the requirement for agents and vendors to disclose all material facts.

Before this legislation was amended the legislation only required agents to answer a question truthfully and did not require a vendor to disclose all material facts.

Unless a buyer was informed, they could have purchased a property that had a significant past, (or expensive issue) without realising.

“The Amendment Act replaces the word “fraudulently” with “knowingly”. “

Consumer Affairs Victoria

This change is significant in our legislation and brings Victoria inline with NSW and some of our other states now. The penalties for agents and vendors who breach the new law are serious. “The penalty for breaching section 12(d) of the Act is 120 penalty units or up to 12 months imprisonment.”

At $165.22 per unit, this fine is just shy of $20,000.

Prior to March 1st, plenty of houses with dark pasts had hit the news when sales campaigns arose, and in some cases the agents actually incorporated the history of the property in their discussion and marketing efforts. This unassuming little single fronted Victorian terrace in Melbourne’s inner north made the news when it sold in 2011.

Despite their attempts at the time to acknowledge the sordid past, not everyone agreed with the agency’s approach. Victim support groups were critical of the crime’s mention.

Interestingly, the prices achieved for both sales were generally reflective of market values for similar dwellings in the suburb and prove that not all buyers are sensitive about murder/crime histories when it comes to buying a dwelling.

Back in early 2005, Victorians woke to ghastly news of a murder in Melbourne’s outer north when a husband and his lover were faced with questions about a wife found choked and barely alive in a car boot. Her death, quickly followed by her husband’s suicide shortly afterwards sparked high media attention and following legal proceedings, the home was sold at auction within less than a year.

The sale result of $970,000 in October 2005 for the Mickleham property surprised more than a few after five bidders fought for the keys.

More recently, a house in Melbourne’s inner-west was finally marketed for sale and sold under the hammer, some five years following a brutal murder. The sale result was surprisingly strong, however the lack of legislative requirement at the time for agents to disclose material facts may have eluded interested buyers from knowledge of the grim and recent past.

This stunningly renovated, period home in Murrumbeena sold back in 2017 and the reporter stated that it was not known whether the new owners were aware of the dark history of the home.

Our recent changes to the legislation aim to prevent a buyer unknowingly purchasing a property with any history or attributes that would have otherwise precluded the property being desirable to them.

But material fact doesn’t only relate to grim pasts and crime scenes.

In fact, the list of ‘material facts’ is extensive and incorporates building defects, the presence of asbestos, and land use restrictions to name a few. Consumer Affairs Victoria have published this document and I quote this excerpt:

• “prior tests or investigations have revealed (or the vendor or agent otherwise knows of) a defect in the structure of the building, a termite infestation, combustible cladding, asbestos (including loose-fill asbestos insulation) or contamination through prior uses of the land,
• the underlying cause of an obvious physical defect is not readily apparent upon inspection (for example, whilst a large uncovered crack in a wall would be obvious to a purchaser upon inspection, the underlying reason for the crack, such as defective stumping, may not);
• there has been a significant event at the property, including a flood, or a bushfire,
• there is a history of pesticide use in the event the property had been used for horticulture or other agricultural purposes,
• there are restrictions on vehicular access to a property that are not obvious during a property inspection (such as truck curfews or where access is via an easement that is not apparent on the Certificate of Title or plans),
• facts about the neighbourhood surrounding the property which may not be immediately apparent upon inspection (such as sinkholes, surface subsidence, development proposals) that would likely affect the use and enjoyment of the property to a greater extent than the usual disturbances and inconveniences of occupying land of the kind and in the local area of the land being sold,
• building work or other work done without a required building permit, planning permit or that is otherwise illegal,
• the property during the current or previous occupation has been the scene of a serious crime or an event which may create long-term potential risks to the health and safety of occupiers of the land, such as:
• extreme violence such as a homicide
• use for the manufacture of substances such as methylamphetamine, or
• a defence or fire brigade training site involving the use of hazardous materials.”

No longer is disclosure a grey area for property buyers in Victoria. The requirement is strict, the information is clear and the penalties are harsh.

Buyers have a right to determine whether any attributes or past history of a property deem it either a no-go property for them, or a less-valuable property for them.