For majority of people, a real estate purchase is the most expensive, and usually the most daunting transaction they will be involved in over the course of their lifetime. Right from the start when you enter your preferences into realestate.com.au or an alternative property site, through to settlement, it’s important to understand the legal requirements involved when buying and selling property. Which searches can be undertaken to avoid issues arising during the process and what options are available to buyers if they are not satisfied with the results?
Introduction
It is crucial that people who are intending on buying a property perform due diligence on the property before they sign the contract. In Queensland, unlike other states in Australia, the obligation is on the buyer to conduct research on the property (buyers beware!) and the seller does not necessarily have to disclose every little detail in the contract. However, sellers are required by law to disclose certain information to buyers before they enter a contract. There may be penalties for failure to comply with these requirements and a buyer may be able to terminate their contract and recover compensation if it is found that the seller did not disclose all the required information.
What should be disclosed?
The seller of a property must give a disclosure notice to a prospective buyer about any safety issues such as in the instance that a property has a pool, however there is no current pool safety certificate. They must disclose all encumbrances affecting the property and notify the buyer if the property is recorded on the contaminated land or environmental management register, if there is an application or an order about a tree on the property, or whether there are any neighbour disputes relating to fences. When selling a unit or townhouse, the seller is required to provide the buyer with information regarding the body corporate
Prior to settlement the seller must provide notice to the buyer whether the property has compliant smoke alarms and an approved electricity safety switch. When selling property over the value of $750,000.00 a clearance certificate from the Australian Taxation Office is required for each seller and should be provided to the buyer at least two weeks prior to settlement.
We are often asked whether sellers or real estate agents must disclose any information about serious crimes or deaths that may have taken place at the property. There is no legal requirement in either Queensland or New South Wales for a seller or their real estate agent to disclose such information.
However, real estate agents do have a duty to disclose a “material fact” to any prospective buyers. Failure to disclose a “material fact” which may be considered misleading and encourages the buyer to purchase the property, which they would not have done if they were aware of the issue, could result in a court setting aside the contract and awarding damages in favour of the buyer.
What is a “material fact”? In real estate, a material fact is information that, if known, may cause a buyer to make a different decision about proceeding with or remaining in a purchase contract, or to the price paid for the property.
Then there are questions around other historical issues, such as if there has been illegal drug activity that occurred at the property. This information would be considered material fact and if not disclosed could have severe consequences.
Illegal drug activity in a home can cause serious health implications and it can be assumed that every buyer would want to know about this history.
What about bad neighbours? Many people move to a new house because they are fed up with the behaviour of their neighbours, but does a real estate agent need to disclose this type of information? Not necessarily. While many people may respect that having bad neighbours may diminish a property’s value, this is not necessarily something that a real estate agent is required to disclose by law.
Real estate agents must be aware that if they withhold information that is considered a material fact, they could be prosecuted for breaching consumer protection laws.
It is always best to err on the side of caution if you are aware of a property’s history which could influence the decision of potential buyers, or even affect the value of the property, to disclose such information.
Real estate agents should be aware that the duty of disclosure relates to any issue which is false, misleading, or deceptive. If Agents are unsure of any circumstances they should be disclosing to prospective buyers or are having problems with vendors as to whether information should be disclosed, it is always best to seek legal advice to ensure all relevant laws are complied with.
Searches to conduct
Searches are conducted in the conveyancing process for several reasons; to collect general information, for the purpose of adjusting the purchase price at the time of settlement, and most importantly to ensure that there are no major issues with the property, which the buyer was not aware of. The are many types of searches including non-negotiable searches, standard searches, council searches and searches against the seller. Below is a list of the different types of searches available and why they may be necessary:
Non-negotiable searches
Title Search – The title search is vital, it will show you who the registered owner is and any dealings registered on the title, such as the seller’s mortgage, easements and any caveats which need to be removed before settlement. This search needs to be ordered twice – once when you sign the Contract, to ensure the details on the Contract are correct, and again on the morning of settlement to ensure that no dealings been registered on the title which may prevent you from accepting clear title at settlement.
Survey Plan – A search of the survey plan will show the boundaries of a property in the form of bearings and distances, the area of the lot and where the lot is situated on the street. This is done so that the property can be easily identified by the land owners and the adjoining owners.
Easement and Encumbrances – An encumbrance is a registered interest in land by a person who is not the land owner. An easement is a common type of encumbrance that gives a person, company or council/authority the right to use part of a property owned by someone else. For example, easements may allow gas, water, or sewerage to flow through the property, and are often granted to local councils. Easements and encumbrances may prohibit you from doing something to your land or allow another party access to your land. This search will enable you to find out what the easement is for – drainage, access, stormwater etc. and further investigations can be done to find out the terms of the easement and any restrictions on that portion of the land.
