In these times of increasing consumer awareness, the issue of full disclosure about the history of a property to be sold has become increasingly important for Vendors and Real Estate Agents alike.
The most famous example of this issue is the case of Sef Gonzalez, who in 2001 murdered his parents and sister in their family home. Three years thereafter the property was purchased by Mr Kwok and Ms Lin, who after paying their deposit discovered the history of the property and sought to rescind the contract on the basis that their Buddhist faith would not allow them to live in a property where a murder had taken place.
In the legal proceedings that followed, Hinton v Commissioner for Fair Trading [2006] NSWADT 257(hereafter called ‘Hinton’) and similar cases, the NSW courts have looked at what must be disclosed when selling a house with a ‘history’.
As such an event cannot be seen to effect the ‘good title’ of the property being sold, Vendor’s are largely unregulated when it comes to disclosing these types of issues, though responsible Vendors should, so as to limit future disputes, disclose issues such as an ‘unnatural death’.
Although a private vendor of a residential property is not in trade and therefore, not liable at law for failing to reveal stigmatising characteristics of a property, legislation will apply to the sale of residential property by a real estate agent; Prestia v Aknar (1996) 40 NSWLR 165.
Section 52 of the Property, Stock and Business Agents Act 2002 (NSW) (hereafter called the ‘Act’) prohibits a real estate agent from making any statement, representation or promise which is false, misleading or deceptive. Remaining silent on an issue known to the agent will also constitute an infringement of the Act.
So what must be disclosed by an Agent? As was the outcome in Hinton where the subject agent was found to have breached the Act, an Agent must disclose all ‘material fact’ known to them which may significantly influence a prospective purchaser’s decision to buy, sell or rent the subject property and / or what market value they would apply to buy, sell or rent the property.
Although potential purchasers still have a responsibility to raise all issues relevant to their purchase, as an agent, there is an obligation to reveal those matters which could not be revealed by a purchaser undertaking the ‘usual enquiries’.
There is no set guideline as to what is deemed to be a ‘material fact’, but rather it is an objective test which agents must assess as the occasion arises. Agents need to therefore turn their attention to all material facts which directly relate to the period during which the seller was the owner of the property, however this will not limit their responsibility to disclose any serious stigmatising characteristics known to them from a previous ownership.