Real Estate

The Value of the Vendor Statement

By June 28, 2017 No Comments

If you’re a homebuyer that loves to dig into every detail of your future home, then you’ll want to know about the Vendor Statement. This key legal document, usually drafted by the vendor’s lawyer or conveyancer, discloses important information about the vendor’s property to the buyer. Information in the Vendor Statement ranges from title details to zoning restrictions to bushfire-prone location declarations. Although the Vendor Statement began in Victoria, it has proven so useful that most states in Australia have now added some form of vendor disclosure to their homebuying process.

The Vendor Statement in Victoria

In Victoria, the Vendor Statement is technically called a Section 32. The official-sounding name comes from the Sale of Land Act of 1962, where section 32 spells out the requirement for vendors to disclose certain details to buyers in real estate transactions.

Drafting

The vendor usually has their lawyer or conveyancer draft the Vendor Statement. A vendor that tries to go it alone risks exposing themselves to legal action if they make a critical mistake or omission.

What it includes

All the ins and outs of putting together a proper Section 32 would take too long to fit into this brief sketch. However, your lawyer or conveyancer can fill you in on all the details and make sure you’re covered. Meanwhile, here are some of the items most often included or mentioned in a Vendor Statement:

  • Vendor’s information
  • Certificate of title: copy or details
  • Outgoings payable by vendor (e.g. council rates)
  • Mortgages/charges/debts on the land
  • Restrictions on the title, such as covenants and easements
  • Planning information
  • Statutory warnings
  • Whether the property has road-access
  • Owner-builder warranty insurance details
  • Connected services: information and location
  • Seven years of building permit information
  • Orders issued by authorities regarding the property
  • Bushfire-prone location declaration (where applicable)

Although long, this is still only a partial list. The main idea is for the vendor to disclose any important information surrounding the property that the buyer ought to know to make a well-informed decision.

Signing and timing

The vendor, or the vendor’s legal representative, must sign the Vendor Statement, for it to be legally valid. The buyer must then have a chance to review the document before signing the Contract of Sale.¬†Because of the legal importance of the Vendor Statement, it’s wise for the buyer to have their lawyer or conveyancer look it over with them. Although state law does not require buyers to sign the Vendor Statement, the buyer generally does so to acknowledge receiving the key document as part of the Contract of Sale.

Legal weight

If the vendor withholds an important piece of property information by failing to disclose it in the Vendor Statement, the contract may become void, allowing the buyer to walk away from the sale without any repercussions. If the sale has already settled, the buyer may even have grounds in some cases to take legal action against the vendor. The vendor’s failure to disclose important information could even lead the state to impose a fine on the vendor. As you can see, the Vendor Statement is not a document to take lightly, and it’s wise to involve your lawyer or conveyancer whenever drafting or reviewing it.

The Vendor Statement in other Australian states

Although usage of the Vendor Statement originated in Victoria, several other states and territories in Australia now require or commonly use some version of the Vendor Statement.

Australian Capital Territory

The ACT requires vendors to disclose key documents to the buyer. These may include the following:

  • Assessment of the property’s physical condition
  • Land development restrictions
  • Asbestos assessment report
  • Pest inspection report
  • Energy-rating statement

New South Wales

In NSW, the seller’s disclosure goes by the title Schedule 1 Prescribed Documents, which covers:

  • Owners, land-use restrictions. (Title and Title notations)
  • Location of the lot. (Deposit Plan or Strata Plan)
  • Location of services. (Service Drainage Diagram)
  • Zoning. (Section 149 Certificate)

Northern Territory

The NT currently does not require a Vendor Statement. State lawmakers introduced legislation in 2012, but it didn’t pass at that time.

Queensland

Although the state does not require a Vendor Statement to accompany the Contract of Sale, they do require a Warning Statement directly above the signature line. The brief legal statement informs the buyer of their statutory cooling-off period and recommends that they take the time to get a property valuation and legal advice.

South Australia

In SA, the Vendor Statement goes by the title Form 1 Disclosure Statement. The vendor’s real estate agent is responsible for gathering all the necessary information from the vendor and other sources, and for preparing an accurate Form 1. The buyer must receive the document no less than ten days before settlement. Otherwise, the buyer can back out of the contract. Furthermore, the buyer cooling-off period begins upon receiving the Form 1¬†unless they receive it before signing the Contract of Sale.

Tasmania

Tasmania currently does not require a Vendor Statement. Like the NT, state lawmakers introduced legislation in 2012, but it didn’t pass at that time.

Western Australia

In WA, the Vendor Statement goes by the title Seller’s Disclosure Statement. Although state law doesn’t yet require the vendor to provide this document to the buyer, they should nonetheless prepare a Seller’s Disclosure Statement for their real estate agent, as buyers often request it.

The value of the Vendor Statement

The Vendor Statement is a widely-used legal document in Australia that helps homebuyers make more informed decisions. Because of the weighty legal consequences of an omission, seller’s should have their lawyer or conveyancer draft the Vendor Statement; and buyers should have their lawyer or conveyancer review it with them. In Victoria, the Vendor Statement is known as a Section 32 and is filled with a wide range of documents and data on the property. Usage of similar versions of the Vendor Statement has now spread to several states in Australia, each with their own rules and common practices surrounding the key document.