Section 52 of the Property and Stock Agents Act 2002 (NSW) requires that a real estate agent must not induce a person to enter into any contract or arrangement by:
- making a statement, representation or promise that is false, misleading or deceptive; or
- failing to any disclose a material fact which the agent knows or ought reasonably to know.
An offence under this section can attract up a penalty of up to $22,000.
What is a material fact?
A material fact is a fact that would be important to a reasonable person in deciding whether or not to proceed with a particular transaction. This includes facts which may influence a decision on whether to buy, sell or rent a property, and facts which may impact a property’s market value.
Section 54(1) of the Property and Stock Agents Regulation 2014 (NSW) (‘the Regulation’) prescribes the following kinds of material facts:
- within the last 5 years the property has been subject to flooding from a natural weather event or bush fire;
- the property is subject to significant health or safety risks;
- the property is listed on the register of residential premises that contain loose-fill asbestos insulation that is required to be maintained under the Home Building Act 1989;
- within the last 5 years the property was the scene of a crime of murder or manslaughter;
- within the last 2 years the property has been used for the purposes of the manufacture, cultivation or supply of any prohibited drug or prohibited plant under the Drug Misuse and Trafficking Act 1985;
- the property is, or is part of, a building that contains external combustible cladding—
- to which there is a notice of intention to issue a fire safety order or a fire safety order has been issued requiring rectification of the building regarding the external combustible cladding; or
- to which there is a notice of intention to issue a building product rectification order or a building product rectification order has been issued requiring rectification of the building regarding external combustible cladding;
- the property is, or is part of, a building where a development application or complying development certificate application has been lodged under the Environmental Planning and Assessment Act 1979 for rectification of the building regarding external combustible cladding,
In September 2021, the Property and Stock Agents Amendment (Material Facts Disclosure Obligations) Regulation 2021 came into effect. Importantly, it amended the Regulation to prescribe an additional material fact, being whether one or more of the following orders made under the Residential Apartment Buildings (Compliance and Enforcement Powers) Act 2020 is in force in relation to the property:
- a building work rectification order;
- a prohibition order; or
- a stop work order.
Conclusion
It is essential that agents are aware of their legal obligations in relation to disclosing information about a property to prospective buyers or tenants. The agents are advised to make enquiries with any vendor clients to ascertain whether any of the material facts discussed above may apply to the property. By ensuring that these material facts are appropriately disclosed, agents are able to avoid contravening the law, limit potential damage to their reputation and provide the parties involved with a greater degree of confidence throughout the property dealing.