New disclosure requirements for contracts for sale of residential land

From 1 September 2017, contracts for sale of residential land will need to be updated to include new documents and meet new disclosure requirements.

Before residential property can be sold, a vendor is required to prepare a contract for sale that:

discloses information about a property’s title, its zoning, sewerage, any rights of ways or restrictions on use and swimming pool compliance;
contains certain documents; and
includes warranties about certain property matters a vendor is obliged to either make or disclose that it cannot make.

Collectively these documents, warranties and information are termed “vendor disclosure”. If contracts for sale do not contain the necessary information or fail to disclose any non-compliance with the statutory warranties, a purchaser has rights to rescind the contract.

On 1 September 2017, the Conveyancing (Sale of Land) Regulation 2010 was repealed and replaced with the Conveyancing (Sale of Land) Regulation 2017. As a result, marketing contracts that were prepared prior to 1 September 2017 that have not been exchanged will need to be updated.

New Asbestos Warning

A contract for sale is now required to contain a warning in respect of loose fill asbestos.

This warning advises purchasers to the effect that a purchaser should:

give consideration to whether or not a property contains loose fill asbestos insulation; and, if so,
to conduct a search of a register maintained by the Department of Fair Trading; and
to make enquiries at the local council as to whether it holds any records showing that the property has loose fill asbestos insulation.

This is particularly relevant for properties constructed prior to 1980. Between 1968 and 1979, a Canberra based company called “Mr Fluffy” provided loose fill asbestos insulation to homes in the ACT and in NSW. It was sprayed into roof cavities as ceiling insulation. It poses a significant health risk.

A taskforce was set up by the NSW Government to carry out free testing of residential property and in 2015, a register was set up to identify residential properties affected by this type of asbestos. In addition, from 20 June 2016, councils have been required to notify prospective purchasers if a property has been listed on the register by placing this information on its planning certificates (attached to contracts).

However, there have been concerns that purchasers may inadvertently purchase properties that had not yet been tested. To address this issue and to bring it to the attention of prospective purchasers, the warning notice is now required to be included in all contracts. Purchasers will be alerted so they can make the necessary enquiries.

Additional sewer service diagram to be attached

A vendor is required to disclose information about a property’s sewerage. It does this by attaching to the contract a diagram from a recognised sewerage authority showing the location of the authority’s sewer. This is commonly called the “sewer diagram”.

The sewer diagram shows the location of the sewer and the means of connection from the property to the sewer. The purpose is to show a purchaser whether part of a structure on the property has been built over or is adjacent to the sewer. This is important as an authority has a statutory easement to gain access for maintenance and is not required to compensate, rebuild or reinstate any structure to the state it was in before. The information is also important to a purchaser as it will affect a purchaser’s plans such as building a swimming pool or an extension to the house.

Following changes in 2009 the sewer diagram became less reliable. The sewer diagram did not contain all relevant information in respect of an authority’s sewer, such as an outline of the house in relation to any pipes.

A vendor will now be required to attach a diagram showing the location of any sewer lines “upstream of the point of connection to the authority’s sewer main” (including point of connection); and the location of the authority’s “sewerage infrastructure for the property downstream of the point of connection.”

This will provide all relevant information to a purchaser and not leave the vendor in a position where it has inadvertently breached its statutory warranty.