If you are planning to sell a property – be it your home or an investment property – here are 5 common mistakes that you need to consider before you place the property on the market.

If you fail to address these issues you may risk delaying your ability to sign a contract of sale or, in a worst case scenario, risk losing a signed sale. 

The laws around selling real estate impose greater obligations on vendors than ever before.  Purchasers have access to more information and have greater rights than ever before.

In a real estate market that is expected to weaken, you simply don’t want to risk losing a possible sale or your purchaser having the right to withdraw from the sale and get their deposit back.

With that in mind, let’s explore 5 issues that you need to consider before you place your property on the market.  Naturally, if you think that you may be facing any of these issues, please contact Lewis O’Brien & Associates so that we can discuss and help resolve any issues you may face.

Building Work

The rules around when you require a building permit and when you are an owner builder are complex and poorly understood – even by many legal professionals.  Whilst a full discussion of the detail of the rules is beyond the scope of this article, let me present some key concepts:

  • Building Permits – In short, in Victoria, you need a building permit for all building work unless an exemption applies.  The most commonly relevant exemption is for repair, renewal or maintenance work that does not adversely affect the structural soundness of the building.  So simply replacing kitchen cabinets could be described as renewal and hence shouldn’t require a building permit.  However, removing a non-structural wall could hardly be described as repair, renewal or maintenance and hence a building permit is likely required.  Note that there is no minimum dollar figure below which a building permit is not required.
  • Owner Builders – If you undertake more than $16,000 worth of “domestic building work” (without engaging a registered builder) you will be an owner builder.  The definition of “domestic building work” excludes work of a specified types contracted under a contract for only that type of work.  Hence, you could easily spend more than $50,000 on a renovation and still undertake less than $16,000 of domestic building work if you are careful.  If you are an owner builder you are required to obtain a consent in advance from the Victorian Building Authority and also provide an owner builder inspection report and owner builder warranty insurance to a purchaser when you sell the property.

A failure to obtain a building permit or to provide required insurances to a purchaser may entitle the purchaser to terminate the contract.  Take care as many purchaser representatives now look for before and after photographs of the property on the internet and will ask for this paperwork if it looks like renovations have been conducted.

If you are concerned that either you or a previous owner of the property may have done works that trigger these requirements in the past 7 years please contact us to review your situation in more detail.

Owners Corporation Issues

Many smaller owners corporations (previously known as body corporates) are operated informally.  It is not uncommon to see 3 and 4 unit properties where nothing has been done in relation to the owners corporation. 

Owners need to be aware that if there are three or more units in the owners corporation and there is common property then public liability / legal liability insurance for the owners corporation is required by law.

If you are selling a unit in such an owners corporation then you will need to provide evidence of insurance to the purchaser.  We have seen a number of cases recently where the vendor has effectively paid for the whole policy because they were time poor and did not have the time to secure the agreement of other owners to contribute to the policy.

Other issues that can cause issues include cladding issues, asbestos, leaks and imminent special levies for major repairs.

The Title to the Property

It is important to know where the title to the property is.

In many cases, the title will be held by the bank that has the mortgage over the property.

However, there are a number of cases where the location of the title may be an issue:

  • If the mortgage was paid out years ago – many owners assume that the mortgage has been removed from the title.  This may not be right and the bank may still hold the title and the mortgage may still be registered;
  • If one of the owners has passed away, steps may need to be taken to update the title into the right name(s);
  • The title was held by a former solicitor or other representative;
  • The title may be lost and an application to replace the lost title may be required; or
  • There may be caveats or other encumbrances on title that need to be addressed prior to settling the sale of the property.

It is also important to remember that your title may have been converted to an electronic format and may be held by a former representative on your behalf.

Material Adverse Facts

Since 2019 it has been an offence to not only make a statement that is false or misleading but also to knowingly conceal a material fact with the intent to induce a purchaser to buy land.

This is an important departure from the old caveat emptor / buyer beware approach.

That is, if you as vendor are aware of material adverse facts that relate to the property you (and the estate agent) are required to disclose them.  The precise definition of a material adverse fact is not clear, but Consumer Affairs says that it is a fact that would be important to a reasonable purchaser in deciding to buy land.

Material facts would clearly include:

  • A lack of building or planning permits for work done;
  • Material building defects including cladding issues and asbestos;
  • Serious crimes committed at the property including homicides and drug manufacture;
  • Fences lines that are materially different to the title; and
  • Facts about the neighbourhood (including development proposals) that are not immediately apparent.

The consequences of breaching this requirement include civil penalties, the risk of contracts being terminated by purchasers and / or damages / compensation claims. 

However, the purchaser is required to prove that the vendor knowingly concealed the fact – and proving what a vendor did or didn’t know isn’t always easy.

The Estate Agent’s Sale Authority

As a final point, a key question about the standard Sale Authority that most real estate agents will expect you to sign.  Do you know that the Agent’s commission is typically due on the presentation of a “binding offer”? 

This is not, as most owner’s expect:

  • At settlement;
  • Once the deposit is released;
  • Once the contract is unconditional; or
  • Once the contract is signed.

Admittedly, most agents will wait and seek payment of the commission from the deposit.  However, the agent doesn’t have to do this – they can ask for their commission to be paid as soon as a binding offer is presented.

This is most stark when a purchaser defaults under a contract and doesn’t settle.  Most agents will expect their commission to be paid from the forfeited deposit and will also expect to be paid a second commission when they re-sell the property. 

This isn’t what most owners expect when they sign a Sale Authority!

Concluding Thoughts

When you are selling your largest asset (or one of your largest assets) it is important to get it right.

The law is imposing stricter obligations on vendors and the consequences, in a softer market, of carelessness could be extremely nasty.

That is why at Lewis O’Brien & Associates we take the time to explore these issues with you before the contract of sale is finalised.  We can help you to resolve issues before the contract is finalised, so you will have an easier sale process, you are less likely to face last minute problems and we can help make the process as comfortable as possible.

If you are about to sell your home or investment property please contact me – lewis@lewisobrien.com.au.

If you have a friend or family member that is about to sell this property please share this information with them.

Lewis O’Brien