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Avoiding costly mistakes: Buyers warned to conduct due diligence after $6.2m error
Buyers have been reminded to do their due diligence after a recent $6.2 million property sale was cancelled as a neighbouring development proposal was likely to obstruct ocean views.
An NSW Supreme Court judge rescinded the $6.2 million sale of a Bronte property after the buyers claimed the vendors and agents made misrepresentations about a proposed development that would obstruct the property’s views.
Earlier this year, Filda Keci and Steven Wallace had put a $310,000 deposit for the Darling Street home in Bronte, which was described as having sweeping ocean views.
Prior to signing the contract, the pair was told by PPD agents, Alex Phillips and Tom Fuller, that only a nine-unit development was planned for an adjoining Hewlett Street site, and that it would not drastically affect the views.
However, the sellers were aware that the site was declared a State Significant Development (SSD), and there was another proposal on the spot for a nine-storey, 100–120 apartment building, which would impact the views, which they communicated to the agents.
In April, after Keci and Wallace had bought the property, they were made aware that there was a different proposed development for the site, and they immediately contacted their solicitor.
After the matter was taken to court, Justice Kate Williams found that while the statements about the nine-unit project were true, it was misleading by implication because they failed to disclose the larger proposal.
As a result, Justice Williams ordered that the contract of sale be rescinded and the buyers refunded for the deposit.
Real Estate Institute of NSW (REINSW) CEO, Tim McKibbin, said to avoid such situations, buyers shouldn’t always assume that an agent will be working in their best interests.
He said that while agents are not permitted to mislead, they ultimately work for the vendor, making it essential for buyers to do their own due diligence.
“The purchaser has an obligation to make their own enquiries to satisfy themselves that the property they’re purchasing will meet their requirements,” he told SPI.
“Some of those enquiries are pest and building reports, surveys, strata reports, those sorts of things I think a prudent purchaser would do.”
Additionally, he advised the use of a buyer’s agent, whose job is to make enquiries on behalf of purchasers, which could include those about development proposals.
“A buyer’s agent, they are doing this every day, and the buyer’s agent is going to do greater due diligence on the property than most purchasers will. So that’s where they demonstrate their value.”
Ultimately, McKibbin said that while agents had a duty to inform potential buyers of “material facts” that could influence a buyer’s decision to enter a contract, vendors also had a role to play.
“When you look at the solicitor, the agent, and the vendor, the person who has the greatest knowledge of the property and its defects is going to be the vendor, but the vendor doesn’t have the obligation to make disclosures,” he said.
However, he said, currently, vendors, solicitors and conveyancers don’t have the same obligations to make those disclosures as the agent does.
“So you can see in circumstances like this that the agent, in fulfilling their obligations, is acting contrary to the interests of the vendor, who they serve,” he said.
McKibbin said REINSW had advocated for reforms to ensure that the vendor, solicitor and agent disclosed important matters to prospective purchasers, and to ensure these matters were made known to them in the contract.
“We’ve been unsuccessful in achieving those. If the government’s purpose in this is to make consumers aware of matters that would be pertinent to their decision to purchase or not, then why is it so hit and miss?”
“Why would you not want the purchaser to be made aware of that by the parties? Why would you only require the agent to do it?”, he concluded.
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