Do your Due Diligence - Buying Property in the ACT
Purchasing real estate is a significant investment for most people. It stands to reason then that a prudent buyer will want to know as much about a property as is possible before proceeding with the purchase. Though it is a common misconception that the contract contains all information pertaining to the property, the cornerstone of property law in Australia rests in the concept of buyer beware and due diligence in relation to any real estate purchase is a serious consideration. Where possible, buyers should make all relevant enquiries of the property prior to entering into a contract.
In respect of residential property in the Territory, buyers are afforded some protection under the Civil Law (Sale of Residential Property) Act 2003 and the Unit Titles Act 2001. Under the legislative regime, obligations are imposed on the seller to attach a set of ‘required documents’ (a defined term) to a Contract for Sale before a property is marketed.
These Required Documents include copies of all interests and encumbrances registered against the title, an extract of the title, the Crown Lease or Units Plan and the Deposited Plan. Also included is an extract noting any notices or breaches of the Crown Lease and any relevant notifications pertaining to development applications lodged over the site and adjacent land, heritage status, and contamination. The seller is also required to attach a current building, compliance and pest report (for town houses and stand-alone dwellings) and an energy efficiency rating. If the property is a unit, the seller must also include a report (called a Section 119 Certificate) detailing the relevant fees, charges and administrative information of the Owners Corporation.
The disclosures required for a residential sale contract offer buyers a considerable understanding of the title and condition of the property and to an extent, negates the need for further investigations of the property. It should be understood, however, that the building, compliance and pest reports are not conclusive evidence of the state or repair of the property. These reports are based on a visual inspection of the property only and, particularly where the property is furnished, may not identify all defects. For this reason, buyers should always undertake their own inspection of the property and, where deemed prudent, obtain their own building, compliance and pest report from a trusted contractor.
The above situation is distinctly different if the property does not fall under the ‘residential’ regime, that is, if the property is classed as commercial, industrial or rural premises. For these types of premises, the disclosure obligations of the seller are limited to information concerning dangerous substances such as the provision of an asbestos report, register or management plan (if any) as is required under the Work Health and Safety Act 2011 and Work Health and Safety Regulation 2011. Beyond such instances, however, the obligation for disclosure is largely a commercial decision for the seller and the onus rests squarely on the buyer to undertake its own investigations. This can often be an expensive and timely exercise but the risks, both monetary and legal, which can arise from a failure to undertake proper due diligence far outweigh such costs and the costs of obtaining appropriate legal advice.
Our property team have extensive experience dealing with contracts for all types of properties. Get in touch with a member of our Real Estate team and do your due diligence before you sign.