What is the law that says you have to declare it?
In NSW under section 52 of the Property, Stock and Business Agents Act 2002, the obligation to disclose a “material fact” lies with the Agent. Section 52 provides:
Misrepresentation by licensee or registered person
(1) A person who, while exercising or performing any function as a licensee or registered person, by any statement, representation or promise that is false, misleading or deceptive (whether to the knowledge of the person or not) or by any concealment of a material fact (whether intended or not), induces any other person to enter into any contract or arrangement is guilty of an offence against this Act.
Maximum penalty: 200 penalty units
Defining what amounts to a “material fact” for the purposes of section 52 is difficult.
The decision of Hinton & Ors v Commissioner of Fair Trading (GD) [2007] NSWADTAP 17 provides some guidance. Paragraph 37 sets out that:
[An] act may become ‘material’ within the meaning of s.52 in two ways – it can become ‘material’ because in the particular circumstances it is known by the agent to be ‘material’ to the particular consumer, even though the agents and consumers may not typically regard the matter as ‘material’. The other way in which it may become ‘material’ is by the application of an objective standard which has regard to what a reasonably informed consumer with a fair minded understanding of the real estate market, including the role of the real estate agent, would regard as ‘material’.
The decision in Hinton involved the sale of a property that had been the scene of a triple murder; the agent failed to disclose this to the purchaser. The decision, to some extent, clarifies the Agent’s obligation to disclose a “material fact” to potential purchasers by effectively removing the subjective element and establishing an objective test.
A Principal has no legal obligation to disclose material facts. At present, a Principal’s disclosure obligations in relation to the sale of property only extend to the matters set out in the Conveyancing Act 1919 and the Conveyancing (Sale of Land) Regulation 2005. The obligation to disclose material facts falls to the Agent.
