Buying and selling real estate doesn’t need to be complicated but there are a number of legal hoops that need to be jumped through to ensure the transaction happens as smoothly as possible.
Across Australia, there are different rules and regulations which underpin the purchase or sale of property, and these can differ from State to State.
That’s why it’s vitally important to always use a qualified legal practitioner to assist you, whether you’re a buyer or a seller.
In this article, we’re going to outline the ins and outs of what’s called a Section 32 in Victoria, which is also known as a Vendor’s Statement.
It’s important to understand that the laws surrounding such a statement differ across the country so if you’re buying interstate it’s imperative that you are familiar with the relevant legislation or have access to professional advice.
In this instance, however, we’ll keep our comments specific to Victoria keep it as simple as possible.
What is a Section 32?
The Section 32 statement is an important part of any real estate transaction. It’s a legal document given by the seller of a property to the interested buyer. The name is derived from Section 32 of the Sale of Land Act in Victoria.
This legislation requires a seller to provide specific information to a buyer about the property in question – before they sign the Contract of Sale. If they don’t then the buyer may have the right to pull out of the Contract.
In essence, the Section 32 statement contains information about the property’s title, including:
- Statutory warnings to the purchaser
- The vendor’s details
- Title details
- Information regarding building permits issued in the past seven years
- Particulars of any owner-builder warranty insurance
- If the vendor is the owner-builder who completed building works there should be a written inspection report (which lists any defects) in the Section 32
- Particulars of any mortgages or “charges” over the land (i.e. debts charged against the land)
- Information regarding covenants, easements and any other restrictions on title (whether or not they appear on the title)
- Planning information, particularly where zoning restricts land use
- Information about outgoings payable by the owner of the property
- Disclosure of any notices or orders issued by the authorities regarding fencing, road-widening, sewerage, etc.
- If there is access to the property by road
- Information on services connected to the property
- A copy of the owners’ corporation certificate (where applicable).
Who prepares the Section 32?
Given its importance to the success of a real estate transaction, a Section 32 should be completed by a lawyer or solicitor to ensure all of the correct information is included. While this is not stated in the Sale of Land Act, the fact that it is a legal document means that a vendor must be given competent legal advice by a qualified lawyer or solicitor in order to understand the responsibilities associated with the preparation of a Section 32. The last thing any seller wants is for a buyer to walk away from a deal because of a simple mistake within the Section 32.
Buying and selling real estate often involves the biggest financial transaction of people’s lives and that’s why there is so much legislation surrounding the process. Most people only buy or sell property a few times in their lives, so they’re unlikely to be completely across all of the laws which can, and do, change regularly.
It’s important that vendors understand there are serious consequences if they don’t disclose all of the necessary information required in a Section 32 statement.
For example, a vendor who knowingly or recklessly provides false information, or fails to provide all of the information required by Section 32 commits a criminal offence and can be fined.
What am I looking for in this document?
The Section 32 statement includes all pertinent information about a property but, of course, each piece of intel can be mean different things to different people.
For example, if a buyer is considering developing the property then information such as zoning or easements will be of more importance to them than a purchaser who is buying it as a home or an investment.
Information to look for in a Section 32 includes:
Copy of the title. The title proves the vendor has the legal right to sell the property. It should also include any easements, covenants, subdivisions or restrictions on the property, which can be as subtle as an easement related to sewerage or water usage.
Outgoings. This disclosure is regarding the financial outgoings associated with the property, which can include rates and/or body corporate or owners’ corporation fees. All buyers should be fully aware of what regular costs they will be liable for as the new owner of the property.
Zoning. As previously mentioned, zoning is important to enable the buyer to understand what can and can’t be developed on the property. For example, the property may be zoned for medium-residential development, which may trigger the need to search surrounding properties for their potential future uses. If neighbouring properties are similarly zones, the new owner may soon have a construction site right next door. Buyers purchasing a residential property also need to ensure it is appropriately zoned for residential (as opposed to, say, commercial) so they can be confident the improvement and their intended use comply with the local town plan. The type of residential zoning, whether it’s neighbourhood or general, should also be noted.
Council valuation. While this isn’t always included in a Section 32, buyers need to be aware that a council valuation may not necessarily reflect the property’s market value. The council valuation uses a different formula than a standard valuation and can differ significantly from its true market value. Focusing too much on the council number, and trying to negotiate because of it, will generally not amount to much more than a useless exercise.
Building permits issued in the past seven years.Building approvals will need to have been issued for properties with works completed recently, for example a new bathroom or kitchen. When this information is not included in the Section 32, it should raise questions about who completed the renovations and why building permits hadn’t been obtained. If the vendor is an owner-builder who completed the works, there should be an inspection report, insurance (if the value of the work is over a set figure) and certain warrantees.
Intuitive Finance – the smart choice
The world of home ownership and property investment can be complex but it’s doesn’t have to be difficult.
When you’re involved in one of the biggest financial transactions of your life it makes sense that you have the right professionals on your side – and this is especially true when it comes to understanding the Section 32 statement or equivalent in other States and Territories.
Ensuring you have the right legal advice about the Section 32 from the outset will help to prevent any problems down the track.
The world of banking and finance can be a pretty daunting one for both novice and sophisticated investors and since our establishment in 2002 we’ve focused on providing outstanding service and business standards.
This approach was vindicated when we received the Finance Broker Business Award at the 2018 Mortgage and Finance Association of Australia (MFAA) Excellence Awards.
Understanding the ins and outs of the Section 32 statement is paramount for anyone buying or selling property today. So why now contact Intuitive Finance today to ensure you have the right information and expert support on your side no matter what stage of the property ownership journey you are on?The information provided in this article is general in nature and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information you should consider the appropriateness of the information with regard to your objectives, financial situation and needs.