With the Property Law Bill 2023 (Bill) currently being considered by committee, the Queensland government has released a draft of the standard seller disclosure statement (draft statement). The draft statement is subject to amendment pending passing of the Bill. In this article, lawyer Luke Hefferan looks at some of the practical implications and obligations to completing the statement to ensure compliance with a seller's statutory obligations.
APPROVED FORM
The Bill requires the disclosure statement to be given to buyers in the approved form. The draft statement is a relatively simplistic document containing several statements given by the seller as well as a tick box section about the documents required to be included with the draft statement.
WHAT IS INCLUDED?
In brief, the seller will be required to give information and searches to the buyer in relation to any unregistered encumbrances, notices affecting the property, and titling documents. You can read more about what needs to be disclosed to buyers in our recent article Proposed new seller disclosure regime in Queensland.
WHAT IS NOT INCLUDED?
Some of the notable exclusions from the disclosure obligations (with a warning to buyers regarding some of the exclusions contained in the draft statement) are things such as past flooding history, past building history, structural soundness, works orders in respect of the property, planning and development limitations, and copies of any encumbrances registered on title.
However, the Bill is still before committee, so the extent of these exclusions is subject to change if/when the Bill becomes law. Also, the standard REIQ contracts contain statements and warranties from the seller in relation to some of these exclusions so consideration should still be taken when preparing documents for any proposed transaction after the disclosure regime comes into place.
WHAT TRANSACTIONS DO THE DISCLOSURE REQUIREMENTS APPLY TO?
The disclosure obligations will apply to the sale of all freehold land except where the sale price is greater than $10 million (including GST) and the buyer, prior to entering into the contract, gives a noticing waiving the disclosure requirement.
Also, 'off the plan' sales will not be affected by these seller disclosure requirements but will remain subject to the extensive statutory disclosure obligations already in place.
WHEN AND HOW SHOULD THE DISCLOSURE STATEMENT BE GIVEN?
The completed disclosure statement will need to be given to the buyer either before or at the same time the buyer signs the contract and may be given as a separate document (ie it will not be required to be attached to the contract).
Any searches and certificates etc prescribed to be included with the disclosure statement will not necessarily need to be attached to the disclosure statement. However, they must be given to the buyer at the same time the seller gives the disclosure statement.
Disclosure statements, and all associated documents, will be able to be given either as hard copy, by fax/email, or by electronic repository (eg being included as a document in a data room).
WHAT IF THE SELLER FAILS TO COMPLY WITH THE DISCLOSURE REQUIREMENTS?
If the seller fails to comply with the disclosure requirements (and there is no available exemption) or if the disclosure documents are materially inaccurate or incomplete, then the buyer will be able to terminate the contract at any time before settlement.
However, the buyer's termination rights will not apply if non-compliance with the disclosure requirements is also non-compliance with disclosure obligations under another piece of legislation which provides a consequence to the seller and available remedy to the buyer.
A prime example of this would be disclosure obligations regarding contamination which must be given before a buyer signs a contract. However, if given after the buyer signs the contract, then the buyer may terminate the contract within 21 days of receipt of the disclosure (ie their termination right does not last until settlement).
Notwithstanding this limitation, it will remain prudent and best practice for sellers to ensure disclosure statements and associated documents are completed as accurately as possible to avoid any buyer termination rights contained in the Bill.