Your Resources
Disclosures - know your obligations as an agent
An agent entered into an agency agreement with a vendor who was based overseas. The agent sent their standard disclosure template and the vendor noted there were no issues with the property to disclose.
However the property was built in the 1990s with monolithic cladding and had a flat roof. The agent knew in their experience as an agent that these types of properties were prone to leaking, however as the vendor hadn’t disclosed any issues or leaks they did not raise this with the vendor or with any prospective purchasers.
Later, post settlement, the purchaser discovered significant leaks in the property and tried to sue both the vendor for misrepresentation and the agent for a breach of their disclosure obligations.
Before signing an agency agreement it is crucial to engage in transparent discussions with the vendor regarding disclosure expectations.
A real estate agent has certain duties that are set out in the Real Estate Agents Act Rules 2012. Two specific rules, Rule 10.7 and Rule 6.4, outline the information agents must disclose.
Rule 6.4 says that an agent must not mislead a vendor or purchaser, or provide false information, or withhold information that should by law or in fairness be provided to a vendor or purchaser.
Rule 10.7 says that if it would appear likely to a reasonably competent licensee that land may be subject to hidden or underlying defects the agent must obtain confirmation that the property is not subject to the defect, supported by evidence or expert advice, or tell the purchaser about the risk so they can take their own advice.
In order to fulfil this duty, as an agent you should enquire with the vendor as soon as you are made aware of any issue or if you notice that there could be an issue (e.g. that the property had characteristics of a leaky building).
If the vendor cannot provide clarifying information but acknowledges a problem, you should agree on how to inform potential buyers. It is recommended that any decisions made about this disclosure be documented, with the vendor receiving a copy.
If a vendor disputes that there is a defect you would need to assess the evidence provided to satisfy yourself that there is no defect. Generally it is always safer to err on the side of disclosing the issue so purchasers can carry out their own due diligence.
If the vendor insists that you do not disclose any defects or likely defects, you need to cease acting for the vendor.
Additionally, for unit title properties, there are comprehensive disclosure requirements under the Unit Titles Act, including Pre-Contract and Pre-Settlement Disclosure Statements.
The Unit Titles Act also provides purchasers with additional rights if disclosure requirements are not met, such as cancellation of the Agreement for Sale and Purchase or delay of settlement.
The Pre-Contract and Pre-Settlement disclosures under the Unit Titles Act do not override the need for the vendor to provide general disclosures to you. General disclosures are in addition to that information.
If you as an agent find yourself in a situation with potential problems with the property you are selling, or with the vendor, seeking advice from a legal professional is advisable to avoid potential consequences for you and your agency.