Frequently asked questions covering common conveyancing topics like section 32 Statements, owner-builder vendors and more.
Section 32 of the Sale of Land Act 1962 (Vic) (SL Act) provides that a vendor selling land must, before a purchaser signs a contract, give a purchaser a signed statement of certain matters and documents as specified in Division 2 of the SL Act.
The section 32 statement must be current upon the purchaser signing the contract of sale.
Whether the information is out of date depends on factors such as the following.
1. Is the information date sensitive?
- council rates information as councils strike new rates every financial year and rates may increase.
When preparing a section 32 statement close to 30 June phone the council for updated information. If the rates have not been struck then state this in the section 32 statement with a warning that the amount may change for the new financial year.
- owner builder inspection report must be not more than six months old at the time the purchaser enters into the contract of sale. Although it is common practice to attach an owner builder inspection report to a section 32 statement, there is no legal requirement to do so. Section 137B(2) of the Building Act 1993 (Vic) simply requires the report to be given to the intending purchaser before the contract is entered into.
2. Has anything changed since the information was obtained?
For example, has the vendor done any building works since a building certificate was obtained?
No. Section 33B of the Sale of Land Act 1962 (Vic) (SL Act) does not confer on the purchaser a right to rescind.
While the purchaser cannot rescind it is an offence not to provide the due diligence checklist and a penalty of up to 60 penalty units (or up to $9,500) may be imposed.
Consumer Affairs Victoria is responsible for enforcing the provisions in the SL Act.
It is usual practice to attach this report to the section 32 statement but there is no legal requirement to do so. The report must be less than six months old when it is given to the intending purchaser.
Section 137B(2) of the Building Act 1993 (Vic) provides that the report must be given to the intending purchaser before the vendor enters into the contract to sell the building.
See section 32B of the Sale of Land Act 1962 (Vic) and section 137B(2) of the Building Act 1993 (Vic) which also requires the owner builder give the intending purchaser a certificate evidencing the existence of the required insurance.
Section 32F of the Sale of Land Act 1962(Vic) (SL Act) says a vendor must include the following information in a section 32 statement:
- specify the prescribed information which must be in an owners corporation certificate (see section 151(4) of the Owners Corporations Act 2006) or attach a current owners corporation certificate
- provide a copy of:
- the owners corporation rules
- statement of advice and information for prospective purchasers and lot owners prescribed in schedule 3, regulation 12, Owners Corporations Regulations 2007 (Vic)
- the resolutions of the last annual general meeting
If the owners corporation is inactive, the above information can be omitted and the vendor can just specify in the section 32 statement that the owners corporation is inactive.
‘Inactive’ means it has not, in the previous 15 months:
- had an annual general meeting
- fixed any fees
- held any insurance.
Note also section 11 of the SL Act which provides that:
A person cannot sell a lot affected by an owners corporation unless the vendor or the owners corporation has a current insurance policy in accordance with the Owners Corporations Act 2006. Where a lot is sold in contravention the purchaser may avoid the sale at any time before the contract is completed.
Subdivisions of two lots are exempt from the requirement to obtain insurance. See section 7A of the OC Act.
Note also section 8 and the exemptions which apply to services only owners corporations.
It follows that for all other subdivision the client needs to be informed about the requirement to obtain insurance and the consequences of failing to comply with section 11 of the SL Act. If insurance is obtained for the owners corporation then the owner corporation is no longer ‘inactive’.
Simply identifying the easement by reference to the instrument number alone is probably not sufficient. That may be found to be identification but not description. It is recommended that words should also be used to describe the restriction (eg drainage easement or single dwelling covenant) and, as relevant, its location, preferably attaching a plan.
For example, a description of a right of way easement could be:
A right of way easement registered number T12345Z over the road shown marked R1 on plan of subdivision 1234567.
It is recommended that practitioners also attach a copy of the registered instrument to the section 32 statement.
In the example above the instrument attached would be the easement registered number T12345Z.
