What is a section 32?

Section 32 vendor statements were introduced in 1983 to enhance consumer protection by requiring the vendor in the sale of real estate in Victoria to give certain disclosures to a purchaser before entering into a contract for the sale of the property.

The name of the document comes from the section legislation which provides for what information and documentation the vendor must give to a purchaser, namely, section 32 of the Sale of Land Act 1962.

Given the importance of the document and its legal nature, it is recommended that an experienced conveyancer prepare or review the section 32 to ensure all of the correct information is included.

The section 32 is prepared by or on behalf of the vendor, preferably by an experienced conveyancer who deals with property law matters exclusively and is qualified to give legal advice and prepare legal documents.

If the section 32 has not been prepared correctly, a purchaser may have grounds to rescind the contract of sale, and the vendor may still be liable to pay the estate agent’s commission on the sale.

While not an exhaustive list of information that must be contained in the section 32 statement, the following information is commonly required to be disclosed or provided:

• Evidence of title by way of a Register Search Statement together with a copy of the registered plan of subdivision that identifies the land being sold. If the vendor is not the registered proprietor, such as in the case of a deceased estate, you must also include evidence of the vendor’s right to sell the land such as a copy of the grant of probate or letters of administration.

• Details of any rates and taxes such as council and water rates, owners corporation fees and land tax (if applicable). Any amounts for which a purchaser may become liable in consequence of purchasing the property must also be disclosed, such as special land tax and back rates.

• Where the property is subject to owner-builder works, particulars of the builder’s warranty insurance.

• A description of any easement, covenant or other similar restriction affecting the land and particulars of any existing failure to comply.

• Details of the planning scheme, zoning and overlays that affect the land, and a statement if the land is within a designated bushfire prone area.

• Particulars of any notice, order, declaration, report or recommendation of a public authority or government department or an approved proposal that directly and currently affects the land, such as a notice of rejection to a planning permit, notice of public acquisition, or a show cause notice for an illegal structure.

• Particulars of any building permit issued in relation to a building on the land.

• Information relating to any owners corporation the affects the land.

• If the property is subject to a growth area infrastructure contribution, details of work in kind agreement.

• A statement as to whether electricity, gas, water, sewerage or telephone services are not connected to the land.

Thanks to the automation and electronic delivery of many certificates required to be included in the section 32, it is possible in many cases to prepare a section 32 on the same day as requested. In most cases, the section 32 is prepared 1-3 days.

However, where the property is subject to an active owners corporation or where a vendor may not have copies of building permits or other documents that may be required, it can take as long as ten (10) business days to finalise the document.

Many providers of certificates offer urgent delivery for a primum fee, and as such if you urgently need a section 32 and do not have all the required information, it is still possible to receive the document in a short timeframe, if you’re willing to pay for it.  

A lot of the information required to prepare a section 32 can and will be obtained directly from the responsible authority of that information, for example, a search of title and copy of the plan of subdivision will be obtained from Land Registry Victoria, whereas a copy of the water encumbrance statement showing any unregistered water or sewerage easements will be obtained from the responsible water authority.

However, some information may only be known to the vendor such as:

• Whether any improvements have been undertaken to the property where a building or planning permit was not required, but builder’s warranty insurance will be applicable such as the upgrade of a kitchen or bathroom.

• The existence of any unregistered easements such as rights of way or overhanging eaves.

• If part of the property exists on a separate title, for example, a car space or storage cage in an apartment building.

• Whether electricity, gas and telephone services are currently connected to the property.

• Breaches of any zoning, covenant or easement restrictions on the property.

To determine what will be required to prepare a section 32 for your property, we will usually provide you with a checklist or have a short discussion about your property.

A section 32 signed by the vendor must be provided to any interested party before they sign a contract to purchase the property. As an estate agent will commonly require an interest party present their offer on a contract of sale, it is essential that a vendor provide a signed section 32 to the estate agent as soon as possible.

