Section 32 Of The Sale Of Land Act

Section 32 Sale of Land Act

Section 32A sets out the financial matters to be included in the statement.

Mortgage

This only relates to a mortgage that is not to be discharged. This is rare.

Charge

This only applies to charges arising by statute, such as a land tax charge. This is rare.

Outgoings

Details, or a summary, of outgoings must be provided. This would include an outgoing that only arises because of the transfer of the property to the purchaser, such as special land tax. It may also include GST that is payable by the purchaser because of a GST transfer clause in the contract. It might be argued that GST is a tax on the supply of the land rather than an outgoing ‘affecting the land’ but, given that s 32 is consumer protection legislation, this requirement may be read widely.

Terms contract

If the parties are entering into a terms contract involving multiple payments, then the vendor must provide an additional vendor statement setting out the cost of that vendor finance: Schedule 2 Sale of Land Act 1962. This requirement does not apply to a contract that is a terms contract only because possession is given to the purchaser prior to final settlement. It only applies to a ‘payments’ terms contract arising because the purchaser is obliged to make more than three payments.

Section 32B – Insurance

The vendor must disclose particulars of the vendor’s insurance, if any, but only if the contract does not provide for the property to remain at the risk of the vendor: s 32B. General condition 23(b) of the By Lawyers contract provides for the property to remain at the risk of the vendor, so particulars of insurance will not be required if either contract is used.

Particulars of any owner-builder insurance must be disclosed, even if the current vendor was not the owner builder. This is not a blanket insurance disclosure obligation. It only applies in relation to owner-builder insurance policies. There is no obligation to disclose insurance obtained by registered builders.

Section 32C – Restrictions (registered and unregistered)

Section 32C sets out land related matters to be included in the statement.

Easements

Registered easements are disclosed by annexure of a copy of the title.

 If the description of the easement on the title is insufficient to adequately describe the easement, a copy of the easement document must be provided.

Unregistered easements must be specifically identified. The existence of a water, sewerage or drainage pipe constitutes an unregistered easement.

A combined drain has been described as ‘a feature in the nature of an easement’ and will therefore need to be disclosed as an unregistered easement.

Covenants Registered covenants may be disclosed by annexure of a copy of the title, but sufficient particulars of the covenant must be given. If the title merely describes the covenant by reference to a number it will be necessary to include either a copy or description of the covenant in the statement.

Others

Previously a lease was not regarded as an ‘other similar restriction’ but a 2013 case suggested that a lease is similar to a ‘restriction’. A lease ought to be attached to the vendor statement but attaching the lease to the contract should satisfy the obligation. A continuing breach of the lease by a tenant may be something that the landlord may be obliged to disclose pursuant to fair trading principles. A s 173 agreement under the Planning and Environment Act 1987 may be an ‘other similar restriction’; however a requirement to enter into a s 173 agreement is not. A planning permit is not an ‘other similar restriction’. It may however fall within s 32D(a).

Breach of restriction

Section 32C(a) requires the disclosure of not only restrictions but also any current breach. A property subject to a restriction that is being breached at the time of sale may nevertheless be sold if the restriction and breach are disclosed to the purchaser at the time of sale. The vendor statement provides the vehicle for disclosure, but it would be prudent, although perhaps not essential, to include a special condition in the contract whereby the purchaser specifically acknowledges the disclosure.

Building over a registered easement constitutes a breach of that easement which must be disclosed to the purchaser. The existence of the easement is disclosed by annexure of the title showing the registered easement, but the breach must also be disclosed. A breach of an easement constituted by a build-over may be cured by obtaining the consent of the relevant authority. This may even be obtained during the contract period.

Building over an unregistered easement constitutes a breach of that easement.

Planning

The objective of this requirement is to bring to the attention of the purchaser the basic details of the relevant planning scheme, the responsible authority, the zoning or reservation of the property and the existence of an overlay. It does not require the vendor to annex parts of the planning scheme and to endeavour to explain the impact of the planning scheme on the particular property. Once the basic details are provided, it is for the purchaser to be satisfied as to the consequences of the planning restrictions affecting the property.

