27 May 2014
Practice Group:
Real Estate
Investment,
Development and
Finance
Amendments to Section 32 of the Sale of Land Act
1962 (Vic)
By Justin Lethlean, Will Grinter and Aleco Lazaridis
Summary
The Sale of Land Amendment Act 2014 (Vic) (Act) will amend the Sale of Land Act 1962
(Vic) (SLA). The objective of the Act is to re-enact, reform and modernise the provisions
relating to statements made under section 32, enhancing consumer protection by
simplifying a vendor's disclosure obligations.
When Will The Amendments Take Effect?
The Act has received Royal Assent and the main operative provisions will come into
operation on 1 October 2014.
The Main Amendments
1. Owners Corporations
No Longer Compulsory to Provide an Owners Corporation Certificate
The Act will amend the SLA so that it is no longer compulsory to attach an owners
corporation certificate to a vendor's statement. However, the same information currently
set out in an owners corporation certificate must be provided by a vendor in the vendor's
statement.
Vendors run the risk of purchasers rescinding their contracts if they do not provide all
information that would normally be provided in an owners corporation certificate.
Therefore, other than in the case of 'inactive owners corporations', it is recommended
that vendors still provide owners corporation certificates to ensure vendors are aware of
all information that is required to be disclosed.
For example, owners corporation certificates contain information regarding legal
proceedings that owners corporations are a party to. If a claim is made against an
owners corporation and the owners corporation manager has not informed its members
of the claim, a vendor will have no way of disclosing that information. Where legal
proceedings are issued, in most instances a manager will only notify the owners
corporation committee and therefore members will only become aware of the legal
proceedings at the annual general meeting.
On this basis, vendors who do not seek current information by way of owners corporation
certificates will be running a risk.
Inactive Owners Corporations
The Act provides that if an owners corporation is inactive, the vendor's statement only
needs to specify this. There is no requirement to provide an owners corporation
certificate or owners corporation information in accordance with the new provisions in the
Act. This amendment is a welcomed change as the existing requirement to provide an
Amendments to Section 32 of the Sale of Land Act 1962 (Vic)
owners corporation certificate has been problematic for properties subject to inactive
owners corporations.
An inactive owners corporation is defined by inactivity in the previous 15 months. The
definition of 'inactive' includes an owners corporation that has not:
 had an annual general meeting
 fixed any fees
 held insurance.
All three of these requirements must be met for the owners corporation to be inactive.
The term 'includes' suggests that there could be other circumstances when an owners
corporation may be inactive.
2. Vendor's Statement
The requirement to attach a copy of the vendor's statement to each contract will be
removed. Therefore, only one separate vendor's statement has to be provided to the
purchaser before the contract of sale is signed.
Presently, it is usual conveyancing practice to prepare two contracts of sale with attached
vendor's statements and a separately bound vendor's statement. The vendor's statement
is then returned to the vendor or its legal practitioner, proving that a vendor's statement
was provided to the purchaser prior to the execution of the contract.
Once the Act becomes operative, we expect that the existing practice will change so that
vendors will provide purchasers with two contracts of sale and two vendor's statements
for signing. The vendor and purchaser will retain one copy of each.
3. Due Diligence Checklist
The Act introduces a new due diligence checklist which must be provided by the vendor
to prospective purchasers of vacant residential land or land which has a residence from
the time the land is offered for sale. This checklist must be in the form approved by the
Director of Consumer Affairs Victoria (CAV).
These provisions do not apply to a vendor if the vendor has engaged a licensed estate
agent to act for the vendor. In that case, the licensed estate agent must ensure that the
checklist is made available to any prospective purchaser from the time the land is offered
for sale.
The checklist is made available if:
 copies are on display or offered to prospective purchasers at any inspection of the
land
 any website "maintained by the vendor and any person acting as a licensed estate
agent of the vendor where the land is offered for sale", allows access to a copy of the
checklist directly or via a link to another website where a copy may be obtained.
Presumably, a link to the checklist on the CAV website will suffice as the Act provides
that the Director of CAV must publish a copy of the checklist on its website.
Amendments to Section 32 of the Sale of Land Act 1962 (Vic)
4. Amendments to Current Requirements
Disclosure of Essential Services
The existing requirement that a vendor's statement disclose essential services that are
connected at the property will no longer apply. The Act provides that a vendor's
statement must only disclose essential services, such as gas, electricity, water, sewerage
and telephone that are not connected at the property.
Disclosure of Notices
Under the Act, a new concept of notices is included so that a vendor's statement must
disclose information 'directly' and 'currently' affecting the land. The intent is to allow
vendors to provide current information as opposed to historical information.
The Act also requires disclosure of notices, property management plans, reports or
orders issued by a governmental department or public authority in relation to livestock
disease or contamination by agricultural chemicals affecting the ongoing use of the land
for agricultural purposes.
Planning Scheme
Where a planning scheme applies to the land, the vendor's statement must now include
the name of any planning overlay affecting the land. The existing practice of disclosing
planning certificates will satisfy this requirement.
5. Non-compliance and Penalties
Currently, a purchaser is entitled to rescind a contract if the vendor gives false
information or fails to supply all of the information required in a vendor's statement.
The Act provides purchasers with an additional right to rescind a contract if the vendor
fails to provide the purchaser with a signed vendor's statement before the purchaser
accepts title and is entitled to possession.
The current provision creates an offence where a vendor supplies false information or
fails to supply all requisite information with a consequent penalty of up to 50 penalty
units.
The Act creates an offence for the failure to provide a vendor's statement at all, as well
as increasing penalties to 300 penalty units for a body corporate and 60 penalty units in
any other case.
Implications
Once operative, the Act will have a range of practical implications for the conveyancing
process, in particular for vendors and their legal practitioners.
As the provisions are not yet operative, no action is necessary at present.
Amendments to Section 32 of the Sale of Land Act 1962 (Vic)
Authors:
Justin Lethlean
Justin.Lethlean@klgates.com
+61.3.9640.4312
Will Grinter
Will.Grinter@klgates.com
+61.3.9640.4411
Aleco Lazaridis
Aleco.Lazaridis@klgates.com
+61.3.9205.2026
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