By Jonathan Tisher

8 February 2018

Last week I was asked whether a purchaser could bring a claim against the vendor because there was no electricity connected to the property and it would cost $3,000 to connect. I asked the purchaser if he turned on the lights during any of his inspections. He answered no and said that he assumed it would be available.

On a regular basis, we receive similar questions about issues relating to a property purchased. The questions generally come after a final inspection is undertaken. Whilst occasionally the issues are substantial, more often than not, they are an irritation to the purchaser and can aggravate the process and destroy the good faith between the vendor, purchaser and agent. Normally, these issues involve both parties incurring further legal costs with some parties trying to delay or avoid settlement.

The issues often relate to misleading information being provided and a purchaser failing to make relatively simple checks or investigations. Examples of misleading information includes car park licences not being recorded, incorrect disclosure of owners corporation fees, faulty equipment being provided or intercom systems and air conditioning systems that do not work.

So how do we avoid issues coming up before settlement?

If you are an agent, do not make assumptions about a property or services or make representations to purchasers without confirming with the vendor first. Always get vendors to sign off on advertising content. If you find out that you have misrepresented a property during an advertising campaign and the contract has not yet been signed, correct the mistake by notifying the purchaser of the correct facts. Don’t bury it and hope it is not discovered.

From a vendor’s perspective, be transparent. If you mislead a purchaser, it will inevitably come back to bite you. If something doesn’t work, either fix it beforehand, remove it from the property or don’t represent that it works (this can be done by a special condition in the contract). Being silent is often more trouble than being open and frank about a matter. You are inviting a claim if you falsely represent any matter.

From a Purchaser’s perspective, check the property carefully before signing the contract. Don’t wait until the final inspection to take a careful look. Carry out basic checks and check the structural integrity of the property. Get appropriate experts to give you advice if needed. Most of all make sure an expert property lawyer reviews the contract and vendor statement before you sign or buy at an auction. Acquiring a property is one of the biggest acquisitions you will make. So don’t make assumptions. Remember buyer beware and undertake a proper due diligence before signing.

Whilst the issues which arise may not be strong enough for a purchaser to exit a contact, there will usually be grounds for a compensation claim which can be brought after settlement is finalised. The vendor and agent remain at risk of a claim and a dispute between themselves as to who is liable for the issue.

If the vendor loses out, the agent may fall into the firing line which may damage the ongoing relationship.

A sale and acquisition of property can be a smooth process or it can be a headache and a frustration for all involved.

Stop that from happening by being transparent, carry out a proper due diligence, get legal advice and don’t mislead.

 

If you have any questions relating to these issues, please contact a member of our Property Team.

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