The vendor’s obligation in the case of a property affected by a reservation for road widening purposes is limited to disclosure of the details of the planning scheme, the responsible authority, the zoning and that reservation. It is then up to the purchaser to inquire as to the extent of that reservation and to be satisfied with that situation before signing the contract.

Where a property is affected by a site-specific provision in a planning scheme that a s 173 agreement restricts further subdivision, the vendor’s obligation is simply to disclose details of the planning scheme, the responsible authority, the zoning and overlays. It is then up to the purchaser to peruse the planning scheme and to be satisfied with the situation before signing the contract.

Section 32D – Notices Section

32D sets out the notices to be disclosed in the statement.

 It is important to analyse the various parts of this section. It requires disclosure of particulars of any: − notice, order, declaration, report or recommendation of a public authority or government department affecting the land; or

− approved proposal affecting the land;

that directly and currently affect the land and of which the vendor might reasonably be expected to have knowledge.

None of the words in subsection (a) are defined in the Act.

There is no overlap between s 32C and s 32D. Whilst planning proposals may fall within the ambit of s 32D during the time that they are being considered by a planning authority, once those proposals pass into the planning scheme they are covered by s 32C and cease to be notices within the meaning of s 32D.

A building permit requiring works to be performed on the property is an approved proposal affecting the land. A planning permit, whilst not within the ambit of s 32C(a) as a restriction or s 32C(d) as zoning, is an ‘approved proposal directly and currently affecting the land’ within the ambit of s 32D(a).

It is therefore necessary to attach a copy of any planning permit obtained in relation to the land. This would be particularly so if the property contravened the permit or the permit contained any ongoing restrictions or obligations, such as building envelopes. Even ‘positive’ permits, such as a permit to build units, should be attached: Downing v Lau [2018] VCC 33.

A planning application does not become an ‘approved proposal’ until formal approval has been granted by the planning authority.

It is uncertain whether an approved planning application relating to land adjoining or in the vicinity of the land sold will have sufficient nexus to be regarded as ‘affecting the land’. It may be that only proposals for use of the land sold fall within this requirement, and whilst proposals relating to other land certainly ‘affect’ that other land, they do not ‘affect’ the land sold. This argument has possibly been strengthened by the addition of the phrase ‘directly and currently’ to the section.

Possible scenarios raising such issues include applications for the construction of multistorey units on adjoining land and applications for use of land in the vicinity for ‘objectionable’ uses, such as quarrying. It is uncertain whether such applications ‘affect’ adjoining land.

Nomination of a property for consideration under the Heritage Act 2017 may constitute a ‘notice’ but the vendor has a separate obligation to notify a purchaser of that nomination. Failure to do so gives the purchaser the right to avoid the contract: s 48 Heritage Act 2017.

The more difficult aspect of s 32D(a) in such cases may be establishing the vendor’s knowledge of such matters, especially if the vendor does not reside in the area. Whether the local knowledge of the vendor’s practitioner might vicariously bind the vendor is uncertain.

In the conveyancing environment there are many notices that may come within the ambit of s 32D: − National Trust classification – This is not a public authority or government department, nor would it qualify as an approved proposal.

− Contamination – A notice from the EPA would certainly fall within s 32D, but a nonofficial report or recommendation from a private consultant would not be from a public authority or government department, nor be an approved proposal.

− Termite infestation or liable to flood – These might be traced back to a report or recommendation of a public authority but it will still be necessary to prove actual or constructive knowledge on the part of the vendor.

The Legal Practitioners’ Liability Committee takes the view that a s 158 statement that makes reference to liability for flooding is not a ‘notice’ within the meaning of the section.

An indemnity granted by a vendor to a sewerage authority in relation to the absence of a reflux valve has been held not to be covered by s 32D.

It is unlikely that general protestations added to rate notices advising of the obligation to fence a swimming pool or install smoke alarms would qualify as a ‘notice’ within s 32D.

Section 32E– If residence

Particulars of building permits issued in last seven years must be disclosed: s 32E. This does not require particulars of permits that should have been obtained or of work that has been done without a building permit.

Section 32F – Owners Corporation

Certificate Section 32F provides an Owners Corporation Certificate issued pursuant to s 151 Owners Corporations Act 2006 is to be attached to the vendor statement, together with copies of the documents required to be attached to the Owners Corporation Certificate pursuant to s 151(4)(b). These documents are:

− rules of the owners corporation;

− prescribed statement providing information to prospective purchasers;

− all resolutions made at the last annual general meeting; and

− a statement that further information can be obtained by inspecting the owners corporation register.