The best risk management is to attach the whole plan of subdivision even though the current section 32(3)(a) of the Sale of Land Act 1962 (Vic) (SL Act) provides:
In the case of land under the Transfer of Land Act 1958, a copy of the Register Search Statement and the document, or part of the document, referred to as the diagram location in the Register Search Statement that identifies the land and its location.
The purpose of this section is to ensure that the property can be identified on the plan.
This can be achieved by including only the pages of the plan which show the property being sold. In a plan of subdivision of 40 pages usually one page shows the apartment and another shows the accessory unit(s) for the property being sold.
The risk with attaching only these two pages is that other information in the plan of subdivision may need to be attached to satisfy other disclosure requirements in the SL Act.
For example, on the front page of the subdivision there may be a description of easements which affect the property, and on other pages of the plan the location of the easement will be shown.
Public authority is not defined in the Sale of Land Act 1962 (Vic) however it is defined in section 4 of the Charter of Human rights and Responsibilities Act 2006 (Vic) for the purposes of that Act which is a useful guide.
The section includes multiple notes and examples and has 11 parts to the definition most notably:
- a public official within the meaning of the Public Administration Act 2004 (Vic)
- an entity established by a statutory provision that has functions of a public nature
- any entity whose functions are or include functions of a public nature when it is exercising those functions on behalf of the state or a public authority.
In conveyancing transactions the most common public authorities would be a local council and water and sewerage authorities.
A common question asked is whether an asbestos report obtained by a vendor from a private company a notice for the purposes of section 32D. This would not be caught but a notice from the Environment Protection Authority to clean up asbestos would be caught as the EPA is clearly a public authority.
Each case needs to be considered on its facts.
The starting point is to determine whether the contract has a condition stating that time is of the essence. Most contracts in Victoria include a condition which makes time of the essence – i.e. it is an essential term of the contract that conditions as to time be strictly complied with.
For example, see general condition 16.1 from the Estate Agents (Contracts) Regulations 2008 (Vic). Note that the regulations sunset on 11 August 2018. See our FAQ about the sunset of the regulations.
The most recent form of contract published by the LIV is August 2019 and in this contract refer to general condition 34 about default notices.
Portbury Development Co. Pty Ltd v Ottedin Investments Pty Ltd  VSC 57 is an example of a case where time remained of the essence where there was an agreement to extend the settlement date combined with a condition in a contract stating that time is of the essence and the vendor had not waived that condition.
Qin v Smith (No. 2)  VSC 476 is an example of a case in which it was held that time had ceased to be of the essence – a vendor’s notice of default was held to be ineffective in that case because the vendor had not been ready willing or able to settle on the specified contract date. The vendor had to first make time of the essence again before serving a notice of rescission on the purchaser.
Where time is no longer of the essence, an offended party must make time of the essence by giving notice of a reasonable period within which to complete so that the other party can, at that time, be said to be in default and so the innocent party can rescind. Usually the contract requires service of a notice of rescission specifying the contractual period within which the default must be remedied after which the contract is at an end.
The LPLC notes that the LIV has issued a new form of contract – August 2019.
Please contact the LIV and your precedent provider about using an up to date contract.
Contracts usually require a written default notice be given before a party is entitled to exercise any rights arising from the other party’s default.
For example, see general condition 27.1 in the Estate Agents (Contracts) Regulations 2008 (Vic). The most recent form of contract published by the LIV is August 2019 and in this contract refer to general condition 34 about default notices. Note that the regulations sunset on 11 August 2018. See our FAQ about the sunset of the regulations.
A default notice specifies the particulars of the default and gives the offending party 14 days to remedy the default. There are no consequences specified if the default is not remedied but the notice does satisfy the usual contractual obligation to give notice before exercising rights and it may be used to make time of the essence again if such provision has been waived.
A rescission notice contains details of the default but states that unless:
- the default is remedied and
- reasonable costs are paid and
- interest is paid
within the time specified the contract is at an end in accordance with general condition 28. All three components need to be paid. We have seen claims where the default was not properly remedied because costs or interest were not paid.
Where time is still of the essence the rescission notice can be served as part of the default notice. See our FAQ about when will time no longer be of the essence.