Understanding material fact will save you from property pain
Picture this - you’ve found your dream property on the best street in your favourite suburb, and it’s looking to come in on budget. Then you find out that just six years earlier, it was the scene of a gruesome murder.
Would you still buy it?
A homeowner is only legally required to disclose to a buyer when someone’s been murdered in their house in the last five years. After that, you have to hope it’s uncovered as part of your due diligence!
A recent killing in the living room is just one thing a seller must disclose about their property. Other events include flooding or bushfires in the last five years and if the property is listed as containing loose-fill asbestos insulation.
These all fall under material facts, and it pays to know what vendors are obliged to tell you and (more importantly) what they’re not.
The facts about material facts.
While a homeowner doesn’t have to disclose pertinent details, vendor agents must share information about a property that could impact a buyer's decision to purchase. These are considered material facts, and agents can face fines if they don’t comply.
Famously, a pair of Sydney real estate agents were fined when the buyer paid a deposit and then found out that the home was the scene of a very gruesome triple murder within five years.
While murder, manslaughter and illicit activity like drug manufacturing (two years) are all safely considered material facts, the definition can be hard to nail down. The guidelines differ state to state and, as a buyer, it’s hard to know you’ve got all the information you need.
Like many things in real estate, there isn’t a consensus on what constitutes material fact across Australia. There isn’t even a hard and fast definition of a material fact in NSW. While things like recent fires, floods, asbestos, combustible cladding, and murder are all material facts, there’s still a lot of room for interpretation.
So, how do agents determine what else is considered a material fact?
NSW Fair Trading has stated that a material fact is a fact that would be important to a reasonable person in deciding whether or not to proceed with a particular transaction. A fact about a property can be material in two ways:
It can become ‘material’ because, in the particular circumstances, it is known by the agent to be material to the particular purchaser, even though agents and purchasers may not typically regard the matter as ‘material’; and
It may become ‘material’ by the application of an objective standard which has regard to what a reasonably informed purchaser with a fair-minded understanding of the real estate market, including the role of a real estate agent, would regard as ‘material’.
It’s also worth noting that vendor agents should inform buyers on matters that can’t be revealed through usual enquiries, such as a physical inspection of the property, professional building and pest inspections, and searches conducted by the purchaser’s solicitor or conveyancer.
While vendor agents should also do their due diligence, it’s not always in their best interest, and plausible deniability can be a strategy. As a buyer, you must be prepared to ask the right questions to get the answers you need.
We ask all of our clients to list the things that are most important to them and may impact their purchase. This could be from religious, cultural and spiritual choices to lifestyle preferences. All this helps us narrow our search and allows us to be specific in seeking material facts.
Please contact our team if you need help deciphering material facts from fiction.