A section 32 will remain current as long as the information in it has not changed. A vendor should take note of the questions asked by the conveyancer when preparing the section 32, and read the section 32 upon completion so that they are fully aware of its contents and can advise if anything changes.

A good conveyancer will provide a broad statement as to property outgoings to ensure that when council and water rates increase your section 32 does not automatically become defective. However, some common situations that will cause a section 32 to become out of date include:

• The issuing of a notice, order, declaration, report or recommendation by a public authority or government department or an approved proposal that directly and currently affects the land.

• The holding of an annual general meeting or special general meeting where the property is subject to an owners corporation.

• The registration of a new mortgage or any change in ownership to the property.

• The disconnection of any service such as electricity, gas or telephone.

Depending on the age of the section 32, they can generally be updated relatively quickly and without additional costs, save for when new certificates may be required.

It is an offence to provide false or incomplete information in a section 32, and the intentional omission or deception may give rise to the purchaser terminating the contract. However, where an omission was accidental, or where the purchaser is in substantially the same position they would be in had the information been provided, and a court would be satisfied the vendor has otherwise acted honestly and reasonably and ought fairly to be excused for the contravention, a purchaser would not have the power to rescind the contract of sale.

There are numerous cases where a vendor failed to disclose information such as planning permits being rejected because their solicitor or conveyancer did not take the correct instruction when preparing the sale documents. The purchasers then received incorrect advice that they would have grounds to terminate the contract without considering whether the vendor was intentionally providing incomplete information. Ultimately the vendor was found to have acted honestly and reasonably as the fault was by their legal representative, the purchasers were found not have successfully terminated their contracts, lost their deposits, and became liable to pay tens of thousands of dollars in legal costs.

The cases highlight the importance of obtaining proper legal advice from an experienced conveyancer before entering into a contract, or exercising any right that you think you may have.

The difficulty in reading a section 32 is that you must have regard to what documents it should contain, as much as what documents is does contain, something that generally only experience will allow you to do. For example, there is no requirement for a section 32 to contain information about illegal building works, only to disclose information about permits granted in the last 7 years. Accordingly, if you suspect renovations have been undertaken to a property in the proceeding 7 years that would have required a permit, you need to look for the planning permit (if required), building permit, occupancy certificate, or in other cases the owner-builder inspection report and builder warranty insurance.

The other issue with reading a section 32 is that information is often omitted or incorrect statements are given by the vendor’s solicitor or conveyancer. Many inexperienced solicitors and conveyancers have broad statements in their section 32 stating that there has been no failure to comply with the terms of any covenant, easement or similar restriction, when a simple examination of the property online clearly shows a garage which has been built over an easement without consent, or a front fence which breaches zoning requirements.

The common form of contract for the sale of real estate in Victoria provides that the purchaser buys the property in its current condition, and any omission or mistake in the description of the property or any deficiency in the area of the land does not invalidate the sale. Accordingly, a purchaser should test and document what appliances are in working order on the day of sale, including hot water service and any heating/cooling, as well as measuring the land to the nearest intersection to ensure the property fences are on the correct boundary.

Purchasers should also take note of any improvements or structures that appear to have been built within the preceding 7 years, or that are placed close to property boundaries where easements are commonly located.

In addition to the requirements set for the vendor under section 32 of the Sale of Land Act 1962, they may also be additional requirements pursuant to section 135 and 137B of the Building Act 1993 which need to be met before a vendor can enter into a contract to sell a property, and failing same, the contract will be voidable at the option of the purchaser at any time before settlement.

If you are purchasing into an owners corporation, it is important to review the owners corporation certificate, minutes of the last annual general meeting, and owners corporation rules to ensure you are satisfied with the current position of the owners corporation. You should take note of any large item works that may need to be completed in the future such as replacement of windows, resurfacing the driveway, or any structural issues, and where present ensure that that the maintenance fund of the owners corporation is sufficient to cover any costs associated with the works.