A property purchase is a significant investment, so it is important that purchasers are well aware of exactly what they’re paying for. Transparency, honesty and integrity are crucial in any transaction, but this is especially true when it comes to property transactions, since so much money is at stake.
Therefore, it is vital that any unauthorised construction works or alterations in the contract of sale be fully disclosed to avoid potential legal problems later.
What is Meant by Illegal or Unauthorised Works?
Unapproved structures or modifications are not recognised as lawful because they have not received council approval or are in direct conflict with bylaws. When a property is sold, these illegal structures, additions or alterations will be brought into the spotlight since the property will need to undergo an inspection as part of the process.
Such illegal works will need to be demolished or otherwise rectified, either by the original owner before the sale or by the buyer after the sale. Therefore, it is critical to disclose them early on so that potential buyers know what they are getting into. The buyer can rescind the contract if there is a work order from the council affecting the property, as it is considered a defect on the title.
With that said, let’s take a look at some of the reasons why it is so important for vendors to fully disclose such works in the contract of sale.
It’s a Legal Requirement
Australian law makes it clear that it is incumbent upon the property vendor to disclose any aspects of the property that might constitute an illegal addition or construction that might require upgrading or demolition to become compliant. This is particularly important if the undisclosed illegal construction materially affects the value of the property purchase or if the buyer would have withheld their offer had they known about it.
To put it simply, such a failure to disclose can be viewed as fraudulent misrepresentation or concealment, which has legal consequences. In such cases, the law makes provision for the purchaser to either completely rescind the contract or seek appropriate compensation for the damages. This can be achieved by reducing the property purchase price or providing financial restitution after the purchase.
It Can Have Financial Consequences
When illegal construction is not disclosed upon the sale of a property, the vendor becomes liable for the financial impact that it might have on the purchaser.
All of this could essentially mean that the contract is rescinded completely, in which case the vendor would pay any expenses that the buyer has already incurred. These costs might include legal, inspection and other conveyancing costs.
However, even if an agreement is reached and the sale of the property remains on the table, the vendor may still incur significant costs as a result of this oversight. These costs might include fines, damages, demolition costs, or any other costs incurred for rectifying the unauthorised constructions or alterations.
The vendor might also be forced to concede a lower sale price. Negotiations over such financial adjustments can also result in the settlement process being heavily delayed, prolonging uncertainty and potentially jeopardising the transaction’s success.
It Can Undermine Your Reputation
Failing to disclose unauthorised and illegal works on a property can undermine a vendor’s reputation as a seller. This can be particularly damaging if it is a business-related transaction. It can make one’s business seem dishonest. Concealing information erodes trust, and the resulting reputational damage might very well end up deterring future clients or business partners from engaging.
Therefore, prioritising transparency and integrity is crucial for vendors to cultivate long-term relationships, attract repeat business, and bolster their standing in the market. Even individual vendors selling private residences could suffer reputational damage from such dishonest practices.
It Promotes a Fair and Ethical Real Estate Market
Transparent disclosure practices help contribute to a fair and ethical real estate market, which benefits everyone involved and helps uphold the economy.
When vendors uphold their obligation to disclose all relevant information about a property, it fosters trust between buyers and sellers and promotes a level playing field for all parties involved. This transparency helps prevent exploitation or manipulation from taking place in property transactions and contributes to the overall integrity of the real estate industry.
Prioritising honesty and accountability allows vendors to play a key role in maintaining the ethical standards of the market and building confidence among stakeholders.
Flash Conveyancing provides expert conveyancing services to ensure smooth property transactions and avoid unnecessary legal problems and delays. Contact us today to find out more about how we can help you.