A vendor who is able to attach all of the required information may do so without obtaining a certificate from the owners corporation. An Owners Corporation Certificate is not required if the owners corporation is ‘inactive’, meaning that it has not met, struck levies or held insurance in the preceding 15 months.

Section 32G – GAIC

If the property is affected by a GAIC, ‘growth areas infrastructure contribution’, then relevant information must be included: s 32G. This will be revealed by the title search.

Section 32H – Services

The obligation is to list services that are not connected to the land: s 32H. There is no obligation to advise whether services are available.

Section 32I

Section 32I provides the evidence of title required to be disclosed.

Title

This requires a copy of the Register Search Statement obtained from Land Use Victoria or, if General Law land, a copy of the last conveyance and any other document evidencing the vendor’s right to sell. The requirement of a copy of the relevant documents implies that the documents provided would need to be current and true copies.

However, provided that the information is correct it is unlikely that the purchaser could rely on such a technical defect.

Proof of right to sell If the vendor is not the registered proprietor, evidence of the vendor’s right to sell is required.

Examples are:

− vendor is purchasing the property: copy of purchase contract or proposed transfer;

− vendor is executor: copy of will, probate or application by legal personal representative;

− vendor is mortgagee: copy of Notice to Pay.

Failure to include proof of right to sell is not likely to justify avoidance.

Sometimes this ‘evidence’ is provided by way of a statement or declaration from the vendor or vendor’s practitioner. The section only requires evidence, not copy documents, so such ‘evidence’ is sufficient.

Plan of subdivision

Historical If the land has ever been subdivided, a copy of the plan of subdivision is required. If the land is described as a lot on a plan, a copy of the plan must be provided. This applies to subdivisions no matter how hold. This is a requirement that is often overlooked.

Proposed

If the land is a lot on a proposed plan of subdivision, a copy of the proposed plan is required. This will be a copy of the certified plan if the plan has been certified by council, or a copy of the latest version of the plan, including any proposed amendments, if it has not as yet been certified. This plan can be quite informal and need not be a surveyor’s plan, but the vendor must be able to deliver the property substantially in accordance with the plan at settlement.

Staged

If the land is in the second or a subsequent stage the following are required:

− the plan for the first stage;

− details of any requirements in a statement of compliance for the stage in which the land is included that have not been complied with;

− details of any proposals relating to subsequent stages;

− details of the planning permit authorising staged subdivisions.

Section 32J – Certificates

Information may be provided by attaching certificates, but certificates are not compulsory: s 32J.

Section 32K

Section 32K sets out rescission provisions.

Breach

A purchaser may terminate the contract if the vendor fails to comply with the disclosure obligations. This right is subject to:

− the vendor having acted honestly and reasonably; and

− the purchaser being ‘substantially in as good a position’.

Honest and reasonable

It has been suggested that a vendor who acts negligently cannot be said to have ‘acted honestly and reasonably’, but a number of subsequent cases have excused vendors despite their negligent behaviour.

A vendor will not be vicariously liable for the negligence of the vendor’s agent or legal practitioner in preparation of the vendor statement. In determining whether the vendor has ‘acted honestly and reasonably’ only the conduct of the vendor is relevant.

Substantially in as good a position A breach of s 32 will be excused unless the purchaser establishes that the breach has caused the purchaser some detriment. This will be established if the purchaser can show that the purchaser would not have purchased the property if disclosure had have been made.

Action taken by the vendor during the course of the contract to overcome non-disclosure may mean that the purchaser is in as good a position.

Failure to provide a vendor statement does not make the contract illegal or void, it simply provides the purchaser with a possible right to terminate the contract.

Section 32L – Offence

It is an offence to supply false information or not supply information: s 32L.

Section 32M – Notice of acquisition

Where a notice to acquire land has been served under the Land Acquisition and Compensation Act 1986 and the land is subject to a contract of sale, the purchaser may rescind the contract: s 32M.

Section 32N – Contracting out

Any attempt by the vendor to contract out of the disclosure obligations is void: s 32N.

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