Material Facts a Real Estate Agent Must Disclose to Potential Buyers

Under section 52(b) of the Property, Stock and Business Agents Act 2002 (NSW), a real estate agent must not induce another person to enter into a contract or arrangement by failing to disclose a material fact of a kind prescribed by the regulations (whether intended or not) that the agent knows or ought reasonably to know. An offence under this section can attract a penalty of up to $22,000.  This means that an agent could be in breach of the law even though they didn’t know about it.

Clause 54 of the Regulation prescribes what is a material fact:

(a) within the last 5 years the property has been subject to flooding from a natural weather event or bush fire;

(b) the property is subject to significant health or safety risks;

(c) the property is listed on the register of residential premises that contain loose-fill asbestos insulation that is required to be maintained under the provision of the Home Building Act 1989 (NSW);

(d) within the last 5 years the property was the scene of a crime of murder or manslaughter;

(e) within the last 2 years the property has been used for the purposes of the manufacture, cultivation or supply of any prohibited drug or plant;

(f) the property is, or is part of, a building that contains external combustible cladding to which there is a notice of intention to issue a fire safety order or building product rectification order (or such an order has issued); and

(g) the property, or is part of, a building where a development application or complying development certificate application has been lodged under the Environmental Planning and Assessment Act 1979 for rectification of the building regarding external combustible cladding.

The advice to agents is that they should, at the very least, make reasonable enquiries with their vendor client to determine whether any of the material facts listed above applies to the property.

The enquiries that an agent undertakes independently of the vendor may extend to carrying out a search of the loose-fill asbestos insulation register which is a register administered by the NSW Fair Trading and is free to access. Agents may also consider making enquiries with the local Council to determine if the land has been affected by flood or bush fire in the last 5 years.

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