A 2017 decision of the Victorian Supreme Court examined whether a purchaser validly terminated the contract of sale under section 32K of the Sale of Land Act 1962 (Vic) (“Act”), where the vendor had stated in the vendors’ statement that the property was connected to mains sewerage when the property had a septic tank system.
Facts
The vendor was selling a property in Park Orchards that had a septic tank system for effluent and was not connected to the main sewerage. The property had been advertised by the selling agent on the internet to include an environmentally friendly fully irrigated watering system to the front and rear gardens via the Septic Treatment Plan and a 4,500-litre rainwater tank with a new Onga pump. The site plan accompanying the advertisement did not depict any septic tank.
The purchaser had no experience with local conditions and did not notice a septic tank system when he inspected the property.
The purchaser’s primary argument was that the vendor had breached her disclosure obligation pursuant to section 32H of the Act. This section of the Act requires a vendor to disclose if particular services are not connected to the property, e.g., telephone, gas, water, sewerage and electricity. The vendor’s statement failed to disclose that the property was not connected to the main sewerage and that effluent was removed from the property by way of a septic tank system. The vendor accepted that the vendor’s statement contravened section 32H of the Act by implying that the property was connected to the main sewerage. However, the vendor sought to be excluded under section 32(4) of the Act on the grounds that:
- she had acted honestly;
- she had acted reasonably;
- she ought fairly to be excused, and
- the purchase was substantially in as good a position as if all the relevant provisions of the Act had been complied with.
Findings
The Court found that the vendor had not discharged her burden of establishing that she acted honestly in having made the false statement regarding sewerage connection to the property or in failing to provide a copy of the permit in relation to the septic tank system. Whilst the vendor claimed that the error was a clerical error made by her conveyancer, no evidence was presented from the conveyancer to support this assertion. Further, the vendor did not adequately explain how she came to sign the vendor’s statement with the incorrect information when all the evidence was consistent with her having known the property was serviced by a septic system.
The vendor tried to rely on the inclusion of the Yarra Valley Water Certificate in the vendor statement, which indicated that the property was not connected to the main sewerage. The judge found that the inclusion of this certificate did not overcome the false representation in the vendors’ statement itself.
The judge rejected the vendor’s claim that the purchaser was in substantially as good a position as if the vendor had complied with the Act. The costs to the purchaser of connecting to mains sewerage would be significant, and having a septic tank system affects the property value in the negative. Further, there were ongoing inspection, maintenance and cleansing requirements for the septic tank system that were not disclosed to the purchaser.
Conclusion
The purchaser was entitled to end the contract and reclaim his deposit. Further, the purchaser was able to claim legal costs against the vendor. This case is a reminder that it is extremely important for all services to be correctly disclosed in the vendors’ statement to avoid the contract being terminated by the purchaser pursuant to section 32K of the Act.
For further information on disclosure requirements in vendors’ statements and termination of contracts, please contact us at 5303 0281 or at property@ballaratlawyers.com.au.
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