Statutory seller's disclosure in Queensland
On 13 May 2022, the REIQ received a private consultation draft of the Property Law Bill 2022 (the Bill) setting out new provisions mandating a seller’s disclosure regime for property sale transactions in Queensland. This regime will require sellers who are not exempt to provide a disclosure statement containing prescribed information to buyers of real property in Queensland. The statement must be provided in the prescribed way and certain termination rights for the buyer will arise if the requirements are not complied with.
The REIQ supports the seller’s disclosure regime to be finalised and implemented in a timely manner given the lengthy consultation taken on this issue, for almost a decade. Queensland currently has limited disclosure requirements for property sales, unlike other States of Australia including New South Wales, South Australia and Victoria, which have prescribed disclosure statements prepared by the seller and provided to the buyer prior to entering into a contract for the sale of property. We expect the disclosure regime will provide the needed certainty about property-related disclosure requirements in Queensland.
In 2017, the Commercial and Property Law Research Centre at QUT Law (Centre) published a comprehensive report about seller’s disclosure in Queensland and their key recommendations1. The Centre found that a disclosure regime should be implemented in Queensland for the objectives of clarifying the seller’s disclosure obligations, requiring a transparent and effective form of disclosure, providing information of value to the buyer when making a decision to purchase and ensuring balance between the information provided and cost to the parties2. The REIQ strongly agrees with the introduction of uniform seller disclosure in Queensland and the core objectives identified by the Centre in the Final Report.
Particularly, we consider it important to balance the level of information provided to the buyer within the seller’s own knowledge, with the time and financial cost of obtaining such information to ensure contracts can continue to be practically and efficiently facilitated.
Although we generally supported the drafting of the Bill, we recommended some changes for the purpose of certainty, clarity and practicality. On 3 June 2022, we provided a Submission including the following recommendations:
- that definitions are clarified to ensure consistency with other related legislation and principles at common law;
- that a real estate professional’s authority under the Property Occupations Act 2014 (Qld) be recognised and protected;
- that exemptions to the regime be reconsidered and clarified to ensure they balance the rights of buyers and sellers in different types of transactions;
- to ensure requirements for how a disclosure statement is to be given are clear, valid and effective;
- to clarify how a disclosure statement can be corrected in a practical manner with respect to the transaction;
- to clarify the requirements if the property is to be sold by way of auction;
- that the level of disclosure to be given is balanced and accessible; and
- to clarify the termination rights of the buyer and ensure practical relevance.
On 31 August 2022, the REIQ provided further review and consultation on a public exposure draft of the Bill. This draft had been significantly revised and we were pleased that most of our recommendations were adopted. With this draft Bill, the Government also released the drafts of the prescribed disclosure statements.
In our Submission, we made several recommendations including:
- to simplify the content of the disclosure statements so that they are easily readable and user friendly for the buyer;
- to clarify what disclosure information is included for consistency with the requirements of the Bill;
- to clarify that disclosure information provided is to be ‘within the seller’s knowledge’ and not a statement of fact;
- recommending that unregistered encumbrances be removed from the items to be disclosed;
- that burdensome, excessive or unnecessary information be removed; and
- that the body corporate certificate be modified to closer align with the version prepared in draft by the Community Titles Legislation Working Group in 2022.
On 20 October 2022, the REIQ provided further consultation on the matter of whether flood history information about a property should be disclosed as part of the regime. Initially, the draft disclosure statement did not include flood history information however, does encourage the buyer to make their own enquiries with respect to how flooding may impact the property.
In the context of flood history information, generally, this can be searched for free by a party either on the website of the local government in which the property is situated, or on the state planning website.
Currently, obtaining flood history information is part of a buyer’s usual due diligence process, noting that it is already a simple process for the buyer to complete, especially in comparison to other searches that a diligent buyer will undertake when purchasing a property. Should it be considered desirable to include flood history information as prescribed disclosure, we propose that the parameters of this requirement be considered and particularised for certainty and consistency.
In our Submission, we noted that in first instance, the following threshold factors should be taken into consideration when determining the type of information that would be available for disclosure:
- whether the information is within the seller’s knowledge;
- if local government zoning and overlays do or do not apply to a property are clear and searchable; or
- whether flood information should be provided in a report or information document from the local government (if available) which gives particulars about flood history information including the categorisation and severity of flooding which may affect a property.
Notwithstanding the above, it is our view that each option, may not adequately achieve the purpose of statutory disclosure as regulated under the scheme. For example, an uncertainty may arise where the seller is aware of previous flooding from before they owned the property but cannot account for the details firsthand. The information may be deemed within the seller’s knowledge, however, we consider it is not reasonable to expect a seller to rely on second-hand information that they cannot verify the accuracy of and expose themselves to a potential termination right.
The alternative is that the seller provides information accessible from the State or local government in relation to flooding. Although this option would provide more detailed information to the buyer about the flooding history of the property, there are inherent problems with existing infrastructure that would render the scheme impractical or impossible to comply with for some sellers in Queensland.
We appreciate that Queensland properties are prone to flash flooding events, cyclones, and severe storms and that this information is desirable when a buyer purchases a property. For this reason, the REIQ consistently educates the community and advocates for buyers to do their own due diligence to make themselves aware of relevant information prior to purchasing a property. Although such seller disclosure may be desired by some, the practical ramifications and unintended consequences of the policy need to be considered thoroughly before introducing such a requirement to ensure that property transactions are not hindered, nor unnecessary burden or risk imposed on either of the parties.
For the reasons outlined above, we suggested the necessity of introducing flood history information into disclosure requirements to be considered. If the benefit of the information is equivalent to that obtained directly by a buyer during their own due diligence process, we question the necessity of the proposed change and benefits achieved by imposing such obligation and potential risk on the seller.
Although there will be an additional administrative burden to the real estate industry, we expect this reform to be well received. The REIQ is committed to creating resources and education to assist real estate professionals in Queensland with the introduction of the seller disclosure regime. It is our view that having real estate agents prepare compliant forms is achievable with the right support and education.
15 Nov 2019
3 min read
Are your property transactions safe from cybercrime?
The property market is the perfect playground for cybercriminals - large sums of money are constantly being transferred between parties with the majority of communications sent via email.
15 Nov 2019
5 min read
Be careful what you do with confidential information
The recent settlement of a claim between a real estate agency and a former employee serves as a timely reminder to real estate professionals that utilising a former employer's confidential client information can be very costly.