By Barry van Heerden
In acting for a seller in the sale of their property there is sometimes the question of how much information the seller must disclose in the Contract in relation to the property.
In the case of Vitek v Estate Homes Pty Ltd the sellers were aware that there may have been contamination on the site by virtue of underground storage tanks and the use of the premises as a service station in the past.
This was not disclosed in the Contract. The Contract did contain a special condition stating the buyer acknowledged having inspected the property, not relying upon any representations of the seller and took the property as inspected.
The buyer then did not settle and attempted to rescind the Contract on the basis that the seller did not disclose the potential contamination of the property to the buyer.
The court however held that despite the fact that the seller had this knowledge there is no legal requirement on the seller to pass that knowledge onto the other party in a Contract.
The buyer’s claim to be entitled to rescind the Contract failed because of the following:-
- The special condition in the Contract made it clear that the buyer had to satisfy itself in relation to the property and that it is buying the property as inspected. The seller had complied with its mandatory disclosure requirements and was not bound to provide anything more than that. It must be noted that at trial there was no evidence that the premises were actually contaminated or the extent of any possible contamination.
- The buyer was a developer and had extensive experience in development of properties and should have been more aware of the consequences of signing a Contract stating that it must conduct its own investigations.
The decision in this case was purely based on the facts of this matter and it highlights the effectiveness of a clause putting the buyer on notice to conduct its own enquiries in relation to the property.
However, if the seller has specific knowledge we believe it is always best to disclose that knowledge to avoid any disputes of misrepresentation.
If you have any doubt whether a seller should disclose any issues relating to the property please do not hesitate to contact our Property and Commercial Department Manager, Christine Martin on 07 5506 8245 or email firstname.lastname@example.org for further assistance on this issue.