Land Tax Clearance Search – A land tax clearance search is to check that the seller has no land tax owing on the land before the buyer takes possession. Unpaid land tax is a first charge over land, which may or may not be registered on the title. This means that land tax has priority over any mortgage on the land and will continue as a charge even if the land is transferred. If the seller does not clear any unpaid land tax on settlement, it will become the buyer’s liability after settlement.
Standard Searches
Transport and Main Roads Property Search – This search identifies potential and existing interests that the QLD Department of Transport and Main Roads may have with a property, including roads, rail, busways, cycleways, and airport noise. The search will indicate whether Council are planning to build roads near the property, which may potentially reduce the value of the property.
Energex – This search is to confirm if electricity is available and connected at the property and advise if any underground assets are present. Whilst it is normally undertaken for your information, the buyer may be entitled to termination or compensation under the Contract if the seller fails to disclose any undisclosed easement over cables.
Contaminated Land Register – This search is of The Environmental Management Register and Contaminated Land Register (EMR/CLR) which are public registers which list contaminated, or potentially contaminated land, in Queensland. If the seller has not disclosed to you in the Contract that the property is listed on either of these registers, you will have a right to terminate the Contract.
Transport Noise Corridor Search – The purpose of this search is to identify whether a property is located within a designated transport noise corridor. It provides users with a mapped image and details about a property’s transport noise corridor status. If the property is in a noise corridor, the Queensland Development Code requires buildings to achieve certain levels of noise mitigation by using appropriate materials for the floor, walls, roof, windows, and doors.
Pool Safety Register – Pool owners are required to have their pools in the pool safety register. Pool owners must confirm whether their pool is registered or not and this can be done easily through a property search on the register. This register is a central information source about pools, pool safety inspectors and pool safety certificates. A buyer may terminate their Contract (acting reasonably) if no pool safety certificate issues prior to the Pool Safety Inspection Date under the Contract.
QCAT Tree Register and Minor Civil Dispute Search – this is a search of the Queensland Civil and Administrative Tribunal to let you know if there are any pending cases involving the seller’s property, relating to a dispute with neighbours over trees or dividing fences.
Council Searches
Rates Search – A current rates balance enquiry confirms the account balance just before settlement of a property transfer. A full inspection of records search is recommended for conveyancing, the search states the status of the rates account and identifies any arrears on the account. The search allows for a rates adjustment to be made at settlement, ensuring that the seller is responsible for the rates up until the date of settlement and the buyer is responsible for the rates from the day of settlement onwards.
Special Water Meter Reading – This search gives you the most accurate and current water account information required to determine any outstanding charges against the owner’s account for settlement adjustments. This is particularly beneficial for buyers where there may be a water leak at the property, as the leak will be identified on the search, by way of excess consumption and all water usage as a result will be paid for by the seller.
Flood Search – Flood check property reports describe the existing flood conditions that have been identified for a given property. These reports can prove beneficial when preparing to purchase a property.
Building Approval Search and Building Property Notices Search – This search checks if the property has the necessary building approvals. Building searches provide written advice about approved building applications. The Building Property Notices search will give information about show cause and enforcement notices which have been issued by the council already.
Searches Against the Seller
ASIC Search – You can search ASIC’s registers to find information about companies, business names, persons, lodged documents, and much more. If the seller is a corporation you can confirm it is not bankrupt and this is able to sell the property. You can also note the Directors of the company to ensure the contract has been executed by authorised representatives. You may also have a right to terminate the Contract if there is a breach of warranty by the seller.
Personal Properties Securities Register (PPSR) Search – to find out if there is a security interest registered over personal property. If you don’t do a search and buy property that has a security interest registered over it, you’re at risk of the goods being repossessed even though you’ve paid for them.
Bankruptcy Search – this search reveals whether the seller is registered as bankrupt. If the seller is bankrupt, then they are unlikely to have the capacity to sell the property and you may have a right to terminate the Contract.
Court Registers – Supreme, District and Federal Court Searches – this will reveal if any action has been commenced by or against the seller, the nature of any action and a copy of all originating court applications, orders, appeals relating to the matter.
Attwood Marshall Lawyers – we want to take the stress out of buying and selling property
Our property lawyers understand that every property is different and will require different searches to be done. Our experienced team can determine which searches need to be conducted and ensure the conveyancing process is completed effectively so 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.
For property and conveyancing advice, contact our team any time by calling Property and Commercial Department Manager, Jess Kimpton, on direct line 07 5506 8214, email jkimpton@attwoodmarshall.com.au, mobile 0432 857 300.
Our Property and Commercial Lawyers are available at our Coolangatta, Kingscliff, Robina Town Centre, Brisbane, Sydney 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 the team instantly online now.
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