Vendors must comply with Section 32 requirements

Over the last few years there have been very few cases dealing with Section 32 of the Sale of Land Act. Under this Section, when selling land, a Vendor is required to provide certain information regarding the property which is being sold including, for example, copies of title documents, details of rates and other information.

The recent case of Nicolacopoulos and Khoury dealt with a property in Murrumbeena. The property which was owned by Nicolacopoulos was part of a three lot subdivision and by operation of law was affected by an Owners Corporation.

The property was purchased by Khoury but no information was included in the Vendor’s Statement regarding the Owners Corporation, in particular a statement under Section 151 of the Owners Corporation Act 2006.

The Vendor, Nicolacopoulos, did not include any information regarding the fact that the property was part of an “Owners Corporation” on the basis that the Owners Corporation was:

• inoperative;
• never operated;
• there was no common property; and
• all of the owners made their individual arrangements regarding insurance.

Khoury argued that if she had known that the property was affected by an Owners Corporation, she would not have purchased it and that she relied on a brochure produced by the selling agent which included the words ‘Stylish and Stand Alone’ and stated ‘Say good-bye to the body corporate, say hello to independent living in classic style’.

It was agreed between the Vendor and Purchaser that the certificate had not been provided. The Vendor argued that under Section 32(7), the Purchaser was basically unaffected by the fact that the certificate had not been provided and because the Owners Corporation was dormant there was nothing for the Purchaser to fear from its activities. Section 32(7) of the Sale of Land Act states:

(7) Notwithstanding subsection (5) the purchaser may not rescind the contract if the court is satisfied that the vendor has acted honestly and reasonably and ought fairly to be excused for the contravention and that the purchaser is substantially in as good a position as if all the relevant provisions of this section had been complied with.

The case was unusual in that it was accepted by the County Court that Khoury had a previous bad experience in relation to a previous Owners Corporation and really wanted to avoid being part of one. The County Court decided that the Vendor had breached Section 32 of the Sale of Land Act and the Purchaser was able to avoid the Contract.

The decision did not deal with whether the selling agent or conveyancing company had been negligent, and it is expected that the Vendor will take action against the conveyancing company and the selling agent for negligence.

The important lesson to learn from this case is that Vendor Statements are important documents and that the information contained in them must be correct and must comply with Section 32 of the Sale of Land Act. The consequences of failing to comply with Section 32 is that a Purchaser could potentially rescind the Contract.

Authors: Paul Watkins and John Turnbull