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Homes flooded in February hit the market: but do agents need to disclose the flood risk of a property to buyers?

News

Many homeowners throughout Queensland are preparing to list their flood-affected homes for sale, with many listings at discounted prices. As the market prepares for an influx of flood-affected homes, Attwood Marshall Lawyers Property and Commercial Lawyer Andrea McGarry revisits agents’ duty of disclosure and uncovers what buyers must be informed about.

Background

Desperate homeowners are selling their properties months after they were damaged in Southeast Queensland’s and Northern New South Wales’s most recent flood disaster.

While the damage is obvious in many homes, in others, flood damage or flood risk may not be as apparent.  It appears the risk of flood inundation is not always made clear to house hunters, but does it need to be?

The Real Estate Institute of Queensland (REIQ) recently commented that there is no legal requirement to advise buyers if a home has been previously affected by flooding.

The REIQ chief executive noted this is because Buyers can obtain flooding information by way of their own due diligence, such as using local Council flood mapping and searches, taking the time to talk to neighbours in the area, and conducting their own research.

However, although a real estate agent may not have a specific legal requirement to disclose previous flooding events, if an agent is asked whether the property has been flood-impacted, an accurate answer is required. If an agent gives a false answer, that will constitute at the very least a misrepresentation and/or unlawful behaviour which could result in prosecution.

The situation for agents located in New South Wales differs to the extent that the Contracts for the sale of properties include a Council Zoning Certificate (known as a 10.7), which notes if properties are subject to flood developmental controls. Unfortunately, Contracts for the sale of properties located in Queensland contain no such certificate.

Real Estate Agents

Whilst there may not be a specific requirement for agents in Queensland to disclose whether a property has been affected by flooding, agents do have a duty not to engage in deceptive or misleading conduct.

When it comes to a Real Estate Agent’s role in disclosing information to a buyer, agents should be reminded of their obligations under the ACCC.

It is unlawful for real estate agents to:

  • intentionally mislead a buyer
  • lead a buyer to a wrong conclusion or impression
  • give a buyer a false impression
  • leave out or hide important information (e.g. in fine-print disclaimers)
  • make false or inaccurate claims.


It makes no difference whether an agent intended to mislead or deceive a buyer—it is how the buyer perceived their conduct that matters. An agent must disclose all relevant information, particularly if it relates to the price of the property. If a property is being sold at a discounted rate due to recent flood inundation, this may be deemed relevant and should be disclosed to avoid a claim of false or misleading conduct.  Agents should always adopt a conservative approach when it comes to disclosure in all instances and seek their own legal advice if they are unsure.

Disclosing “material facts”

Agents across both Queensland and New South Wales have a duty to disclose material facts about a property they are marketing for sale.

Queensland

An agent must not, in connection with the sale, for promoting the sale, or for providing a service in connection with the sale, of residential property in Queensland, represent in any way to someone else anything that is false or misleading. A representation includes the wilful concealment of a material fact in the representation. What constitutes a “Material Fact” is considered somewhat of a grey area there is no set definition for this term in the legislation, and the general position of property sales in Queensland has long been known as “buyer beware”. However, agents should use their reasonable endeavours to query material facts about the property – obtain the information from the seller and disclose it to the buyer.

In the absence of a clear definition, it would be prudent to consider a material fact as anything that may influence a buyer or the price they are prepared to pay.

New South Wales

NSW is stricter than QLD as the legislation defines material facts within section 52(1) (b) Property and Stock Agents Act and enforces that any failure to disclose a material fact of a kind prescribed by the regulations (whether intended or not) that the agent knows or ought reasonably to know, will be considered misrepresentation by a licensee or registered person.

The NSW Property and Stock Agents Regulation 2014 sets out specifically what is considered a material fact.

The new regulations are stricter and more specific in making sure that the agents disclose the necessary details and facts to a prospective buyer. These facts should include the details of whether the property: 

  • Has been the scene of a crime or manslaughter in the past five years
  • Has been used for prohibited drug or plant production in the past two years
  • Has considerable health or safety risks
  • Has recently been flooded or affected by bushfire in the past five years
  • Is, or has been a part of a building that has external combustible cladding, to which: a fire safety and building product rectification order (or notices of intention requiring the building to be rectified has been issued, or a development application or a complying development certificate application has been fixed for revision regarding the cladding 
  • Is listed on the Loose-fill Asbestos Insulation Register (even if the buyer could also access the access the register online);


The agent is liable if they fail to disclose these facts to the prospective home buyers, whether they did so unknowingly or not. 

How can Attwood Marshall Lawyers help?

Our property lawyers understand that every property is different and will require specific searches and different levels of due diligence to be done.  Our experienced property lawyers are here to support agents, buyers and sellers, in their property transactions to ensure that the conveyancing process is completed quickly and effectively and that all parties are aware of their rights and obligations under the contract.

We are available to provide advice on contracts, searches, and disclosure if you have any questions or concerns.

If you are unsure of any circumstances which should be disclosed to prospective buyers or are having problems with your vendors as to whether something should be disclosed, please contact our Property & Commercial Department Manager, Jess Kimpton, on direct line 5506 8214, email jkimpton@attwoodmarshall.com.au or free call 1800 621 071.

Our Property and Commercial Lawyers are available at our CoolangattaKingscliffRobina Town CentreBrisbaneSydney and Melbourne offices. Need assistance outside regular business hours? Our Robina Town Centre office is also open Thursday nights until 9pm and Saturday mornings until 12noon.

Book an appointment with our property lawyers instantly online now.

Read more:

Property searches and full disclosure can prevent future issues for buyers

Agents Duty of Disclosure for Violent Deaths or Suicide

Buying a property? What real estate agents have a duty to disclose before sale

 
 

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